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

When a patient gets a biosimilar drug like Inflectra or Renflexis instead of Remicade, the billing process isn’t as simple as switching one pill for another. Unlike generic pills, which are chemically identical to their brand-name versions, biosimilars are complex biological products made from living cells. That complexity changes how they’re coded, billed, and paid for-especially under Medicare Part B. If you’re a provider, pharmacist, or even a patient trying to understand why your bill looks different, this is how it actually works.

How Biosimilars Are Coded Differently Than Generics

Generic drugs use the same HCPCS code as their brand-name counterparts. If you prescribe a generic lisinopril, you bill it under the same code as the brand-name Zestril. But biosimilars? Each one gets its own unique code. That’s because the FDA treats them as distinct products, even if they’re highly similar to the original biologic.

After FDA approval, each biosimilar is assigned a temporary Q-code or permanent J-code. For example:

• Inflectra (infliximab biosimilar) → J1745
• Renflexis (infliximab biosimilar) → J1747
• Remicade (reference product) → J1740

This system replaced the old blended code model used between 2016 and 2017, where all infliximab biosimilars shared code Q5101. That caused problems: if one biosimilar entered the market at a lower price, others could ride on its reimbursement without lowering their own costs. The 2018 change fixed that by giving each product its own billing identity.

How Medicare Pays for Biosimilars

Medicare Part B pays for most biologics and biosimilars at 106% of the average sales price (ASP). But here’s the twist: the 6% add-on is calculated differently for biosimilars versus the reference product.

For a biosimilar, Medicare pays:

1. 100% of the biosimilar’s own ASP
2. Plus 6% of the reference product’s ASP

So if Remicade’s ASP is $2,500 per dose and Inflectra’s ASP is $2,000, here’s the payment breakdown:

• Remicade: $2,500 + 6% of $2,500 = $2,650
• Inflectra: $2,000 + 6% of $2,500 = $2,150

That means the provider makes $150 more per dose with Remicade than with Inflectra-even though Inflectra costs $500 less. This structure doesn’t reward cost savings. It rewards using the more expensive drug.

Why This Payment Model Slows Adoption

You’d think lower-priced biosimilars would quickly replace expensive biologics. But in the U.S., biosimilar adoption for infliximab is only about 35% after five years. In Europe, it’s 75-80%. Why the gap?

The 6% add-on tied to the reference product’s price creates a financial disincentive. Providers earn more per dose by sticking with the brand. A 2020 analysis by Dr. Mark Trusheim at MIT found that for every dose of Remicade administered, providers make $30 more than with Inflectra. That’s not a small difference when you’re treating hundreds of patients a month.

Even when biosimilars are 20-30% cheaper, the reimbursement gap is often only 10-15%. That’s not enough to change prescribing habits, especially in oncology or rheumatology practices where biologics are routine. A 2022 survey of 217 cancer centers found that despite cost savings, providers still chose the reference product 70% of the time.

The JZ Modifier: A New Layer of Complexity

On July 1, 2023, CMS added a new requirement: the JZ modifier. This modifier must be added to claims for infliximab and its biosimilars when no drug is discarded during administration.

Why? Because Medicare only pays for the amount actually used. If a 100mg vial is given to a patient who only needs 50mg, the provider can bill for the full 100mg only if they document the unused portion was discarded. But if they use every drop? They must use the JZ modifier to prove no waste occurred.

This sounds simple, but it’s created real headaches. One gastroenterology practice reported a 30% increase in billing staff time just to track discarded amounts. If the modifier is missing, claims get denied. And since many providers didn’t know about it until after it went live, claim denials spiked in the first quarter of 2024.

What Providers Get Wrong-and How to Avoid It

Most billing errors come from three sources:

1. Using the wrong HCPCS code (e.g., billing Inflectra as J1740 instead of J1745)
2. Forgetting the JZ modifier for infliximab products
3. Using outdated ASP rates from last quarter’s CMS update

The fix? Two-step verification:

• Pharmacy staff confirm the exact biosimilar administered
• Billing staff cross-check the code and modifier against CMS’s latest Drug Pricing File

Practices that do this reduce claim denials from 12-15% to under 3%. Fresenius Kabi and other manufacturers now offer free coding guides that include current HCPCS codes, ASP rates, and modifier rules. One survey found 87% of providers found these guides helpful.

How Payment Differs Across Payers

Medicare Part B isn’t the only payer. Medicare Advantage plans, commercial insurers, and Medicaid all have their own rules.

• Medicare Part B: 106% of ASP (biosimilar’s ASP + 6% of reference’s ASP)
• Medicare Advantage: Often 100-103% of ASP-sometimes without the 6% add-on
• Commercial insurers: Vary wildly. Some pay 100% of WAC, others use formulary tiers that favor biosimilars
• Medicaid: Usually follows Medicare, but state-specific rules apply

This means a patient might pay $50 out-of-pocket for a biosimilar under Medicare, but $150 under a private plan. Providers need to check each payer’s policy before prescribing.

What’s Next? Changes Coming by 2025

Critics say the current system is broken. The 6% add-on tied to the reference product’s price doesn’t encourage savings-it rewards cost. That’s why MedPAC (Medicare Payment Advisory Commission) recommended a major shift: consolidated billing.

Under this proposal, all biosimilars and the reference product for a given drug class would share one payment rate: 106% of the volume-weighted average ASP. So if 60% of infliximab doses given are Inflectra at $2,000 and 40% are Remicade at $2,500, the payment would be based on $2,200-not $2,500.

CMS is considering this change. In February 2023, they issued a notice asking for public feedback. If adopted by 2025, it could push U.S. biosimilar adoption from 35% to 65%-matching European levels.

Another idea: eliminate the reference product’s ASP from the biosimilar’s add-on. That would mean Inflectra gets paid 106% of its own ASP ($2,120), not $2,150. That small change could boost utilization by 15-20 percentage points, according to Avalere Health.

The Bottom Line

Biosimilars aren’t generics. Their billing system was built for complexity-and it’s still evolving. The current model tracks usage well but fails to reward cost savings. Providers are stuck between clinical guidelines and financial incentives that don’t align. Patients pay more than they should. And the system, as it stands, doesn’t fully deliver on the promise of affordable biologics.

But change is coming. With CMS actively reviewing payment models and manufacturers pushing for simpler billing, the next two years could redefine how biosimilars are paid for in the U.S. For now, the best move for providers? Know your codes, verify your modifiers, and always check the latest ASP rates. Because in biosimilar billing, the smallest error can mean the biggest loss.