Reimbursement and Coding for Biosimilars: How Billing Works Under Medicare Part B

When a doctor prescribes a biosimilar instead of the original biologic drug, the billing process isn’t as simple as switching one pill for another. Unlike generic small-molecule drugs, biosimilars are complex biological products made from living cells. Their reimbursement under Medicare Part B follows a unique set of rules that affect how much providers get paid, how claims are coded, and even which drug gets chosen in the first place.

How Biosimilars Are Paid For Under Medicare Part B

Medicare Part B covers drugs given in a doctor’s office or clinic - things like infliximab, rituximab, or adalimumab biosimilars. The payment isn’t based on what the drug costs the hospital or clinic. Instead, it’s tied to a formula: 100% of the biosimilar’s Average Selling Price (ASP) plus 6% of the reference biologic’s ASP. That means if a biosimilar sells for $1,800 per dose and the original drug sells for $2,500, the provider gets paid $1,800 + 6% of $2,500 = $1,950.

This system was designed to encourage biosimilar use without punishing providers who switch. But here’s the catch: the 6% add-on is based on the more expensive reference product. So even when a biosimilar is 20-30% cheaper, the provider’s profit margin doesn’t increase proportionally. For the example above, the provider makes $150 more per dose with the reference drug than with the biosimilar - a $30 difference that adds up fast when treating hundreds of patients.

The Coding System: Q-Codes and J-Codes

Before 2018, all biosimilars for the same reference drug shared one HCPCS code. That meant Inflectra, Renflexis, and other infliximab biosimilars all billed under Q5101. CMS switched to product-specific codes in January 2018 because that old system created a problem: if one biosimilar came in cheap, all others got paid less too. Manufacturers had no incentive to enter the market with lower prices.

Now, each FDA-approved biosimilar gets its own unique code. Inflectra is J3590. Renflexis is J3591. Hadlima is J3592. These are permanent J-codes if the product has been on the market long enough. Newer ones start as temporary Q-codes until CMS assigns a permanent J-code. Providers must use the exact code for the product they administered. Using the wrong code - even by one digit - triggers a claim denial.

For infliximab products, there’s an extra layer: the JZ modifier. Since July 1, 2023, providers must add JZ to the claim if no drug was discarded. If a vial has 100 mg and the patient only needs 50 mg, and the rest is thrown away, you don’t use JZ. If you use the whole vial - even if you give half to two different patients - you still use JZ. This rule was added to prevent overbilling, but it’s created a paperwork headache. One gastroenterology practice in Ohio reported a 30% spike in billing staff time just to track discarded amounts.

Why Providers Still Choose the Expensive Drug

Even though biosimilars can cost 20-30% less, many clinics still use the original biologic. Why? It’s not about safety - biosimilars are just as effective. It’s about money.

Let’s say you’re a cancer center giving rituximab to 100 patients a month. The reference drug costs $4,000 per dose. A biosimilar costs $3,000. Under the current system:

• Reference drug payment: $4,000 + 6% of $4,000 = $4,240 per dose
• Biosimilar payment: $3,000 + 6% of $4,000 = $3,240 per dose

The provider makes $1,000 more per dose with the original drug. That’s $100,000 extra per month. Even with a 25% discount on the biosimilar, the profit gap stays wide. A 2022 survey of 217 cancer centers found that 68% still preferred the reference product for high-cost biologics - not because of clinical reasons, but because of reimbursement.

Studies from Avalere Health estimate that if CMS removed the reference product’s ASP from the biosimilar payment formula - so biosimilars got 106% of their own ASP - utilization would jump by 15-20 percentage points. That’s the kind of change that could save Medicare billions.

What Happens When Multiple Biosimilars Enter the Market

The first biosimilar to enter a market gets a special deal. For the first six months, CMS pays 106% of the Wholesale Acquisition Cost (WAC) - the list price - instead of ASP. This gives manufacturers time to build up enough sales data to calculate a true ASP. After that, payment switches to 100% of ASP plus 6% of the reference product’s ASP.

But once that first biosimilar is established, every new entrant skips the WAC period. They jump straight into the ASP-based system. That means later entrants face tougher pricing pressure. They have to undercut not just the reference drug, but also the first biosimilar, to win business.

This is why manufacturers time their launches carefully. Many wait for CMS’s quarterly payment updates (released in January, April, July, October) to ensure their new product gets the latest ASP data baked into the payment rate. Fresenius Kabi and Sandoz both adjusted launch dates in 2023 to align with these cycles.

Common Billing Mistakes and How to Avoid Them

Claims denials for biosimilars are common - often because of simple errors. Here are the top three mistakes providers make:

1. Using the wrong HCPCS code - like billing for Inflectra (J3590) when they gave Hadlima (J3592).
2. Forgetting the JZ modifier on infliximab claims when no drug was discarded.
3. Using outdated codes - CMS updates codes quarterly, and 22% of denials come from using a code that was retired six months ago.

Solutions are straightforward but require discipline:

• Print and post the current HCPCS code list in the billing area. CMS updates them every quarter - check CMS.gov for the latest.
• Use a dual-check system: pharmacy staff verify the drug given, billing staff verify the code. Practices that do this cut error rates from 12-15% to under 3%.
• Subscribe to manufacturer coding guides. Fresenius Kabi’s 2023 guide for STIMUFEND® was rated "helpful" by 87% of surveyed providers.

How the U.S. Compares to Europe

The U.S. has 32 approved biosimilars as of late 2023, but only about 35% of biologic prescriptions are filled with biosimilars. In Germany, Sweden, or the Netherlands, that number is 75-85%. Why the gap?

Europe uses reference pricing or tendering. Once a biosimilar enters the market, the government sets one payment rate for all products in that class. The lowest bidder wins. Providers don’t get extra money for using the expensive drug - they get paid the same no matter what they prescribe.

In the U.S., the 6% add-on tied to the reference product’s ASP creates a financial incentive to stick with the pricier option. Some experts, like Dr. Mark Trusheim from MIT, call it a "perverse incentive." Others, like MedPAC, are pushing for a "consolidated billing" model where all drugs in a class get paid the same - 106% of the weighted average ASP. That could boost biosimilar use overnight.

What’s Next for Biosimilar Reimbursement?

CMS is actively reviewing the system. In February 2023, they issued an Advanced Notice of Proposed Rulemaking asking for feedback on alternatives: a flat-dollar add-on instead of a percentage, or removing the reference product’s ASP from the biosimilar payment formula entirely.

MedPAC recommended in June 2023 that CMS apply "least costly alternative" (LCA) policies to biosimilars with three or more competitors. That would mean paying 106% of the average price of all products in the class - not just the reference drug. If adopted, this could increase biosimilar use by 20-30% in categories like infliximab or adalimumab.

Analysts at RAND Corporation and Avalere Health agree: without structural changes, U.S. biosimilar adoption will plateau around 40-45% by 2030. In Europe, it’s already over 75%. The difference isn’t science - it’s payment.

The bottom line: billing for biosimilars isn’t broken - it’s designed to protect the high-cost biologic market. Until that changes, providers will keep choosing the more expensive drug, not because it’s better, but because it pays better.