A biosimilar is a biological product that is highly similar to an existing FDA-approved reference biologic drug. Biosimilars are not exact copies of brand-name drugs. Instead, they are comparable but not identical versions of original “innovator” biologic drugs. Although not exact copies, biosimilars have no clinically meaningful differences in terms of safety and efficacy compared to their reference products. They have the same structural and functional characteristics and are used to treat the same diseases and conditions as the reference product. 

Biologic products are derived from living organisms such as humans, animals, microorganisms, or yeast. They are highly-sophisticated, large molecule drugs. A small-molecule drug typically has a well-defined chemical structure and can be easily characterized and replicated. In contrast, biologics can have millions of atoms and intricate three-dimensional structures. Given the complexity and variability of biological entities, it’s impossible to create an exact copy of a biologic drug. 

When developing a biosimilar, the aim is not to create an exact copy (which is, as mentioned, impossible) but rather a product that is highly similar to the original biologic, known as the reference product. This means that, while there may be minor differences in inactive components or post-translational modifications, these differences should not have a clinically meaningful impact on the safety or efficacy of the drug. For a biosimilar to be approved, it must undergo rigorous testing to demonstrate its similarity in terms of structure, function, safety, efficacy, and quality to the reference product.

While, biosimilars and generic drugs both offer alternatives to more expensive brand-name or reference products there are several key differences between the two: 

Definition:

Biosimilars are biological producs that are highly similar to an already approved biological product rather than exactly identical. Generics, on the other hand, are exact copies of brand-name drugs. They have the same active ingredient, dosage form, strength, and route of administration.

Origin and Complexity:

Biosimilars are large, highly complex molecules derived from living organisms. Generics, on the contrary, are chemically synthesized, exact copies of small-molecule brand-name drugs. 

Approval Process:

Approving a biosimilar involves challenging comparative studies to demonstrate the similarity of the biosimilar to its reference product. Approving a generic solely requires the demonstration of bioequivalence, which shows that the generic releases its active ingredient into the human body in the same manner as the original.

Cost/Pricing:

Biosimilars are usually less expensive than their reference biologics but generally more expensive than generic drugs due to their complex production process. Generic drugs are usually much cheaper than their brand name drugs and offer significant savings for patients and healthcare systems.

Interchangeability: 

Not all biosimilars are automatically considered interchangeable with their reference products. In many regions, switching from a reference biologic to a biosimilar (or vice versa) requires a physician’s decision. Generics are considered interchangeable with the brand-name version, and pharmacists can typically substitute a generic for a brand-name drug without consulting the prescribing physician. 

Q codes are a type of HCPCS code used in the healthcare industry to identify services and items for Medicare beneficiaries. Codes that begin with Q5 specifically pertain to biosimilar drugs. For example, Q5118 is the Q code for the biosimilar Zirabev, a biosimilar of the cancer drug Avastin.

Below, are all biosimilar drugs and their HCPCS codes, mapped to their reference products:

Biosimilars offer a promising avenue to contain the escalating costs of biologic drugs. Their introduction fosters competition, drives down prices, and provides more options for patients and healthcare providers, leading to substantial potential savings in healthcare expenditures. However, the reimbursement rates of biosimilars can be a bit complex. 

The ASP, or average sales price, of a drug is a significant pricing metric for any HCPCS coded office-administered drug.  Traditionally, ASP is calculated by subtracting 6% from a product’s Medicare payment limit. This is because Medicare’s reimbursement rate, or the Medicare payment limit, is set at 6% above the average sales price of a given drug. 

However, biosimilar products are a bit different. Medicare does not default to their typical reimbursement rates but, rather calculates the Medicare payment limit for a biosimilar at either 6% or 8% above the ASP of the biosimilar’s reference drug. This means that the price of a biosimilar’s reference product plays a large role in the Medicare reimbursement rate of the biosimilar product. 

Let’s create a scenario to illustrate this calculation. In our example, a make-believe biosimilar drug has an ASP of $80 and its reference biologic has an ASP of $100. Following the 8% logic, the Medicare payment limit of our biosimilar would be $88 since 80 + (100 x 0.08) = 88. Following the 6% logic, the Medicare payment limit of our biosimilar would be $86 since 80 + (100 x 0.06) = 86.