U.S. Department of Health and Human Services 
 
Office of Inspector General 
 
 
 
Medicare Part D and 
Beneficiaries Could Realize 
Significant Spending 
Reductions With Increased 
Biosimilar Use
 
 
Suzanne Murrin 
Deputy Inspector General for Evaluation and Inspections 
March 2022, OEI-05-20-00480 
     
  U. S. Department of Health and Human Services     
 
Office of Inspector General 
 
R eport in Brief 
 
March 2022, OEI-05-20-00480 
 
 
Medicare Part D and Beneficiaries Could 
Why OIG Did This Review 
Biologicsusually large, complex  Realize Significant Spending Reductions With 
molecules produced in a living 
Increased Biosimilar Use 
systemare some of the most 
expensive drugs available, and 
spending for biologics is growing in  What OIG Found 
Key Takeaway 
Medicare Part D because they treat  Since biosimilars were introduced in 2015, use of 
diseases common among Medicare  and spending on these drugs in Part D has 
Medicare Part D and its 
beneficiaries.  Biologics are  steadily increased.  However, they are still used 
beneficiaries could 
estimated to cost Part D upwards of  far less frequently than their higher-cost 
realize significant 
$12 billion annually.  reference product alternatives.  In 2019, 
spending reductions if 
biosimilars reference products were still 
biosimilar use becomes 
A biosimilar is a lower-cost biologic 
prescribed about five times more frequently than 
more widespread, but 
that is highly similar to an existing 
biosimilars in Part D. 
the lack of biosimilar 
biologic approved by the Food and 
coverage on Part D 
Drug Administration (FDA (i.e., the  We estimated that with increased use of 
formularies may limit 
biosimilars reference product).  biosimilars instead of reference products, Part D 
increased utilization. 
and beneficiary spending could have been 
Although a limited number of 
considerably reduced in 2019.  Specifically, 
biosimilars are currently available for 
Part D spending on biologics with available biosimilars could have decreased 
Part-D-covered reference products,  by $84 million, or 18 percent, if all biosimilars had been used as frequently as 
multiple biosimilars for Humirathe 
the most-used biosimilars.  Additionally, beneficiaries out-of-pocket costs for 
best-selling prescription drug in the 
these drugs could have decreased by $1.8 million, or 12 percent.  Although 
worldare expected to be available 
these amounts are modest in the context of overall Part D spending, far 
in 2023, thereby presenting an 
greater spending reductions will be possible as additional biosimilars become 
opportunity to significantly decrease 
available. 
Part D drug costs. 
Biosimilars have the potential to significantly reduce costs for Part D and 
How OIG Did This Review 
beneficiaries if their use becomes more widespread, particularly with the 
We analyzed biosimilar utilization  expected launches of biosimilars for blockbuster drugs Humira and Enbrel.  
and spending in Part D from 2015 to  However, a lack of biosimilar coverage on Part D formularies could limit this 
2019.  We also calculated multiple  wider utilization.  In 2019, not all plan formularies covered available 
estimates to explore how Part D and  biosimilars.  Moreover, those formularies that did cover biosimilars rarely 
beneficiary spending in 2019 could  encouraged their use over reference products through preferential formulary 
have changed with increased  tier placement and utilization management tools. 
utilization of biosimilars. 
What OIG Recommends and How the Agency Responded 
Lastly, we determined the extent to 
Without further changes to the Part D program, the impact of limited 
which Part D plan formularies 
coverage and promotion of biosimilars on formularies may be magnified as 
encouraged the use of biosimilars 
biosimilars for blockbuster drugs become available.  To help ensure that 
rather than reference products.  
Part D and beneficiaries can capitalize on potential savings, we recommend 
Specifically, we examined whether 
that the Centers for Medicare & Medicaid Services (CMS) encourage plans to 
biosimilars were included on Part D 
increase access to and use of biosimilars in Part D.  We also recommend that 
plan formularies and, if so, whether 
CMS monitor biosimilar coverage on formularies to identify concerning 
they were on a less preferential tier 
trends.  CMS concurred with our first recommendation and neither concurred 
or were subject to different 
nor nonconcurred with our second recommendation. 
utilization management 
requ irements than their reference   
products.       
 
TABLE OF CONTENTS 
 
 
 
 
 
BACKGROUND  1 
Methodology  9 
FINDINGS  13 
Use of biosimilars in Part D increased every year, but most biosimilars were still used far less  13 
than their reference products in 2019 
Increased biosimilar use could have reduced Part D and beneficiary spending considerably in  16 
2019, suggesting the potential for far greater spending reductions when biosimilars for 
blockbuster drugs become available 
Not all Part D plan formularies covered available biosimilars in 2019, and those that did  19 
rarely encouraged their use 
CONCLUSION AND RECOMMENDATIONS  23 
CMS should encourage Part D plans to increase access to and use of biosimilars  24 
CMS should monitor Part D plans submitted formularies to determine whether they  24 
discourage beneficiaries from using biosimilars 
AGENCY COMMENTS AND OIG RESPONSE  25 
DETAILED METHODOLOGY  26 
APPENDIX  30 
ACKNOWLEDGMENTS AND CONTACT  32 
ABOUT THE OFFICE OF INSPECTOR GENERAL  33 
   
BACKGROUND 
 
Objectives 
1. To identify trends in biosimilar utilization and spending in the Medicare
Part D program for 20152019.
2. To estimate how increased use of biosimilars could have changed Part D
spending and beneficiary spending in 2019.
3. To examine the extent to which Part D formularies were designed to
encourage the use of biosimilars rather than reference products in 2019.
Biological productsusually large, complex molecules produced in a living system
are among the most expensive prescription drugs in the United States.  Although less 
than 2 percent of Americans used biologics in 2018, they accounted for 40 percent of 
the total spending on prescription drugs.1  Biologics cost Medicare Part D and 
beneficiaries nearly $12 billion in 2019.2  Because biologics are often used to treat 
diseases common among the Medicare population (e.g., rheumatoid arthritis, cancer), 
Part D spending on biologics likely will continue to rise as more beneficiaries benefit 
from these expensive drugs.3 
A biosimilar is a biological product that is highly similar to and has no clinically 
meaningful difference from what is known as its reference producti.e., an existing 
biologic approved by the Food and Drug Administration (FDA).4  In 2010, Congress 
_____________________________________________________________________________________________________________________________
1 Scott Gottlieb, M.D., Commissioner of Food and Drugs, remarks as prepared for delivery at the 
Brookings Institution on the release of the Food and Drug Administrations (FDAs) Biosimilars Action 
Plan, July 18, 2018.  Accessed at https://www.fda.gov/news-events/press-announcements/remarks-fda-
commissioner-scott-gottlieb-md-prepared-delivery-brookings-institution-release-fdas on June 15, 2021. 
2 OIG analysis of the Centers for Medicare & Medicaid Services (CMS) Part D Dashboard for calendar year 
(CY) 2019 spending.  This figure excludes insulin and vaccines.  On March 23, 2020, FDA began regulating 
insulin as a biologic product, allowing for biosimilar and interchangeable versions.  Until July 2021, FDA 
had not approved any insulin biosimilars.  FDA, Insulin Gains New Pathway to Increased Competition, 
March 23, 2020.  Accessed at https://www.fda.gov/news-events/press-announcements/insulin-gains-
new-pathway-increased-competition on June 15, 2021.  See also FDA, FDA Approves First 
Interchangeable Biosimilar Insulin Product for Treatment of Diabetes, July 28, 2021.  Accessed at 
https://www.fda.gov/news-events/press-announcements/fda-approves-first-interchangeable-biosimilar-
insulin-product-treatment-diabetes on October 2, 2021. 
3 The Medicare Payment Advisory Commission (MedPAC), Chapter 14: The Medicare prescription drug 
program (Part D): Status report, Report to the Congress: Medicare Payment Policy, March 2018.  Accessed 
at https://www.medpac.gov/wp-content/uploads/import_data/scrape_files/docs/default-
source/reports/mar18_medpac_ch14_sec.pdf on February 4, 2022. 
4 A reference product is the single biological product, already approved by FDA, against which a 
proposed biosimilar product is compared.  42 U.S.C.  262(i)(4). 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Background | 1       
 
created an abbreviated approval pathway for biosimilars to increase competition and 
to lower prices for biosimilars in comparison to their reference products.  However, in 
the subsequent 11 years, competition and savings largely have not been realized.5 
Most Medicare spending on biosimilars and their reference products currently occurs 
in Part B,6 but Part D spending on biosimilars is expected to grow in the coming years.  
Specifically, biosimilars for two blockbuster drugs covered only under Part DHumira 
and Enbrelhave been approved but are not yet available to U.S. consumers.7  When 
biosimilars for these drugs become availableexpected in 2023 and 2029, 
respectivelythey present an opportunity to significantly decrease Part D drug 
costs.8, 9  Humira and Enbrel accounted for more than $5 billion in Part D spending 
and nearly half of Part D spending on biological products in 2019. 
This study is part of a larger strategy by the Office of Inspector General (OIG) to 
address one of the top management and performance challenges facing the 
Department of Health and Human Services (HHS)namely, ensuring the financial 
integrity of HHS programs.10  More broadly, the objectives of this study align with the 
Administrations strategies to reduce U.S. prescription drug spending by increasing 
access to and utilization of lower-cost biosimilars.11  It also forms a foundation for 
future work on this topic as Part D spending on biosimilars grows and as the 
_____________________________________________________________________________________________________________________________ 
5 Mike Z. Zhai, Ameet Sarpatwari, and Aaron Kesselheim, Why Are Biosimilars Not Living up to Their 
Promise in the US?, AMA Journal of Ethics, August 2019, p. 669.  Accessed at https://journalofethics.ama-
assn.org/article/why-are-biosimilars-not-living-their-promise-us/2019-08 on June 15, 2021. 
6 Most biosimilars are typically administered by a physician and therefore billed under Part B, which is 
Medicares medical benefit.  Although insulin is primarily billed under Part D, FDA did not regulate insulin 
as a biologic productor allow for biosimilar versionsuntil March 23, 2020.  FDA, Insulin Gains New 
Pathway to Increased Competition, March 23, 2020.  Accessed at https://www.fda.gov/news-
events/press-announcements/insulin-gains-new-pathway-increased-competition on June 15, 2021. 
7 FDA had approved 34 biosimilars as of March 2022; however, some of these biosimilars were not 
available to consumers because of ongoing patent litigation or patent settlement agreements or because 
manufacturers had not yet launched them. 
8 Mike Z. Zhai, Ameet Sarpatwari, and Aaron Kesselheim, Why Are Biosimilars Not Living up to Their 
Promise in the US?, AMA Journal of Ethics, August 2019, p. 671.  Accessed at https://journalofethics.ama-
assn.org/article/why-are-biosimilars-not-living-their-promise-us/2019-08 on June 15, 2021. 
9 Eric Sagonowsky, Sandoz's Enbrel biosim case turned away at SCOTUS, giving Amgen's blockbuster 
8 more years of free rein, Fierce Pharma, May 17, 2021.  Accessed at 
https://www.fiercepharma.com/pharma/sandoz-s-enbrel-biosim-case-turned-away-at-supreme-court-
giving-amgen-s-blockbuster-many on August 17, 2021. 
10 OIG, Top Management and Performance Challenges Facing HHS, 2020.  Accessed at 
https://oig.hhs.gov/reports-and-publications/top-challenges/2020/index.asp on June 15, 2021. 
11 HHS, Comprehensive Plan for Addressing High Drug Prices: A Report in Response to the Executive Order 
on Competition in the American Economy, September 9, 2021.  Executive Order No. 14036, 86 Fed. Reg. 
36987 (July 14, 2021). 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Background | 2       
 
biosimilar market matures.  Additional OIG work will examine biosimilar utilization 
and spending in Part B.12 
Biological Products 
Spending for biological productswhich are usually large, complex molecules 
produced in a living system, such as a microorganism, plant cell, or animal cellis 
growing.13  Recent analysis indicates that biologic spending has grown more than 
twice as quickly as overall drug spending since 2015 and totaled $211 billion in 
2019.14  List prices for Humira and Enbreltwo biologics that accounted for nearly 
half of the $12 billion in Part D biologic spendingdoubled between 2012 and 
2017.15  Because biologics are used to treat diseases common among Medicare 
beneficiaries (e.g., rheumatoid arthritis), Part D spending on biologics will continue to 
increase as additional beneficiaries benefit from these expensive therapies.16 
Biosimilars 
A biosimilar is a biological product that is highly similar to and has no clinically 
meaningful differences from an existing biologic (known as the biosimilars reference 
product) that has already been approved by the FDA.  In 2010, Congress passed the 
Biologics Price Competition and Innovation Act (BPCIA) as part of the Patient 
Protection and Affordable Care Act, creating an abbreviated approval pathway for 
biosimilars to introduce competition and lower prices for these drug products.17  
Under the BPCIA, FDA may approve a biosimilar once the drug manufacturer 
demonstrates that the biosimilar is highly similar to the reference product and that 
there are no clinically meaningful differences between the reference product and   
_____________________________________________________________________________________________________________________________ 
12 OIG, Biosimilar Trends in Medicare Part B, OEI-05-22-00140.  Accessed at https://oig.hhs.gov/reports-
and-publications/workplan/summary/wp-summary-0000659.asp on February 16, 2022. 
13 FDA, Biological Product Definitions.  Accessed at 
https://www.fda.gov/files/drugs/published/Biological-Product-Definitions.pdf on June 15, 2021. 
14 IQVIA, Biosimilars in the United States 2020-2024: Competition, Savings, and Sustainability, 
October 2020. 
15 Nathan E. Wineinger, Yunyue Zhang, and Eric J. Topol, Trends in Prices of Popular Brand-Name 
Prescription Drugs in the United States, JAMA Network Open, May 31, 2019, pp. 45. 
16 MedPAC, Chapter 14: The Medicare prescription drug program (Part D): Status report, Report to the 
Congress: Medicare Payment Policy, March 2018.  Accessed at https://www.medpac.gov/wp-
content/uploads/import_data/scrape_files/docs/default-source/reports/mar18_medpac_ch14_sec.pdf on 
February 4, 2022. 
17 P.L. No. 111148, Title VII,  7001-7003. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Background | 3       
 
the biosimilar.  The first biosimilarZarxiowas approved under the BPCIA by FDA in 
2015.18 
As of March 2022, 20 of the 34 FDA-approved biosimilars were available in the United 
States.19  Ongoing patent litigation and patent dispute settlements prevented many 
of the remaining biosimilars from launching in the U.S. market.20  For example, as a 
result of patent dispute settlements, manufacturers of multiple FDA-approved 
biosimilars for the blockbuster reference product Humira are not expected to launch 
their products in the United States until 2023.21  Similarly, approved biosimilars for 
another blockbuster drug, Enbrel, are not expected to launch until 2029.22 
A biosimilar can be deemed interchangeable if the manufacturer can demonstrate 
that the biosimilar produces the same clinical result as its reference product in any 
given patient.23  The interchangeability designation allows pharmacists to substitute 
an interchangeable biosimilar for its reference product without involving the 
prescriber.24  Meeting the BPCIA-established threshold for interchangeability requires 
additional data, such as results of clinical trials in which patients are switched from the 
reference product to the biosimilar.25, 26  As of November 2021, only two biosimilars
one for an insulin product and one for Humirahad been deemed 
_____________________________________________________________________________________________________________________________ 
18 Lisa A. Raedler, Zarxio (Filgrastim-sndz): First Biosimilar Approved in the United States, Journal of 
Hematology Oncology Pharmacy, June 2020, vol. 10, no. 3.  Accessed at http://jhoponline.com/2016-first-
annual-oncology-guide-to-new-fda-approvals/16744-zarxio-filgrastim-sndz-first-biosimilar-approved-in-
the-united-states on June 15, 2021. 
19 FDA, Biosimilar Product Information: FDA-Approved Biosimilar Products, July 2021.  Accessed at 
https://www.fda.gov/drugs/biosimilars/biosimilar-product-information on August 2, 2021. 
20 Mike Z. Zhai, Ameet Sarpatwari, and Aaron Kesselheim, Why Are Biosimilars Not Living up to Their 
Promise in the US?, AMA Journal of Ethics, August 2019, p. 670.  Accessed at https://journalofethics.ama-
assn.org/article/why-are-biosimilars-not-living-their-promise-us/2019-08 on June 15, 2021. 
21 Ibid, p. 671. 
22 Eric Sagonowsky, Sandoz's Enbrel biosim case turned away at SCOTUS, giving Amgen's blockbuster 
8 more years of free rein, Fierce Pharma, May 17, 2021.  Accessed at 
https://www.fiercepharma.com/pharma/sandoz-s-enbrel-biosim-case-turned-away-at-supreme-court-
giving-amgen-s-blockbuster-many on August 17, 2021. 
23 42 U.S.C.  262(k)(4). 
24 Forty-seven States have passed laws allowing pharmacists to substitute interchangeable biosimilars for 
their reference products unless a prescriber indicates that the prescription should be dispensed as 
written.  Cardinal Health, Biosimilar Interchangeability Laws by State, July 2021.  Accessed at 
https://www.cardinalhealth.com/content/dam/corp/web/documents/publication/Cardinal-Health-
Biosimilar-Interchangeability-Laws-by-State.pdf on September 27, 2021. 
25 42 U.S.C.  262(k)(4)(B). 
26 Mike Z. Zhai, Ameet Sarpatwari, and Aaron Kesselheim, Why Are Biosimilars Not Living up to Their 
Promise in the US?, AMA Journal of Ethics, August 2019, p. 669.  Accessed at  
https://journalofethics.ama-assn.org/article/why-are-biosimilars-not-living-their-promise-us/2019-08 on 
June 15, 2021. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Background | 4       
 
interchangeable.27, 28, 29  Without interchangeability status, currently a prescriber 
must proactively write or approve a prescription for a biosimilar. 
In 2019, eight biosimilars were available and approved as alternatives to four 
reference products in Part D.  These biosimilars can be self-administered or 
administered by a caregiver.  They treat autoimmune diseases like ulcerative colitis; 
anemia due to chronic kidney disease; and neutropenia, when the body makes too 
few white blood cells as a result of chemotherapy.  Part D and beneficiary spending 
on these biosimilars and their reference products was about $466 million.30  Exhibit 1 
lists the biosimilars covered under Part D in 2019 and their reference products. 
Exhibit 1: Eight Biosimilars for Four Reference Products Were Covered Under 
Part D in 2019 
Drug Group  Biosimilar  Approval Date  Reference Product(s) 
Filgrastims  Zarxio  March 2015  Neupogen 
 
  Nivestym  July 2018   
  Granix  August 201231   
Infliximabs  Inflectra  April 2016  Remicade 
 
  Renflexis  May 2017   
Pegfilgrastims  Fulphila  June 2018  Neulasta 
 
November 
  Udenyca   
2018 
Epoetin alfas  Retacrit  May 2018  Epogen/Procrit 
Source: OIG research, 2021. 
_____________________________________________________________________________________________________________________________ 
27 An interchangeable product is a biosimilar product that meets additional requirements.  FDA, 
Biological Product Definitions.  Accessed at https://www.fda.gov/files/drugs/published/Biological-
Product-Definitions.pdf on June 15, 2021. 
28 FDA, FDA Approves First Interchangeable Biosimilar Insulin Product for Treatment of Diabetes, 
July 28, 2021.  Accessed at https://www.fda.gov/news-events/press-announcements/fda-approves-first-
interchangeable-biosimilar-insulin-product-treatment-diabetes on July 29, 2021. 
29 FDA, FDA Approves Cyltezo, the First Interchangeable Biosimilar to Humira, October 18, 2021.  
Accessed at https://www.fda.gov/news-events/press-announcements/fda-approves-cyltezo-first-
interchangeable-biosimilar-humira on October 18, 2021. 
30 OIG analysis of the CMS Medicare Part D Drug Spending Dashboard.  Dashboard available at 
https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Information-
on-Prescription-Drugs/MedicarePartD. 
31 Although Granix was approved under a Biologic License Application before the BPCIA created an 
abbreviated approval pathway for biosimilars, it is considered a filgrastim biosimilar alternative. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Background | 5       
 
A number of barriers potentially limit the use of available biosimilars.  Research shows 
that many prescribers and patients are not well informed aboutand sometimes not 
even aware ofbiosimilar alternatives.32, 33  Furthermore, some prescribers are 
hesitant to switch patients who are already successfully using a reference product to 
its biosimilareven when the prescribers have a high degree of confidence in the 
biosimilars safety and effectiveness.34  Industry stakeholders argue that confusion 
among prescribers, patients, and plans results in part from differences in FDA naming 
conventions for biosimilars and their reference products that may make biosimilars 
appear inferior.35, 36, 37  Additional research indicates that low biosimilar use, 
particularly in Part D, may be attributed to a variety of causes, such as formulary 
exclusion, unfavorable formulary tier placement, and rebates for preferential 
formulary treatment of reference products.38, 39, 40 
Part D Drug Coverage and Formulary Design 
Part D sponsors contract with the Centers for Medicare & Medicaid Services (CMS) to 
administer the Part D benefit through prescription drug plans.  Each plan has a 
formulary, or a list of covered drugs.  CMS reviews the formularies submitted by plan 
sponsors to ensure they align with best practices and provide sufficient access to  
   
_____________________________________________________________________________________________________________________________ 
32 John W. Cook et al., Academic oncology clinicians understanding of biosimilars and information 
needed before prescribing, Therapeutic Advances in Medical Oncology, vol. 22, Jan. 6, 2019. 
33 Ira Jacobs et al., Patient attitudes and understanding about biosimilars: an international cross-
sectional survey, Patient Preference and Adherence, May 26, 2016. 
34 NORC, Understanding Stakeholder Perception of Biosimilars, April 2021.  Accessed at 
https://www.norc.org/Research/Projects/Pages/understanding-stakeholder-perception-of-
biosimilars.aspx on October 5, 2021. 
35 Biospace, In an Attempt at Clarity, FDA Makes the Biosimilar Naming Convention Even More 
Confusing, March 8, 2019.  Accessed at https://www.biospace.com/article/fda-abandons-biosimilar-
naming-convention/ on October 30, 2019. 
36 Biosimilars Council, Naming Advocacy.  Accessed at https://www.biosimilarscouncil.org/advocacy/ on 
October 28, 2019. 
37 Biosimilars nonproprietary names follow a standard naming convention: the reference products 
nonproprietary name plus a four-letter suffix (e.g., pegfilgrastim-jmdb). 
38 Mike Z. Zhai, Ameet Sarpatwari, and Aaron Kesselheim, Why Are Biosimilars Not Living up to Their 
Promise in the US?, AMA Journal of Ethics, August 2019, p. 671.  Accessed at https://journalofethics.ama-
assn.org/article/why-are-biosimilars-not-living-their-promise-us/2019-08 on June 15, 2021. 
39 Jinoos Yazdany et al., Out-of-Pocket Costs for Infliximab and Its Biosimilar for Rheumatoid Arthritis 
Under Medicare Part D, JAMA, Vol. 320, No. 9, September 2018, pp. 931-933.  Accessed at 
https://jamanetwork.com/journals/jama/fullarticle/2698912 on June 15, 2021. 
40 Biosimilars Council, Failure to Launch: Barriers to Biosimilar Market Adoption, September 2019.  
Accessed at https://www.biosimilarscouncil.org/wp-content/uploads/2019/09/AAM-Biosimilars-Council-
Failure-to-Launch-2-web.pdf on June 15, 2021. p. 6. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Background | 6  a range of drugs.41  At a minimum, formularies must cover commonly needed drugs 
and generally must offer at least two different drugs in each drug class and 
category.42  Formularies allow Part D plans to negotiate lower drug prices with 
manufacturers in exchange for giving the drugs preferential tier placement on a plans 
formulary.43 
Tier Placement 
Part D plan formularies organize the drugs they cover into tiers with different 
beneficiary cost-sharing requirements.44  Beneficiaries typically pay less for drugs on 
lower formulary tiers and more for drugs on higher formulary tiers.45  Part D plans can 
use preferential tier placement to encourage utilization of certain drugs.  Many Part D 
plans use five-tier formularies that include one specialty tier for very high-priced 
drugs.46, 47
Utilization management tools 
In addition to using formulary tier placement to control costs and utilization of 
specific drugs, Part D plans may implement utilization management tools.  These tools 
include prior authorization and step therapy.  Prior authorization requires prescribers 
to obtain approval from the Part D plan before it will cover a specific drug.  
_____________________________________________________________________________________________________________________________
41 CMS, Medicare Prescription Drug Benefit Manual, ch. 6,  30.2.7.  Accessed at 
https://www.cms.gov/Medicare/Prescription-Drug-
Coverage/PrescriptionDrugCovContra/Downloads/Part-D-Benefits-Manual-Chapter-6.pdf on 
June 15, 2021. 
42 42 CFR  423.120(b)(2). 
43 Health Affairs, Prescription Drug Pricing, September 2017, p. 1.  Accessed at 
https://www.healthaffairs.org/do/10.1377/hpb20171409.000177/full/hpb_2017_09_14_formularies.pdf on 
June 15, 2021. 
44 Beneficiaries can request coverage for drugs not included on their plans formulary by submitting 
formulary exception requestswith provider documentationto their Part D plan.  CMS, Parts C & D 
Enrollee Grievances, Organization/Coverage Determinations, and Appeals Guidance,  40.5.2, 40.5.3.  
Accessed at https://www.cms.gov/Medicare/Appeals-and-Grievances/MMCAG/Downloads/Parts-C-and-
D-Enrollee-Grievances-Organization-Coverage-Determinations-and-Appeals-Guidance.pdf on August 16,
2021. 
45 According to CMS, tier 1 should be the lowest cost-sharing tier available to beneficiaries, and any 
subsequent tiers should be higher cost-sharing tiers in ascending order.  CMS, Medicare Prescription Drug 
Benefit Manual, ch. 6,  30.2.7. 
46 MedPAC, Chapter 14: The Medicare prescription drug program (Part D): Status report, Report to the 
Congress: Medicare Payment Policy, March 2019.  Accessed at https://www.medpac.gov/wp-
content/uploads/import_data/scrape_files/docs/default-source/reports/mar19_medpac_ch14_sec.pdf on 
February 4, 2022. 
47 In 2022, Part D plan sponsors may establish a second, preferred specialty tier on their formularies.  
42 CFR  423.104(d)(2)(iv)(D).  CMS gave sponsors flexibility to determine which drugs are placed on the 
two specialty tiers.  For example, CMS noted that the second specialty tier may impact Part D drug costs 
by allowing sponsors to encourage use of biosimilars on the preferred specialty tier or by giving them 
additional negotiating power with brand drug manufacturers.  86 Fed. Reg. 6077 (January 19, 2021). 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Background | 7  Step therapy typically requires beneficiaries to first try a less expensive drug before 
moving to a more expensive drug. 
Drug rebates 
Part D plan sponsors may negotiate rebates from drug manufacturers in exchange for 
encouraging greater utilization of a manufacturers drug.  For example, manufacturers 
may offer rebates to plan sponsors in exchange for placing their drugs on preferred 
formulary tiers with lower beneficiary cost-sharing or for exclusive coverage of their 
drugs.48, 49  In some cases, a manufacturers rebates for biologic reference products 
may be high enough that they reduce the cost of these products so much that the 
biosimilarsdespite their typically lower list priceare more expensive for the Part D 
plan than their reference products.50  However, manufacturer rebates generally do not 
directly lower Part D drug costs for beneficiaries. 
Beneficiary cost-sharing 
Beneficiaries cost-sharing obligations shift over the course of the annual Part D 
benefit.  As their drug spending increases, beneficiaries move through the phases of 
the standard Part D drug benefitdeductible, initial coverage, coverage gap, and 
catastrophic coverage.  Cost-sharing amounts for beneficiaries, known as 
out-of-pocket costs, vary from one phase to another.  Beneficiaries pay for all drug 
costs until they meet their Part D plans deductible.  During the initial coverage and 
coverage gap phases, beneficiaries pay copayments (fixed payment amounts) and 
coinsurance amounts (payments based on a percentage of the drugs cost).  
Beneficiaries then pay no more than 5-percent coinsurance during catastrophic 
coverage. 
Contributions from other sources can reduce beneficiaries out-of-pocket costs.  
Beneficiaries who meet certain income and asset thresholds may qualify for reduced 
cost-sharing under Medicares Low-Income Subsidy (LIS) program.  In some cases, 
beneficiaries may receive financial assistance from other sources, such as charities or 
other government healthcare programs. 
Recent legal and policy changes to the Part D drug benefit have decreased beneficiary 
cost-sharing for biosimilars; however, these changes affect only select Part D coverage 
phases or beneficiaries.  Beginning in 2019, biosimilar manufacturers provided 
_____________________________________________________________________________________________________________________________
48 Congressional Research Service, Negotiation of Drug Prices in Medicare Part D, October 2019, p. 1.  
Accessed at https://crsreports.congress.gov/product/pdf/IF/IF11318 on June 15, 2021. 
49 MedPAC, Chapter 14: The Medicare prescription drug program (Part D): Status Report, Report to the 
Congress: Medicare Payment Policy, March 2020, p. 431.  Accessed at https://www.medpac.gov/wp-
content/uploads/import_data/scrape_files/docs/default-source/reports/mar20_medpac_ch14_sec.pdf on 
February 4, 2022. 
50 Jinoos Yazdany, Failure to Launch: Biosimilar Sales Continue to Fall Flat in the United States, Arthritis 
Rheumatology, Vol. 72, No. 6, pp. 870-873, September 2019. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Background | 8  beneficiaries with a 70-percent discount on biosimilars in the coverage gap 
by participating in the Medicare Coverage Gap Program.51, 52  Prior to this, when 
beneficiaries were in the coverage gap, they received the 70-percent manufacturer 
discount only on biologics (i.e., reference products and biologics without biosimilar 
competitors).53  Additionally, CMS finalized a rule in 2018 that reduced cost-sharing 
for LIS beneficiaries, allowing biosimilars to be covered at the copayment level for 
generic drugs rather than for brand-name drugs for these beneficiaries.54  As a result, 
LIS beneficiaries paid very littlebetween $0 and $3.40for biosimilar drugs in 
2019.55 
Methodology 
This study analyzed trends in biosimilar utilization and spending in Part D using 
information about prescription drug costs and beneficiary spending from calendar 
years (CYs) 2015 to 2019.  We calculated multiple estimates to explore how Part D and 
beneficiary spending in CY 2019 could have changed had there been increased 
biosimilar use. 
This study also analyzed 2019 Part D plan formularies to examine how formulary 
coverage, placement, and utilization management requirements for biosimilars 
compared to those for their reference products. 
Data Analysis 
Analysis of total utilization and spending over time.  To analyze total Part D 
biosimilar utilization and spending over time, we identified all Prescription Drug Event 
(PDE) records for biosimilars and reference products from January 1, 2015, 
_____________________________________________________________________________________________________________________________
51 The Bipartisan Budget Act of 2018 required that manufacturers provide a 70-percent discount for 
biosimilars.  Section 53116 of Bipartisan Budget Act of 2018, P.L. No. 115-123 (February 9, 2018).  See 
also Kaiser Family Foundation, Closing the Medicare Part D Coverage Gap: Trends, Recent Changes, and 
Whats Ahead, August 21, 2018.  Accessed at https://www.kff.org/medicare/issue-brief/closing-the-
medicare-part-d-coverage-gap-trends-recent-changes-and-whats-ahead/ on June 15, 2021. 
52 Although the Part D coverage gap (the so-called doughnut hole) closed in 2019, beneficiaries still 
face high cost-sharing for biologics and biosimilars after the initial coverage phase.  Beneficiaries still pay 
for 25 percent of brand-name drug costs after initial coverage ends.  Bipartisan Budget Act of 2018, 
P.L. No. 115-123 (February 9, 2018).
53 Kaiser Family Foundation, Summary of Recent and Proposed Changes to Medicare Prescription Drug 
Coverage and Reimbursement, February 15, 2018.  Accessed at https://www.kff.org/medicare/issue-
brief/summary-of-recent-and-proposed-changes-to-medicare-prescription-drug-coverage-and-
reimbursement/ on June 15, 2021. 
54 42 CFR  423.782(a)(2)(iii)(A) and 423.782(b)(3). 
55 CMS, Announcement of Calendar Year (CY) 2019 Medicare Advantage Capitation Rates and Medicare 
Advantage and Part D Payment Policies and Final Call Letter, April 2, 2018.  Accessed at 
https://www.cms.gov/Medicare/Health-
Plans/MedicareAdvtgSpecRateStats/Downloads/Announcement2019.pdf on June 15, 2021. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Background | 9  to December 31, 2019.56  We considered all biosimilars approved for the same 
reference product to belong to one biosimilar drug group.  For each year and quarter, 
we summed the number of records for each biosimilar drug group and reference 
product.  We calculated annual and quarterly utilization rates for all biosimilars and 
for each biosimilar drug group by dividing the number of biosimilar prescriptions by 
the total number of biosimilar and reference product prescriptions.  We calculated 
Part D gross spending by summing the ingredient cost, sales tax, and dispensing fee 
PDE variables.57 
To analyze total beneficiary spending on biosimilars over time, we summed the 
patient payment amount from PDE records.58  This amount represents the 
out-of-pocket copayment or coinsurance paid by a beneficiary for a prescription. 
We also calculated 2019 Part D and beneficiary spending for two reference 
productsHumira and Enbrelexpected to have biosimilars available on the 
U.S. market in 2023 and 2029, respectively. 
Analysis of average spending in 2019.  For each biosimilar drug group and reference 
product, we calculated average Part D and beneficiary spending amounts for CY 2019 
by dividing the Part D and beneficiary spending by the total drug weight dispensed. 
We then used the average spending amounts to illustrate spending differences for 
typical prescriptions for biosimilars and reference products.  First, to define a typical 
prescription, we calculated the median drug weight dispensed for each biosimilar 
drug group and its reference product.  We then multiplied the average spending 
amounts for each biosimilar drug group and reference product by the amount 
dispensed for the typical prescription. 
Analysis of changes in 2019 spending with increased biosimilar use.  We calculated 
multiple estimates for changes in Part D and beneficiary spending had biosimilars 
been used at higher rates in 2019. 
We took two steps to estimate how any increase in biosimilar utilization could have 
changed Part D and beneficiary spending.59  We first estimated how much Part D and 
beneficiaries could have spent if all CY 2019 prescriptions for reference products had 
been for biosimilars instead, using the average biosimilar spending amounts 
described above.  We used average spending at the biosimilar drug group level to 
_____________________________________________________________________________________________________________________________
56 We excluded insulin from this analysis because FDA did not regulate insulin as a biologic product until 
March 23, 2020. 
57 This represents the total amount paid for drugs covered by the Medicare benefit before rebates are 
taken into account. 
58 To better approximate most beneficiaries cost-sharing obligations, we excluded beneficiaries who 
were receiving other sources of support (e.g., group health plans, governmental programs) from the 
analysis of beneficiary spending, as well as beneficiaries enrolled in PACE (Program of All-Inclusive Care 
for the Elderly) plans. 
59 We analyzed changes in spending by beneficiaries receiving the low-income subsidy (LIS) separately. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Background | 10  avoid making assumptions about prescribing practices (e.g., which brand or strength 
of a biosimilar would be prescribed).  Based on thisand the actual spending and 
utilization for biosimilars in 2019we then estimated how any increase in biosimilar 
utilization could have changed Part D and beneficiary spending. 
We then used these estimates to assess 2019 Part D and beneficiary spending at 
various utilization rates, two of which we focused on in the report.  We included 
conservative estimates of what Part D and beneficiary spending could have been if 
total biosimilar utilization had matched the 60-percent utilization rate of the most 
used biosimilar group (i.e., filgrastim biosimilars).  We also included optimistic 
estimates of what Part D and beneficiary spending could have been if biosimilar 
utilization in 2019 had matched the 90-percent utilization rate for Part D generic 
drugs (i.e., approved generic versions of small-molecule, nonbiologic drugs).60  The 
total difference between the actual and estimated spending amounts represented the 
potential reductions in Part D and beneficiary spending if biosimilar use had increased 
in 2019. 
We used the same methodology to estimate how increased biosimilar use could have 
changed Part D net spendingthat is, Part D spending after adjusting for rebates.  To 
arrive at net spending calculations, we used Direct and Indirect Remuneration (DIR) 
data about manufacturer rebates from CMSs Health Plan Management System 
(HPMS).61  We did not adjust beneficiary spending to reflect rebates because rebates 
typically do not affect beneficiary out-of-pocket costs. 
Analysis of biosimilar formulary coverage and placement.  We analyzed formulary 
coverage and placement separately for each biosimilar drug group.  To determine 
whether Part D plan formularies encouraged biosimilars, we used data from HPMS to 
calculate the percentage of formularies that included both biosimilars and their 
reference products; included only biosimilars; or included only the reference products 
for biosimilars.  For formularies that covered both biosimilars and their reference 
products, we calculated the percentages that (1) placed biosimilars on lower, higher, 
or the same formulary tiers as their reference products and (2) had different 
requirements for step therapy and prior authorization for biosimilars than they had 
for those biosimilars reference products. 
See the Detailed Methodology section for more information. 
_____________________________________________________________________________________________________________________________
60 In an analysis of Part D prescriptions that could have been filled with an approved generic version of 
a small-molecule drug, CMS found that the generic drug was used 90.8 percent of the time.  CMS, 
Increasing Access to Generics and Biosimilars in Medicare, February 5, 2020. 
61 Because HHS treats DIR data with confidentiality, we are refraining from reporting net spending or net 
savings totals of individual biosimilar or reference products in this report. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Background | 11  Limitations 
Changes in Part D and beneficiary spending are estimates and do not represent the 
exact spending changes that would have resulted from increased biosimilar use 
in 2019.  For instance, these estimates do not account for how drug manufacturers 
might have responded to greater biosimilar utilization, such as by renegotiating 
rebates with plans or changing pricing for reference products or biosimilars in 
response to greater biosimilar use.  These estimates also do not account for how 
increased use of biosimilars could have shifted beneficiaries through the Part D 
benefit phases or the resulting impacts on beneficiary spending. 
This study did not assess whether the increased utilization rates used to estimate 
spending reductions are achievable.  For example, this report does not include an 
analysis of additional barriers and challengessuch as prescriber preferencesthat 
may prevent greater use of biosimilars.  Unlike generic drugs, the biosimilars in this 
study cannot be substituted for their reference products by a pharmacist because FDA 
has not deemed them interchangeable. 
Standards 
We conducted this study in accordance with the Quality Standards for Inspection and 
Evaluation issued by the Council of the Inspectors General on Integrity and Efficiency. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Background | 12   
FINDINGS 
 
Use of biosimilars in Part D increased every year, but most 
biosimilars were still used far less than their reference products 
in 2019 
Since biosimilars were first introduced in 2015, use of these drugs in Part D has 
steadily grownyet remains low compared to use of their reference products.  In 
nearly 5 years, the total number of biosimilar prescriptions increased substantially; 
however, biosimilars accounted for only 17 percent of all prescriptions for biosimilars 
and their reference products in 2019.  Among the four drug groups, only filgrastim 
biosimilars were used more frequently than their reference products.  From 2015 to 
2019, filgrastim biosimilars grew from 3 percent to 62 percent of quarterly filgrastim 
prescriptions, driven largely by increased use of Zarxio.  In contrast, newer biosimilars 
in the other three drug groups were used to a much lesser extent than their reference 
products.  Specifically, in the fourth quarter of 2019, biosimilars made up 16 percent 
of epoetin alfa prescriptions, 12 percent of pegfilgrastim prescriptions, and 7 percent 
of infliximab prescriptions.  Exhibit 2 shows that most biosimilars were used much less 
frequently than their reference products. 
Exhibit 2: For most biosimilars, use remained low compared to their 
reference products. 
Note: We analyzed the biosimilar share of prescriptions starting in the quarter when a biosimilar alternative first 
became available on the U.S. market. 
Source: OIG analysis of Part D PDE data from 20152019. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Findings | 13  While biosimilar filgrastim use in Part D increased substantially after a year on the 
market, subsequent biosimilars have been adopted more slowly.  Filgrastim 
biosimilars grew from 3 percent to 22 percent of all filgrastim prescriptions within a 
year of their introduction.  In contrast, after the same amount of time on the market, 
newer biosimilars accounted for smaller proportions of their respective drug groups 
prescriptions than did filgrastim biosimilars.  By the end of their respective first years 
on the market, biosimilars made up less than 1 percent of total infliximab 
prescriptions, 8 percent of pegfilgrastim prescriptions, and 12 percent of epoetin alfa 
prescriptions.  In addition to being affected by time on the market, utilization of 
newer biosimilars may have been affected by other factors, such as the purpose of the 
drug, providers prescribing preferences, or the number of available biosimilars.  
Exhibit 3 illustrates the slower adoption of these biosimilars when compared with 
filgrastim biosimilars. 
Exhibit 3: Newer biosimilars have been adopted more slowly than filgrastim 
biosimilarsboth at the end of their first year on the market and after.
Source: OIG analysis of Part D PDE data from 20152019. 
Part D spending.  As biosimilar utilization increased, Part D spending for these drugs 
rose but still accounted for a small portion of overall Part D spending on biosimilars 
and their reference products combined.  From 2015 to 2019, total spending on 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Findings | 14  biosimilars rose from $1.7 million to $60.8 million.  In 2019, however, this amounted 
to only 13 percent of the overall $466 million that Part D paid for biosimilars and their 
reference products combined. 
Although Part D spending on biosimilars has increased, the program paid less on 
average for biosimilars than for their reference products, which contributed to 
biosimilars small share of overall spending.  Additionally, Part D spending adjusted 
for rebates was lower on average for biosimilars than for their reference products.62  
See Exhibit 4 for average Part D gross spending differences for typical reference 
product and biosimilar prescriptions in 2019.   
Exhibit 4: Part D spending for typical prescriptions was lower for biosimilars 
than for the biosimilars reference products. 
Source: OIG analysis of Part D PDE data from 2019. 
Beneficiary spending.  As with the share of biosimilars in Part D spending, 
beneficiaries total out-of-pocket spending on biosimilars constituted a small share of 
their spending on reference products and biosimilars combined.  Beneficiaries total 
out-of-pocket costs for biosimilars increased from $152,000 in 2015 to $2.8 million in 
2019.  This accounted for less than 20 percent of the $14.5 million that beneficiaries 
spent on biosimilars and their reference products in 2019. 
On average, beneficiaries paid less for most biosimilars than for their reference 
products.  See Exhibit 5, on the next page, for an illustration of how lower average 
beneficiary spending for biosimilars would translate to lower out-of-pocket costs for 
_____________________________________________________________________________________________________________________________
62 Because HHS treats DIR data with confidentiality, we are refraining from reporting net spending or net 
savings totals of individual biosimilar or reference products in this report. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Findings | 15  typical biosimilar prescriptions in 2019.  Additionally, Low-Income Subsidy (LIS) 
beneficiaries typically paid $2.55 less for most biosimilars than for their reference 
products. 
Exhibit 5: Beneficiary out-of-pocket costs for typical prescriptions were 
lower for biosimilars than for the biosimilars reference products. 
Note: The analysis of beneficiaries typical prescription spending does not include spending by beneficiaries whose 
cost-sharing contributions were reduced by Medicares LIS program. 
Source: OIG analysis of Part D PDE data from 2019.
Increased biosimilar use could have reduced Part D and 
beneficiary spending considerably in 2019, suggesting the 
potential for far greater spending reductions when biosimilars 
for blockbuster drugs become available 
Drug spending on biologics with available biosimilars could have been reduced 
considerably for the Part D program and its beneficiaries if all biosimilars had been 
used at higher rates.  This is true both for gross spending and for net spending, which 
takes into account the rebates that manufacturers pay to Part D plan sponsors.  The 
estimated net spending reductions for the Part D program from increased biosimilar 
use are comparable to reductions based on gross spending.63  Further, rebates 
generally have no effect on beneficiary out-of-pocket costs and therefore do not 
change the estimated reductions in beneficiary spending.  Although the estimated 
spending decreases are modest in the context of overall Part D spending, far greater 
_____________________________________________________________________________________________________________________________
63 Because HHS treats DIR data with confidentiality, we are refraining from reporting net spending or net 
savings totals of individual biosimilar or reference products in this report. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Findings | 16  spending reductions may be possible as biosimilars for blockbuster drugs Humira and 
Enbrel come on the U.S. marketexpected in 2023 and 2029, respectively. 
Part D spending on biosimilars and their reference products 
could have been reduced between 18 percent and 31 percent 
if biosimilars had been used at higher rates 
Part D gross spending on biosimilars and their reference products could have 
decreased $84 million in 2019 if all available biosimilars had been used at the same 
60-percent utilization rate as
filgrastim biosimilars.  This amounts
to 18 percent of the $466 million
that Part D spent on all biosimilars
and their reference products in
2019.  We estimated utilization for
all biosimilars at 60 percent
because filgrastim biosimilars had
achieved this utilization rate after
nearly 5 years on the market.  Furthermore, if biosimilars had been used at
a 90-percent utilization ratethe utilization rate of generic, nonbiologic drugs
Part D gross spending on these drugs could have decreased by $143 million, or
31 percent of actual 2019 gross spending.
In both estimates, the largest spending reductions would have come from increased 
utilization of the biosimilar for epoetin alfa.  Epoetin alfa products were widely used in 
Part D in 2019, but use of the biosimilar was low compared to use of its more 
expensive reference product. 
Beneficiaries out-of-pocket costs for biosimilars and their 
reference products could have been reduced between 12 percent 
and 22 percent if biosimilars had been used at higher rates 
Overall beneficiary spending on biosimilars and their reference products could have 
decreased by nearly $1.8 million if all biosimilars had been used at the same 
60-percent utilization rate at which filgrastim biosimilars were used.  This is 12 percent
less than the $14.3 million spent by these beneficiaries on all biosimilars and
reference products in 2019.  If all biosimilars had been used at the same rate as
generic drugs (90 percent), overall beneficiary spending on these drugs could have
decreased by $3.1 million22 percent.
For some individual beneficiaries, using a biosimilar rather than a reference product 
had the potential to markedly reduce the beneficiarys out-of-pocket spending for 
these expensive drugs.  The extent to which a beneficiary could have reduced this 
out-of-pocket spending by using a biosimilar depends on multiple factors, such as the 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Findings | 17  type of drug prescribed, the benefit phase in which the prescription was filled, and the 
cost-sharing structure of the beneficiarys Part D plan.  For example, beneficiaries may 
have greater reductions in their out-of-pocket costs when using biosimilars during the 
initial coverage phase, rather than during the catastrophic coverage phase, because 
beneficiary cost-sharing is capped at 5 percent during the latter.  Exhibit 6 illustrates 
the differences in cost-sharing between reference product and biosimilar epoetin alfa 
for two beneficiaries in the same Part D plan. 
Exhibit 6: Beneficiaries may have significantly different out-of-pocket costs 
when using reference products and biosimilarseven when they are 
enrolled in the same Part D plan and during the same benefit phase. 
Note: We selected claims for reference product prescriptions and biosimilar prescriptions that were for the same 
quantity and strength of drug and that occurred in the initial coverage phase of the Part D benefit. 
Source: OIG analysis of Part D PDE data from 2019. 
Although out-of-pocket costs are low for LIS beneficiaries, these beneficiaries also 
could have realized spending reductions with increased utilization of biosimilars in 
2019.64  Spending by these beneficiaries could have decreased by 15 percent or nearly 
$34,000 if all biosimilars had been used at the same utilization rate (60 percent) at 
which filgrastim biosimilars were used.  If all biosimilars had been used at the same 
rate as generic drugs (90 percent), spending could have decreased 25 percentmore 
than $55,000. 
_____________________________________________________________________________________________________________________________
64 LIS beneficiaries generally paid very little for prescription drugs in 2019between $0 and $8.50 for 
a brand-name drug or reference product and between $0 and $3.40 for a generic or biosimilar.  CMS, 
Announcement of Calendar Year (CY) 2019 Medicare Advantage Capitation Rates and Medicare 
Advantage and Part D Payment Policies and Final Call Letter, April 2, 2018.  Accessed at 
https://www.cms.gov/Medicare/Health-
Plans/MedicareAdvtgSpecRateStats/Downloads/Announcement2019.pdf on June 15, 2021. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Findings | 18  Substantial reductions in both Part D and beneficiary spending 
may be possible when biosimilars for blockbuster drugs become 
available 
The potential for even greater spending reductions is possible as more biosimilars 
come on the market.  Nine biosimilars for two blockbuster drugsHumira and 
Enbrelhave been approved but are not yet available to U.S. consumers.  Unlike with 
the drugs we analyzed for this study, which are also covered under Medicares Part B, 
Humira and Enbrel are covered solely by Part D.  As a result, all savings on biosimilars 
for these drugs will accrue to Part D and its beneficiaries.  Further, many Part D 
beneficiaries likely will continue to take drugs such as Humira and Enbrel because 
they treat diseases like rheumatoid arthritis that are prevalent among the Medicare 
population.  Finally, these drugs are typically administered more frequentlyas often 
as weekly or every other weekthan the drugs included in this study. 
Together, Humira and Enbrel accounted in 2019 for more than $5.7 billion in Part D 
spendingmore than 14 times the $405 million that Part D spent that year for 
reference products with available biosimilars.  In 2019, beneficiary spending for 
Humira and Enbrel totaled more than $70 million.  When biosimilars for Humira and 
Enbrel become availableexpected in 2023 and 2029, respectivelythey present an 
opportunity to dramatically decrease spending if there is significant use of the 
biosimilars.  Furthermore, at least seven biosimilars for Humiraincluding one 
designated as interchangeablemay be available and could bring even greater 
spending reductions.  For instance, one recent study indicates that with each 
additional biosimilar alternative that enters the market, the average price decreases 
for the entire group of biosimilars and their corresponding reference product.65  With 
numerous biosimilars available as alternatives to Humira, they may have a greater 
impact on the market than if a single biosimilar alternative were available.  
Additionally, Humira may see increased competition from the biosimilar alternative 
that has been designated as interchangeable, which means that pharmacists can 
substitute it for the reference product without consulting with the prescriber.66 
Not all Part D plan formularies covered available biosimilars in 
2019, and those that did rarely encouraged their use 
The Part D program and its beneficiaries would have seen spending reductions with 
more widespread biosimilar use, but biosimilar use may have been limited by Part D 
formularies lack of biosimilar coverage.  As of 2019, not all plan formularies that 
covered reference products also covered their biosimilar alternatives.  Those that 
covered both reference products and biosimilars usually treated them equally
_____________________________________________________________________________________________________________________________
65 Richard G. Frank et al., Biosimilar Competition: Early Learning, National Bureau of Economic Research 
Working Paper Series, March 2021.  Accessed at http://www.nber.org/papers/w28460 on July 26, 2021. 
66 Biosimilar substitution by pharmacists is subject to State pharmacy laws, which vary by State. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Findings | 19  in other words, they did not use formulary design or utilization management tools to 
encourage the use of biosimilars instead of reference products. 
When biosimilars for Humira and Enbrel become available, plans may have strong 
incentives to exclude them from formularies or otherwise discourage their use.  
Humira and Enbrel account for billionsrather than millionsof dollars in Part D 
spending.  To maintain their market share, manufacturers may provide substantial 
rebates to Part D plan sponsors in exchange for exclusive coverage or preferred 
placement of these drugseither of which would discourage the use of biosimilars.67 
These rebates typically would not lower out-of-pocket costs for beneficiaries using 
the reference products. 
In 2019, plan formularies did not always include biosimilars
particularly those that had been more recently introduced 
Biosimilarsespecially those that were newer on the marketwere not always 
included on plan formularies in 2019.68  The plan formularies that covered only 
reference products in effect discouraged biosimilar utilization by preventing 
beneficiaries from using their Part D coverage for biosimilars instead of reference 
products.  Specifically, in 2019, 38 percent of plan formularies that covered an epoetin 
alfa reference product did not cover the biosimilar and 32 percent of formularies that 
covered the pegfilgrastim reference product did not cover a biosimilar.  These 
coverage decisions occurred despite the biosimilars costing Part D less on average 
than their reference products, even when accounting for rebates.  Although nearly all 
plan formularies covered at least one filgrastim biosimilar, 40 percent did not cover 
Zarxiothe most widely used filgrastim biosimilar and the primary competitor to the 
reference product.69 
Few plan formularies covered biosimilars without also covering their corresponding 
reference products, and thereby actively encouraged the use of biosimilars.  Filgrastim 
biosimilars were the only biosimilars that a considerable number of plan formularies 
_____________________________________________________________________________________________________________________________
67 MedPAC, Chapter 14: The Medicare prescription drug program (Part D): Status Report, Report to the 
Congress: Medicare Payment Policy, March 2020, p. 431.  Accessed at http://medpac.gov/docs/default-
source/reports/mar21_medpac_report_to_the_congress_sec.pdf on October 5, 2021. 
68 In 2019, Part D plans did not include infliximab products on their formularies because of a change that 
CMS made to its list of drugs that may be included on formularies.  (CMS had removed some drugs 
primarily covered under Part B, like infliximab products, from this list.)  Although infliximab reference 
products and biosimilars were not explicitly included on Part D formularies, they were still covered and 
paid for by Part D.  Any beneficiary who needed an infliximab product had to submit a formulary 
exception requestwith provider documentationto the beneficiarys Part D plan.  CMS, Parts C & D 
Enrollee Grievances, Organization/Coverage Determinations, and Appeals Guidance,  40.5.  Accessed at 
https://www.cms.gov/Medicare/Appeals-and-Grievances/MMCAG/Downloads/Parts-C-and-D-Enrollee-
Grievances-Organization-Coverage-Determinations-and-Appeals-Guidance.pdf on October 4, 2021. 
69 Zarxio is considered the primary competitor to Neupogenthe reference product for filgrastim 
biosimilarsbecause it was approved for all five of the filgrastim indications and has gained a larger 
market share in Part D than other filgrastim biosimilars. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Findings | 20  18 percentcovered instead of the reference product.  In contrast, no plan 
formularies covered only the epoetin alfa biosimilar rather than the reference 
products.  Similarly, only one plan formulary covered only a pegfilgrastim biosimilar 
without also covering the reference product.  
Most plan formularies that included biosimilars did not use tools 
to encourage biosimilar use 
Plan formularies rarely used formulary toolssuch as preferential tier placement or 
utilization managementto encourage the use of biosimilars instead of their 
reference products. 
Tier placement.  Tier placement plays a key role in whether prescribers decide to 
prescribe biosimilars.  For example, in addition to affecting beneficiary cost-sharing, 
tier placement on a plan formulary can influence prescribers preferences.  Specifically, 
a recent survey (conducted from December 2019 through January 2020) found that 
when both the biosimilar and its reference product are available on the formulary, 
prescribers will choose the reference product unless the biosimilar is in a preferred 
position on the formulary.70 
Most plan formularies that covered both biosimilars and reference products did not 
encourage biosimilar use by placing these drugs in preferred positions on the 
formulary relative to the positions of their reference products.  Instead, most placed 
biosimilars on the same formulary tier as their reference products.  Specifically, more 
than 97 percent of these plan formularies placed all covered biosimilar and reference 
product filgrastims or pegfilgrastims on the same formulary tier.  Less than 3 percent 
of these formularies placed either a filgrastim biosimilar or a pegfilgrastim biosimilar 
on a lower tier than its reference product.  Additionally, more than 60 percent of these 
plan formularies placed all epoetin alfa biosimilars and reference products on the 
same formulary tiers.  Only 12 percent of these formularies placed all epoetin alfa 
biosimilars on lower tiers than their reference product. 
When plan formularies place a biosimilar and its reference product on the same tier, 
beneficiaries have fewer financial incentives to use the biosimilar.  As drugs on lower 
(i.e., preferential) formulary tiers typically have lower out-of-pocket costs, placing 
a biosimilar and its reference product on the same tier limits the potential cost 
savings for beneficiaries using the biosimilar.71  Notably, when a biosimilar and its 
reference product are on the same tier, with a fixed copayment, using the biosimilar 
may not reduce beneficiary cost-sharing at all. 
Utilization management tools.  Similarly, most plan formularies used the same 
utilization management tools for biosimilars and their reference productsmeaning 
_____________________________________________________________________________________________________________________________
70 Allison R. Kolbe et al., Physician Understanding and Willingness to Prescribe Biosimilars: Findings from 
a US National Survey, BioDrugs, Vol. 35, Issue 3, pp. 363-372, 370. 
71 CMS, Medicare Prescription Drug Benefit Manual, ch. 6,  30.2.7. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Findings | 21  they neither actively encouraged nor discouraged biosimilar use.  For newer 
biosimilars, most 2019 plan formularies that covered both biosimilars and their 
reference products used the same prior authorization or step therapy requirements 
for these drugs.  More than 95 percent of these plan formularies had the same prior 
authorization or step therapy requirements for pegfilgrastim or epoetin alfa 
biosimilars and their reference products.  For filgrastims, more than 85 percent of plan 
formularies had the same utilization management requirements for biosimilars and 
for their reference product. 
There were some exceptionsa small number of plan formularies used utilization 
management tools to encourage use of the most used biosimilars, particularly the 
filgrastim biosimilar Zarxio.  Specifically, 13 percent of plan formularies did not require 
prior authorization for at least one filgrastim biosimilar but did for the reference 
product.  Also, 8 percent of plan formularies used step therapy in a way that would 
encourage the use of these biosimilarsusually requiring that beneficiaries try the 
biosimilar Zarxio before other filgrastims. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Findings | 22   
CONCLUSION AND RECOMMENDATIONS 
 
Biosimilars have the potential to reduce costs for the Part D program and its 
beneficiaries, both now and in the future.  Although use of these drugs has steadily 
increased, most are still used far less often than their reference products.  We 
estimated that even a conservative increase in the use of currently available 
biosimilars could have greatly reduced spending for the Part D program and its 
beneficiaries in 2019.  With biosimilars for the blockbuster drugs Humira and Enbrel 
on the horizon, the scale of the potential savings from increased utilization of 
biosimilars stands to grow substantially. 
Part D plans limited coverage and promotion of biosimilars have prevented the 
program and its beneficiaries from maximizing potential savings.  By not including 
biosimilars on formularies, many Part D plans effectively discouraged the use of these 
drugs.  Even the most used and successful biosimilarZarxiolikely would have been 
used more frequently with wider formulary coverage.  Most Part D plans also did not 
actively encourage use of biosimilars by placing them on lower formulary tiers or by 
requiring beneficiaries to try a biosimilar before the reference product. 
Without further changes to the Part D program, the impact of these limitations will be 
magnified as biosimilars for blockbuster drugs become available.  Unlike the drugs we 
examined in our study, Humira and Enbrel account for billions of dollars in Part D 
spending.  As a result, plans may have even more incentives to limit formulary 
coverage or to employ utilization management tools to potentially discourage the use 
of biosimilars for these biologics.  This is because drug manufacturers pay substantial 
rebates to Part D plans, potentially encouraging Part D plans to cover the 
manufacturers reference products instead of the corresponding biosimilars, or to give 
the reference products preferential treatment.  Left unexamined, this issue represents 
a serious vulnerability for future savings for Part D and especially for its beneficiaries, 
whounlike Part D planstypically do not realize any direct financial benefit from 
manufacturer rebates. 
CMS could do more to ensure that beneficiaries have access to currently available 
lower-cost biosimilars under Part D and to prepare the program for the launch of 
future biosimilars.  CMS has already taken some steps to increase utilization of 
lower-cost biosimilar drugs by allowing Part D plans to establish a second, preferred 
specialty tier with lower cost-sharing for beneficiaries.  Part D plans have the flexibility 
to use this tier for either biosimilars or their reference products.  To further promote 
the use of biosimilars now and help ensure that the program is poised to capitalize on 
potential future savings, CMS can encourage Part D plans to use formularies designed 
to increase the use of biosimilars and CMS can monitor Part D plans treatment of 
biosimilars to identify future areas of concern. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Conclusion and Recommendations | 23  We recommend that CMS: 
Encourage Part D plans to increase access to and use of 
biosimilars 
CMS should encourage Part D plans to increase access to and the use of biosimilars 
instead of their reference products within its authority.  To do this, CMS could use a 
demonstration project to evaluate incentivizes for encouraging biosimilar use.  For 
example, CMS could conduct a demonstration project to determine whether capped 
copayments increase the use of lower-cost biosimilars.  CMS could also explore other 
methods to encourage biosimilar use, such as continuing its efforts to use the Star 
Ratings system, which helps beneficiaries compare the quality of prescription drug 
plans when they shop for Part D coverage.  Although CMSafter receiving public 
feedbackdid not pursue a previously proposed biosimilar utilization measure, it 
could explore additional options.72  For example, CMS could consider developing a 
biosimilar access measure based on whether plans cover at least one biosimilar as an 
alternative to each reference product in instances when the biosimilar is less 
expensive or when there are two or more biosimilars on the market. 
Monitor Part D plans submitted formularies to determine 
whether they discourage beneficiaries from using biosimilars 
CMS should monitor biosimilar coverage, cost-sharing, and utilization management 
requirements in Part D plan formularies on a regular basis to understand biosimilar 
coverage trends.  Ideally, CMS would begin conducting such monitoring prior to any 
upcoming expected launches of biosimilars into the marketsuch as biosimilars for 
Humira and Enbrel, which would be the first biosimilars to be covered only under 
Part D.  Such monitoring could be integrated into CMSs annual review of Part D 
formulary performance and content or could be conducted separately, to the extent 
that CMSs authority allows.  To identify concerning trends in biosimilar coverage, 
CMS could monitor whether Part D plan formularies (1) exclude biosimilars, (2) place 
biosimilars on less preferential tiers than their reference products, or (3) employ 
stricter utilization management policiessuch as prior authorization and step 
therapyfor biosimilars than for their reference products.  The results of monitoring 
trends in biosimilar coverage could inform CMSs efforts to encourage biosimilar 
access and use within its authority. 
_____________________________________________________________________________________________________________________________
72 In its 2021 Rate Announcement, CMS stated that it would consider the public feedback it received for 
any potential future development of generic utilization measures.  CMS, Announcement of Calendar 
Year (CY) 2021 Medicare Advantage (MA) Capitation Rates and Part C and Part D Payment Policies, 
April 6, 2020.  Accessed at https://www.cms.gov/files/document/2021-announcement.pdf on 
February 28, 2022. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Conclusion and Recommendations | 24  AGENCY COMMENTS AND OIG RESPONSE
CMS concurred with our first recommendation and neither concurred nor 
nonconcurred with our second recommendation. 
In response to our first recommendation, CMS stated that it plans to examine how 
demonstration projects could be used to incentivize the use of biosimilars.  CMS also 
indicated that it will continue to explore other options within its authority to increase 
access to and use of biosimilar drugs.  CMS's commitment to supporting the 
increased use of biosimilars has the potential to protect the Part D program and 
beneficiaries from significant drug costs.  
In response to our second recommendation, CMS stated that it has limited authority 
to review Part D plan formularies.  Specifically, CMS said that its formulary review 
process is limited to ensuring that formularies provide access to medically necessary 
treatments and that formularies do not discriminate against particular types of 
beneficiaries.  In response to CMSs comments, we clarified that the monitoring we 
recommend is intended to inform CMSs efforts to encourage the use of biosimilars 
within its authority.  It is critical for HHS, Congress, and the public to have information 
about biosimilar coverage on Part D plans formularies, particularly as biosimilars for 
Humira and Enbrel become available in the coming years. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Agency Comments and OIG Response | 25   
DETAILED METHODOLOGY 
 
Data Sources 
Product information for biosimilars and reference products.  We used FDAs 
Biosimilar Product Information, FDAs Purple Book, and First Databank to identify all 
biosimilars and reference products and their National Drug Codes (NDCs).  FDAs 
Biosimilar Product Information lists all FDA-approved biosimilars.  The Purple Book 
lists all biological products, including biosimilars.  First Databank links drugs 
proprietary names with their NDCs. 
Prescription drug data.  To analyze biosimilar utilization, Part D spending, and 
beneficiary spending, we used Medicare Part D PDE records.  PDE records include the 
quantity of the drug dispensed, variables necessary to calculate Part D gross 
spending, and beneficiary spending.  We considered each PDE record to be one 
prescription.  We used detailed DIR data from CMSs Health Plan Management 
System (HPMS) to calculate rebates in order to calculate net Part D spending. 
Formulary coverage and design data.  To analyze biosimilar formulary coverage, we 
used Approved Formulary Submission data from HPMS.  These data include 
information about the drugs covered on Part D plan formularies, such as tier 
placement and utilization management requirements. 
Data Analysis 
Identifying biosimilars and reference products.  Using FDAs Biosimilar Product 
Information and Purple Book, we identified all biosimilars approved for use as of 
January 1, 2019 and their reference products.  We used First Databank to identify all 
NDCs associated with these biosimilars and reference products.  In total, we identified 
81 NDCs for 4 reference products and 8 biosimilars covered by Part D plans. 
Biosimilar drug group(s).  We considered all biosimilars approved for the same 
reference product to belong to one biosimilar drug group.  Biosimilar drug group(s) 
included biosimilars with different proprietary names and strengths.  We analyzed 
average spending for each biosimilar drug group to avoid making assumptions about 
prescribing practices that are beyond the scope of this study (e.g., which biosimilar 
brand or strength would be prescribed). 
Analysis of utilization and spending over time.  We calculated Part D biosimilar 
utilization and spending over time by using PDE records for biosimilars and reference 
products from January 1, 2015 to December 31, 2019.  For each year and quarter, we 
summed the number of prescriptions for each biosimilar drug group and reference 
product. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Detailed Methodology | 26  We calculated annual and quarterly utilization rates for all biosimilars and for each 
biosimilar drug group by dividing the number of biosimilar prescriptions by the total 
number of biosimilar and reference product prescriptions. 
We calculated annual Part D and beneficiary spending for each biosimilar drug group 
and reference product.  For Part D gross spending, we summed three PDE variables: 
ingredient cost, sales tax, and dispensing fee.  This represents the total amount paid 
to a pharmacy at the point of sale for drugs covered by the Medicare benefit before 
rebates are taken into account.  For beneficiary spending, we used the patient 
payment amount from PDE records.  This amount represents the copayment or 
coinsurance paid by a beneficiary for a prescription.73 
Lastly, we calculated 2019 Part D and beneficiary spending for the two reference 
products covered by Part D expected to face biosimilar competition in the coming 
yearsHumira and Enbrel.  Biosimilars for these drugs have been approved by FDA 
but are not yet available on the U.S. market. 
Converting quantity to drug weight.  To analyze biosimilars of different strengths as 
one biosimilar drug group, we converted the quantity dispensed to drug weight 
dispensed.  To calculate the drug weight dispensed for each prescription, we 
multiplied the strength of the prescription (e.g., 480 mg/0.8 ml) by the quantity 
dispensed of the prescription (e.g., 1.6 ml).  We summed the drug weight dispensed 
for each biosimilar drug group to calculate the total drug weight dispensed. 
Average Part D and beneficiary spending by drug weight dispensed.  We calculated 
average Part D and beneficiary spending amounts at the reference product and 
biosimilar drug group level by dividing Part D and beneficiary spending by the total 
drug weight dispensed.74 
Part D and beneficiary spending for typical prescriptions.  We used average Part D 
and beneficiary spending to illustrate differences in spending for typical biosimilar 
and reference product prescriptions.  To calculate the amount dispensed for a typical 
prescription, we used the median drug weight dispensed for each biosimilar drug 
group and reference product.  We then multiplied the average spending amounts for 
_____________________________________________________________________________________________________________________________
73 We excluded beneficiaries receiving other sources of support, such as State Pharmaceutical Assistance 
Plans, group health plans, or governmental programs, from the analyses of beneficiary spending and 
spending reductions.  We also excluded beneficiaries enrolled with PACE (Program of All-Inclusive Care 
for the Elderly) organizations because these beneficiaries do not pay for their prescription drugs.  For 
beneficiaries receiving the low-income subsidy (LIS), we analyzed only pre-catastrophic prescriptions 
because such beneficiaries often pay nothing in the catastrophic phase. 
74 LIS beneficiaries were analyzed separately.  We calculated average spending for LIS beneficiaries by 
dividing total spending by the total number of prescriptions because LIS beneficiaries typically pay only a 
fixed copayment for biosimilars.  To illustrate differences in LIS spending for typical biosimilar and 
reference product prescriptions, we compared the median LIS beneficiary payment for each biosimilar 
drug group and its reference product. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Detailed Methodology | 27  the biosimilar drug group and reference product by the drug weight dispensed for 
the typical prescription. 
Part D and beneficiary spending reduction estimates with increased biosimilar 
utilization.  We took two steps to estimate how any increase in biosimilar utilization 
could have changed Part D and beneficiary spending.  We first estimated how much 
Part D and beneficiaries could have spent if all CY 2019 reference product 
prescriptions had been for biosimilars, using the average biosimilar spending 
amounts.  We then used these figuresand actual biosimilar utilization and spending 
in 2019to estimate how any increase in biosimilar utilization could have changed 
Part D and beneficiary spending.   
We reported estimates of 2019 Part D and beneficiary spending at two specific 
utilization ratesif biosimilars had accounted for 60 percent and 90 percent of 
prescriptions.  The first estimate assumed total biosimilar utilization matched the 
60 percent utilization rate of the most used biosimilar group (i.e., filgrastim 
biosimilars).  The second estimate assumed biosimilar utilization matched the 
90 percent utilization rate for Part D generic drugs.75  The total difference between 
the actual and estimated spending amounts represented the potential reductions in 
Part D and beneficiary spending had biosimilar use increased in CY 2019. 
We used the same methodology to estimate how increased biosimilar utilization 
could have changed Part D net spending (i.e., when adjusting Part D spending for 
rebates).  We calculated net spending by subtracting total rebates for each biosimilar 
drug group and reference product from its total Part D gross spending.76  We did not 
adjust beneficiary spending for rebates because they do not typically affect 
beneficiary out-of-pocket costs. 
Analysis of biosimilar formulary coverage and placement for CY 2019.  We analyzed 
CMSs 2019 HPMS Approved Formulary Data to determine whether Part D plan 
formularies encouraged the use of biosimilars.  We excluded Part D plan formularies 
without any enrolled beneficiaries from our analysis. 
We analyzed formulary coverage and placement separately for each biosimilar drug 
group.  We calculated the percentage of Part D plan formularies that included both 
biosimilars and their reference products, only biosimilars, and only biosimilars 
reference products.  For formularies that covered both biosimilars and their reference 
products, we calculated the percentage that (1) placed biosimilars on lower, higher, or 
the same formulary tiers as their reference products and (2) had different step therapy 
or prior authorization requirements for biosimilars and their reference products.  We 
also checked Part D plans cost-sharing requirements for the small number of 
formularies that placed biosimilars on lower formulary tiers than their reference 
_____________________________________________________________________________________________________________________________
75 CMS, Increasing Access to Generics and Biosimilars in Medicare, February 5, 2020. 
76 Because HHS treats DIR data with confidentiality, we are refraining from reporting net spending or net 
savings totals of individual biosimilar or reference products in this report. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Detailed Methodology | 28  products.  We did this to confirm that these plans, in fact, had lower cost-sharing for 
biosimilars on lower tiers than their reference products on higher tiers. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Detailed Methodology | 29     AGENCY COMMENTS
DATE:  February 23, 2022 
TO:  Suzanne Murrin 
Deputy Inspector General for Evaluation and Inspections 
Office of Inspector General 
FROM:  Chiquita Brooks-LaSure 
Administrator 
Centers for Medicare & Medicaid Services 
SUBJECT:  Office of Inspector General (OIG) Draft Report: Medicare Part D and 
Beneficiaries Would Realize Significant Spending Reductions with Increased 
Biosimilar Use, OEI-05-20-00480 
The Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to review and 
comment on the Office of Inspector Generals (OIG) draft report. CMS is committed to ensuring 
that Medicare beneficiaries have access to high quality and affordable health care while, at the 
same time, working to preserve the Medicare Trust Funds. Recognizing that Medicare payment 
policy can play a large role in promoting use of biosimilar and generic drugs, CMS is committed 
to continuing to use its authority to promote competition, support increased utilization of 
biosimilar and generic drugs, reduce the federal governments spending on drugs, and achieve 
greater equity in drug access and affordability for beneficiaries. 
Under the Medicare Part D system, Medicare contracts with private plan sponsors to provide a 
prescription drug benefit and entrusts plan sponsors with authority to negotiate drug prices with 
pharmaceutical companies. A provision in the law that established the Medicare Part D program 
specifically prohibits the Health and Human Services Secretary from interfering with the 
negotiations between drug manufacturers and pharmacies and plan sponsors, requiring a 
particular formulary, or instituting a price structure for the reimbursement of covered Part D 
drugs. However, CMS exercises its authority to review Part D plan formularies to ensure that 
drug plans provide access to medically necessary treatments and do not discriminate against any 
particular types of beneficiaries. 
It is important to note that factors outside of coverage and payment policy may affect provider 
and beneficiary preferences for a reference product versus the biosimilars, as well as inclusion on 
plan formularies. For example, prescribers or beneficiaries may prefer the more familiar 
reference product when a biosimilar first enters the market. In addition, after the biosimilar has 
been on the market for some time, the price of a biosimilar may fall below the cost of the 
reference product even when taking the reference products rebate into consideration, which may 
drive uptake and increased market share for the biosimilar. As an example, the earliest 
biosimilar, Zarxio, which came onto the market in 2015 is now represented on over 80 percent of 
Medicare Part D plan formularies and has a significantly greater market share than its reference 
product. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use
OEI-05-20-00480   Detailed Methodology | 30 CMS is committed to continuing to work within its authority to address both cost and access 
concerns. OIGs recommendations and CMS' responses are below. 
OIG Recommendation 
CMS should encourage Part D plans to increase access to and use of biosimilars. 
CMS Response 
CMS concurs with OIGs recommendation. Within our authority, CMS is committed to taking 
action, as appropriate, to increase access to and use of biosimilars. As discussed above, CMS 
authority to review Part D plan formularies centers on ensuring that drug plans provide access to 
medically necessary treatments and do not discriminate against any particular types of 
beneficiaries. In addition, while a multitude of policy and operational considerations influence 
whether CMS implements a demonstration project, CMS intends to examine how demonstration 
projects could be used to test methods to lower beneficiary and program spending on drugs and 
incentivize the use of biosimilar and generic drugs.1 CMS will continue to explore options to 
address this issue. 
OIG Recommendation 
CMS should monitor Part D plans submitted formularies to determine whether they discourage 
beneficiaries from using biosimilars. 
CMS Response 
As discussed above, CMS has the authority to review Part D plan formularies to ensure that drug 
plans provide access to medically necessary treatments and do not discriminate against any 
particular types of beneficiaries. CMS uses that authority to review plan formularies for 
appropriate inclusion of all drug classes, including biosimilars.  
CMS thanks OIG for their efforts on this issue and looks forward to working with OIG on this and 
other issues in the future. 
1 https://innovation.cms.gov/strategic-direction-whitepaper 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use
OEI-05-20-00480   Detailed Methodology | 31      
 
ACKNOWLEDGMENTS AND CONTACT 
 
 
 
Acknowledgments 
Melissa Baker served as the team leader for this study, and Sarah Vogel served as the 
lead analyst.  Others in the Office of Evaluation and Inspections who conducted the 
study include Samantha Handel Meyer, Kayla Phelps, and Abigail Wydra.  Office of 
Evaluation and Inspections staff who provided support include Miriam Anderson, 
Kevin Farber, Althea Hosein, Christine Moritz, Michael Novello, Kelsey Ridenour, and 
Kelly Waldhoff. 
We would also like to acknowledge the contributions of other Office of Inspector 
General staff, including Eddie Baker, Debashis Bhattacharya, Sarai Bailey, and 
Amber Jessup. 
This report was prepared under the direction of Laura Kordish, Regional Inspector 
General for Evaluation and Inspections in the Chicago regional office, and Adam 
Freeman, Deputy Regional Inspector General. 
Contact 
To obtain additional information concerning this report, contact the Office of Public 
Affairs at Public.Affairs@oig.hhs.gov.  OIG reports and other information can be found 
on the OIG website at oig.hhs.gov. 
Office of Inspector General 
U.S. Department of Health and Human Services 
330 Independence Avenue, SW 
Washington, DC 20201 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  Acknowledgments and Contact | 32       
 
ABOUT THE OFFICE OF INSPECTOR GENERAL 
 
 
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-
452, as amended, is to protect the integrity of the Department of Health and Human 
Services (HHS) programs, as well as the health and welfare of beneficiaries served by 
those programs.  This statutory mission is carried out through a nationwide network 
of audits, investigations, and inspections conducted by the following operating 
components: 
The Office of Audit Services (OAS) provides auditing services for HHS, 
either by conducting audits with its own audit resources or by overseeing audit work 
done by others.  Audits examine the performance of HHS programs and/or its 
grantees and contractors in carrying out their respective responsibilities and are 
intended to provide independent assessments of HHS programs and operations.  
These audits help reduce waste, abuse, and mismanagement and promote economy 
and efficiency throughout HHS. 
The Office of Evaluation and Inspections (OEI) conducts national 
evaluations to provide HHS, Congress, and the public with timely, useful, and reliable 
information on significant issues.  These evaluations focus on preventing fraud, waste, 
or abuse and promoting economy, efficiency, and effectiveness of departmental 
programs.  To promote impact, OEI reports also present practical recommendations 
for improving program operations. 
The Office of Investigations (OI) conducts criminal, civil, and administrative 
investigations of fraud and misconduct related to HHS programs, operations, and 
beneficiaries.  With investigators working in all 50 States and the District of Columbia, 
OI utilizes its resources by actively coordinating with the Department of Justice and 
other Federal, State, and local law enforcement authorities.  The investigative efforts 
of OI often lead to criminal convictions, administrative sanctions, and/or civil 
monetary penalties. 
The Office of Counsel to the Inspector General (OCIG) provides 
general legal services to OIG, rendering advice and opinions on HHS programs and 
operations and providing all legal support for OIGs internal operations.  OCIG 
represents OIG in all civil and administrative fraud and abuse cases involving HHS 
programs, including False Claims Act, program exclusion, and civil monetary penalty 
cases.  In connection with these cases, OCIG also negotiates and monitors corporate 
integrity agreements.  OCIG renders advisory opinions, issues compliance program 
guidance, publishes fraud alerts, and provides other guidance to the health care 
industry concerning the anti-kickback statute and other OIG enforcement authorities. 
Medicare Part D and Beneficiaries Could Realize Significant Spending Reductions With Increased Biosimilar Use 
OEI-05-20-00480  About OIG | 33