Biosimilars and the Medicaid Drug Rebate Program

March 30, 2015

In this notice to participating drug manufacturers, the Centers for Medicare and Medicaid Services (CMS) Center for Medicaid and CHIP Services (1) provides guidance to states on the classification of biosimilar biological products for rebate purposes and (2) outlines strategies for states to use these products to reduce costs while improving access in terms of state Medicaid preferred drug lists. CMS specifically reminds states that educating physicians and pharmacists on how to prescribe and dispense cost-effective biosimilars is important to encourage and maximize their use.

Biosimilars fall within the definition of single source drugs in the Medicaid Drug Rebate program. Under Medicaid law, the definition of “single source drugs” includes covered outpatient drugs licensed under a biological license application (BLA; reference biological products and biosimilars generally are licensed under BLAs. (Medicare Part D law also classifies biosimilars as single source products.) Because biosimilars are considered to be single source products, they are subject to supplemental rebates by manufacturers and will be subject to best price reporting.

CMS encourages states to encourage use of biosimilars if, after evaluation, patients and the Medicaid program benefit from increased access and lower costs, particularly for the treatment of chronic conditions. CMS further encourages the use of utilization management tools, such as prior authorization, step therapy, and preferred drug lists.