As hospitals reduced their spending on oncology treatments due to the increasing availability of biosimilars, the reimbursements they received from insurers did not drop at the same rate—allowing hospitals to claim greater margins as they increased their use of the treatments, according to a recent analysis published in JAMA.
The observational study linked the Blue Cross Blue Shield insurance data of more than 66,000 cancer patients receiving care with the average acquisition and actual reimbursement payments of more than 1,500 hospitals. Additional analyses took into account hospital characteristics, such as eligibility for 340B drug discounts, that could affect purchasing and reimbursement.
It focused on three oncology biosimilars for bevacizumab, trastuzumab and rituximab that became increasingly available and cheaper between 2020 and 2024. The physician-administered biosimilars hit the market as competitive alternatives to biologics that lose their patent protection, giving hospitals an incentive to switch over and reduce costs for themselves and other stakeholders, in this case commercial insurers.
That process, referred to as gainsharing, appears to have fueled “a spiral of discounts in which the biosimilar manufacturers annually reduce acquisition prices and hospitals follow by reducing reimbursement prices, albeit at a slower pace that allows an expansion of the markups retained by the hospitals,” researchers from the University of California, Berkeley and Brown University wrote in their study. “These reductions in prices and increases in hospital markups were accompanied by rapid increases in adoption of biosimilars.”
Over the study window, researchers found the prices hospitals paid to drug manufacturers for bevacizumab, trastuzumab and rituximab dropped by 60%, 72% and 63% respectively, outpacing reimbursement declines of 32%, 36% and 34%, according to the analysis.
Hospitals’ retained margins for those products, or the difference between acquisition and reimbursement prices, increased as a result. The researchers outlined retained margin increases from an average $133.19 to $138.28 per unit for bevacizumab (from a 298% markup to a 778% markup), $107.14 to $124.24 for trastuzumab (298% to 778%), and $145.91 to $165.40 for rituximab (284% to 916%).
Put another way—in a multivariable analysis taking into account hospital characteristics, hospitals’ retained margin per dollar paid to acquire the biosimilar increased by $2.72 for bevacizumab, $1.82 for trastuzumab and $2.32 for rituximab, researchers wrote.
At the same time, the researchers found increased adoption of the three biosimilars during the study window, from 32% to 93% for bevacizumab, from 37% to 87% for trastuzumab and from 18% to 84% for rituximab.
“These findings suggest that gainsharing methods of payment, in which the entity paying for a product, in this case the insurer, shares the savings with the entity generating the savings, in this case the hospital, potentially offer substantial improvements in the efficiency of the healthcare system,” the researchers wrote.
An editorial published by the journal alongside the study was less convinced.
“Although it is possible to view the authors’ findings as a positive story about substantial increases in hospital adoption of biosimilars, an alternative view is that more work is needed to ensure efficient biosimilar adoption in practice,” the editorial reads.
The authors of that editorial—who are affiliated with Washington University, Vanderbilt University Medical Center and Memorial Sloan Kettering Cancer Center—noted that the rate of biosimilar adoption observed in the study “is still far slower than” what’s been reported for generics. “Motivated health systems” could move faster than the five-year window outlined by the study, they wrote while referencing a Kaiser Permanente effort that reached 90% utilization of the same three biosimilars within two months of their launch.
Additionally, they wrote that some of the data raise questions about how well insurers are able to bargain with hospitals and drive the expected efficiencies of biosimilar adoption.
The margin retained by hospitals per unit in 2024 for biosimilars of trastuzumab was acquired for about $20 per unit and reimbursed at $90, for a $70 margin, they wrote referencing the study’s findings. Meanwhile, the originator product could be acquired for $80 and reimbursed for $160, an $80 margin that gives hospitals little reason to switch over to the biosimilar.
“Insurers, though, should not agree to reimburse $160 when equivalent therapies are available at $90,” the editorial’s authors wrote. “The question remains: Why are insurers not paying closer to the acquisition cost rather than maintaining a high margin for these products? As a result, hospitals have absorbed substantial amounts of the collective savings that could have been realized from biosimilar adoption.”
The editorial’s authors wrapped their critiques with calls for policy interventions that would “lower spending more automatically, rather than leaving it to the discretion of insurers and hospitals,” such as those proposed by MedPAC in its June 2023 report.