Senate Bill 1094, authored by San Diego Democrat Sen. Akilah Weber Pierson, would let health insurers and pharmacists substitute a patient’s brand-name biologic drug for a lower-cost biosimilar version unless the patient’s doctor objects. Insurance plans would be required to notify both doctors and patients 60 days before making any such switch.

Weber Pierson, who also works as an obstetrician, introduced the measure as prescription drug costs continue climbing statewide. According to state health officials, insurance spending on medications jumped 72% between 2017 and 2024, with biologics representing a major share of that increase. State prescription data show that six of the 10 most expensive drugs sold in California fall into the biologic category.

A legislative analysis estimates the bill could trim roughly $87.7 million annually from premiums paid by employers, government programs and individual enrollees — a modest reduction of less than 1%. Californians could also save between $92 and $310 a year in out-of-pocket costs, though the amount would depend on individual insurance plans.

The measure is part of a broader push by state lawmakers and health officials to rein in healthcare spending. Recent efforts have included penalizing hospitals for excessive cost growth, scaling back coverage for weight-loss medications under Medi-Cal, and launching a state-backed insulin program sold well below market price. Officials note that such savings don’t always show up as direct rebates to consumers — instead, they’re intended to slow the pace at which premiums and other costs rise over time.

SB 1094 earned support from the insurance industry, business groups and some labor unions as it moved through the Legislature, though not without objections. Rheumatology groups and several patient advocacy organizations have raised concerns that switching patients to a different drug purely for cost reasons — rather than medical necessity — could disrupt treatment plans that are currently working well.

Biologic drugs are commonly prescribed for complex autoimmune disorders such as rheumatoid arthritis, lupus and ulcerative colitis, as well as certain cancer immunotherapies. Biosimilars serve as their generic equivalent. Although not chemically identical to the original biologics, the U.S. Food and Drug Administration has determined they are safe and equally effective for most patients.

Weber Pierson likens the shift to substituting a generic drug for its brand-name counterpart. “Biosimilars are just as effective with a similar side effect profile as the biologics, but cost significantly less,” she said, adding that patients who don’t respond well to a biosimilar would be permitted to switch back to their original medication.

Unlike conventional synthetic drugs manufactured through chemical processes, biologics are derived from living cells through a complex and costly production method. Biosimilars typically cost 15% to 35% less than their brand-name equivalents, according to research published in JAMA Health Forum.

“When you look at high-cost drugs, they’re oftentimes these specialty drugs that really go towards serving a very small percentage of the overall population,” Weber Pierson said, explaining her decision to focus on biologics specifically.

A report released last year by the state’s Department of Managed Health Care found that specialty drugs, including biologics, make up less than 2% of all prescriptions but account for 63% of total annual prescription drug spending statewide.

Not everyone is convinced the switch will be smooth for patients. Liz Helms, president of the California Chronic Care Coalition, said she understands the pressure to control healthcare costs but worries that patients who are stable on a brand-name biologic could see their treatment disrupted in pursuit of savings that may never materialize for them personally.

Dr. Robin Dore, a rheumatologist with more than four decades of experience treating patients with rheumatoid arthritis, osteoporosis, lupus and other autoimmune conditions, shares that concern. Many of her patients already endure severe pain and lengthy insurance approval processes, she said, noting that insurers frequently require patients to try cheaper drugs first before approving coverage for biologics.

Dore, former president of the California Rheumatology Alliance, said that while many patients transition to biosimilars without issue, others spent years cycling through different treatments before finding one that worked for them. Her organization pushed for the bill’s requirement that health plans give physicians 60 days’ notice along with a list of affected patients, allowing doctors time to weigh in and prepare.

She said some of her patients have already been switched to biosimilars after insurers dropped coverage of certain brand-name biologics — a pattern she expects to become more common under SB 1094. So far, she said, those switches haven’t resulted in noticeable savings for her patients.

Studies have found mixed results when it comes to whether increased biosimilar use actually lowers out-of-pocket costs for consumers.

Weber Pierson acknowledged that her original hope was for patients to see immediate financial relief, though she believes the impact may become more apparent over time. “I would love to be able to put money back into the pockets of patients,” she said. “Unfortunately, our healthcare system is so complicated that it’s hard to do that.”

To prevent insurers from simply keeping the savings generated by increased biosimilar use, the bill would require health plans to report annually on how those savings are being applied. As Weber Pierson put it, even a smaller premium increase represents meaningful relief: “If premiums would have gone up $50, and instead now they’re going up $5, it’s an increase in healthcare, but it’s not as much.”

Original source: CalMatters

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Secretary Xavier Becerra: “Today’s action marks a critical step toward reducing health care costs for American families and increasing competition. We’re moving full-speed ahead on Inflation Reduction Act implementation to deliver results for millions of Americans.” 

CMS Administrator Chiquita Brooks-LaSure: “CMS is swiftly implementing the historic Inflation Reduction Act to make the new law and the benefits it provides a reality for the people we serve. The temporary Medicare Part B payment increase for qualifying biosimilars that is now in effect will foster competition in the drug marketplace for conditions such as diabetes, cancer, and immune disorders, and will improve access to these life-saving medicines that help keep people with Medicare healthy.” 

Additional Background: 

According to the United States Food & Drug Administration (FDA), biosimilars are a diverse category of products and are generally large, complex molecules. Biological products may be produced through biotechnology in a living system, such as a microorganism, plant cell, or animal cell, and represent the fastest growing segment of the pharmaceutical industry. 

In accordance with section 11403 of the Inflation Reduction Act, CMS is implementing a temporary increase in payment under Medicare for qualifying biosimilars. The new law provides for a temporary increase in the add-on payment for qualifying biosimilars whose average sales price (ASP) is not more than the price of the associated reference biological product. This provision encourages the creation and utilization of biosimilars to compete with original biologic products and incentivizes innovation for less costly access to these important therapies in the United States. 

By statute, Medicare Part B generally pays 106% of ASP (ASP plus 6%) for separately payable drugs and biologicals furnished in physician offices, hospital outpatient departments, and ambulatory surgical centers, with some exceptions. ASP is calculated based on manufacturers’ sales to all U.S. purchasers minus manufacturer rebates, discounts, and price concessions (with certain exceptions). Manufacturers report ASP data to CMS quarterly. 

Prior to the implementation of the provisions in section 11403 of the Inflation Reduction Act, CMS paid biosimilars a rate of the biosimilar’s ASP plus an add-on of 6% of the reference biological product’s ASP. Under section 11403 of the Inflation Reduction Act, qualifying biosimilars will temporarily be paid ASP plus 8% (rather than plus 6%) of the reference biological product’s ASP for a 5-year period. For existing qualifying biosimilars for which payment was made using ASP as of September 30, 2022, the 5-year period begins on October 1, 2022. For new qualifying biosimilars for which payment is first made using ASP between October 1, 2022, and December 31, 2027, the applicable 5-year period begins on the first day of the calendar quarter during which such payment is made.

The goal of the temporary add-on payment for providers is to increase access to biosimilars, as well as to encourage competition between biosimilars and reference biological products, which may, over time, lower drug costs and lead to savings to beneficiaries and Medicare.

CMS has posted the quarterly Medicare Part B drug pricing file that reflects the temporary increased amount for qualifying biosimilar biological products. The October 2022 Medicare Part B quarterly drug pricing file can be accessed at: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice.

Public payment files for biosimilars in the hospital outpatient departments (HOPDs) and ambulatory surgical centers (ASCs) can be found at the following links: 

• HOPD:  https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/HospitalOutpatientPPS/Addendum-A-and-Addendum-B-Updates
• ASC: https://www.cms.gov/medicare/medicare-fee-for-service-payment/ascpayment/11_addenda_updates

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