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

When a doctor prescribes a biosimilar-like Inflectra instead of Remicade-how does the clinic get paid? It’s not as simple as handing in a receipt. Unlike generic pills, biosimilars are complex biologic drugs that require special billing rules under Medicare Part B. The system changed dramatically in 2018, and if you’re a provider, pharmacist, or even a patient trying to understand your bill, knowing how this works can make a big difference.

How Biosimilars Are Coded Differently Than Generics

Biosimilars aren’t like generic pills. A generic version of metformin shares the same active ingredient and gets the same billing code as the brand name. Biosimilars are different. They’re highly similar to their reference biologic-like Humira or Enbrel-but not identical. Because of that, each biosimilar gets its own unique billing code. This wasn’t always the case.

Before January 2018, all biosimilars for the same reference drug used one shared HCPCS code. For example, if two biosimilars were approved for infliximab, they both used code Q5101. The payment was a blended rate based on the average price of all products under that code. That created a problem: if one biosimilar came in cheaper, the others still got paid the same average rate. Why would a manufacturer lower their price if they’d still get paid the same? It discouraged competition.

In 2018, CMS flipped the script. Now, every FDA-approved biosimilar has its own HCPCS code. Inflectra has J1745. Renflexis has J1746. Hadlima has J1747. Each gets paid based on its own Average Selling Price (ASP), plus 6% of the reference product’s ASP. This means if Inflectra sells for $2,000 per dose and Remicade sells for $2,500, Inflectra gets paid $2,000 + 6% of $2,500 = $2,150. Remicade gets paid $2,500 + 6% of $2,500 = $2,650.

Why the 6% Add-On Matters More Than You Think

The 6% add-on is built into the payment for every biological drug under Medicare Part B. It’s meant to cover the cost of handling, storing, and administering these complex drugs. But here’s the catch: the add-on is calculated using the reference product’s ASP-not the biosimilar’s.

That means even if you give a patient a biosimilar that’s 25% cheaper, the provider still gets paid 6% of the more expensive reference drug. For Inflectra, that’s 6% of Remicade’s price. So while the drug costs less, the provider’s reimbursement doesn’t drop proportionally. In fact, the profit gap stays wide.

Dr. Mark Trusheim from MIT calculated this in 2020: for every dose of Remicade, a provider earns $150 in add-on revenue. For Inflectra, it’s $120. That’s a $30 difference per dose. In a clinic giving out hundreds of doses a month, that adds up to real money. It’s no surprise studies show many providers still default to the reference product-even when biosimilars are cheaper.

Experts like Avalere Health estimate that if CMS paid biosimilars 106% of their own ASP instead of the reference’s, biosimilar use could jump 15 to 20 percentage points. Right now, biosimilars make up only about 35% of the infliximab market in the U.S., even after five years. In Europe, where payment systems are designed to favor the lowest-cost option, that number is closer to 80%.

The JZ Modifier and Other Billing Requirements

Starting July 1, 2023, CMS added another layer: the JZ modifier. This modifier is required on claims for infliximab and its biosimilars when no drug is discarded. If a vial contains 100 mg and you only use 80 mg, you have 20 mg left over. That’s a discarded amount. You don’t use the JZ modifier in that case. But if you use the full vial-no waste-you must add JZ to your claim.

Why? It’s about accurate tracking. CMS wants to know if providers are wasting expensive drugs or using them efficiently. But this has created new headaches. One gastroenterology practice reported a 30% increase in billing staff time just to verify discarded amounts. Pharmacies now have to track vial usage down to the milligram. It’s detailed, time-consuming, and not always intuitive.

Providers also have to make sure they’re using the right code. CMS updates payment rates every quarter. If you’re still using a code from last year’s list, your claim will be denied. A 2022 survey found that 22% of initial denials were due to outdated codes. Many clinics now use automated systems or manufacturer guides-like Fresenius Kabi’s 2023 coding handbook-to double-check before submitting.

What Happens When a New Biosimilar Enters the Market?

When the first biosimilar for a reference drug hits the market-say, Inflectra for Remicade-it doesn’t immediately get paid based on ASP. CMS uses a temporary workaround: reimbursement is set at 106% of the Wholesale Acquisition Cost (WAC) for the first six months. That gives the manufacturer time to build up enough sales data for ASP to be calculated accurately.

But here’s the twist: any biosimilar that comes in after that-like Renflexis or Avsola-doesn’t get the WAC grace period. It jumps straight into the ASP-based payment system. That puts later entrants at a disadvantage. They’re competing with a product that had six months of higher reimbursement to build market share. This has led to criticism that the system favors early movers, not necessarily the best or cheapest option.

Provider Challenges and Real-World Mistakes

The transition to individual codes in 2018 wasn’t smooth. A 2022 survey of 217 cancer centers found that 68% experienced billing confusion. Nearly half had claims denied because staff picked the wrong code. Even after years, mistakes persist. Some providers still try to use the old shared code. Others forget the JZ modifier. Some don’t realize Medicare Advantage plans may pay differently than traditional Medicare Part B.

One oncology practice found that switching to a dual-verification system-where the pharmacist checks the administered product against the billing code before submission-cut claim errors from 15% to under 3%. That’s not just about avoiding denials. It’s about cash flow. A single denied claim can take weeks to resolve. For small clinics, that’s money tied up.

Training also took time. The Healthcare Financial Management Association estimated clinics needed 40 to 60 hours of staff training just to get comfortable with the new system. Many providers still say CMS’s official guidance is too technical and doesn’t cover real-world edge cases.

Where the System Is Headed

There’s growing pressure to fix the reimbursement structure. MedPAC, the Medicare advisory panel, has proposed a “consolidated billing” model: instead of paying each biosimilar separately, pay one rate based on the average price of all products in the class. That’s called a Least Costly Alternative (LCA) approach. If implemented, a clinic giving out Inflectra, Renflexis, and Hadlima would get paid 106% of the average price of all three. That would strongly incentivize using the cheapest option.

CMS is already exploring alternatives. In February 2023, they issued a proposal asking for feedback on whether to remove the reference product’s ASP from the biosimilar add-on entirely. If they do, providers would earn less on the reference drug and more on biosimilars-flipping the current incentive.

Right now, biosimilars account for about 18% of the U.S. biologics market. Analysts predict that could rise to 45-50% by 2027 under current rules. But without structural changes, it won’t reach European levels. The system works well for tracking usage and letting new products enter. But it doesn’t do enough to push providers toward lower-cost options.

For patients, that means higher out-of-pocket costs. For providers, it means lost savings. For taxpayers, it means Medicare continues paying more than necessary. The coding system is precise. The payment structure? That’s where the real problem lies.

What Patients Should Know

You might get a bill for a biosimilar and wonder why it’s not cheaper than the brand. The answer isn’t always in the drug’s sticker price-it’s in how it’s billed. Your provider may be paid more to give the reference drug, even if you’re getting the biosimilar. That doesn’t mean you’re being overcharged, but it does mean the financial incentive isn’t aligned with cost savings.

Ask your doctor: “Is this a biosimilar? Is it covered the same way under my plan?” Some Medicare Advantage plans have different rules than traditional Medicare. And if you’re paying a copay, make sure you’re not paying more than you should because the provider is being reimbursed differently than expected.

There’s no magic fix yet. But understanding how billing works helps you ask better questions-and maybe push for better choices down the line.