by Caspian Hartwell - 14 Comments

When a doctor prescribes a biosimilar instead of the original biologic drug, the billing process isn’t as simple as swapping one pill for another. Unlike generic drugs, which are chemically identical to their brand-name counterparts, biosimilars are highly similar but not exact copies of complex biological products. This difference changes everything - from how they’re coded in medical records to how much Medicare pays providers. Understanding how reimbursement works for biosimilars isn’t just for billing staff. It affects patient access, provider decisions, and even drug pricing across the entire healthcare system.

How Biosimilars Got Their Own Codes

Before 2018, all biosimilars for the same reference drug shared one HCPCS code. For example, if two biosimilars were approved for infliximab (the same drug as Remicade), they both used code Q5101. CMS paid providers based on a blended average of all those drugs’ prices. That created a big problem: if one biosimilar came in cheaper, the provider still got paid the same amount as if they used the more expensive one. There was no financial reward for choosing the lower-cost option. Manufacturers had little incentive to enter the market because their lower price didn’t translate into higher reimbursement.

In January 2018, CMS changed the rules. Now, every FDA-approved biosimilar gets its own unique HCPCS code - either a temporary Q-code or a permanent J-code. Inflectra for infliximab got J1745. Renflexis got J1746. Each has its own payment rate. This shift was designed to make reimbursement fairer and more transparent. It also gave manufacturers a clear path to compete on price without being penalized by a blended payment system.

How Much Do Providers Get Paid?

The payment formula is straightforward but has a twist. For every biosimilar administered, Medicare Part B pays 100% of the biosimilar’s Average Selling Price (ASP) plus 6% of the reference product’s ASP. So if the reference drug (like Remicade) sells for $2,500 per dose and the biosimilar (like Inflectra) sells for $2,000, here’s the math:

  • 100% of Inflectra’s ASP: $2,000
  • 6% of Remicade’s ASP: $150
  • Total reimbursement: $2,150
Compare that to the reference drug: 100% of $2,500 = $2,500, plus 6% = $150, totaling $2,650. That means the provider makes $500 more per dose using the original biologic. Even though the biosimilar costs 20% less, the provider’s profit margin is still higher with the brand-name drug.

This structure is the biggest barrier to biosimilar adoption. It’s not about the price difference - it’s about the reimbursement difference. A 2020 analysis by Dr. Mark Trusheim at MIT showed this 6% add-on on the reference product’s price creates a financial incentive to keep using the more expensive drug. For oncology clinics and rheumatology practices that administer dozens of doses per week, that $50 difference per dose adds up fast.

The JZ Modifier: A New Layer of Complexity

On July 1, 2023, CMS added another requirement: the JZ modifier. This code must be added to claims for infliximab and its biosimilars when no drug is discarded during administration. In other words, if a vial contains 100 mg and the patient only needs 50 mg, and the provider discards the leftover 50 mg, they don’t use JZ. But if they use every last drop - maybe by splitting doses between two patients - they must report JZ.

This sounds like a small paperwork tweak. But in practice, it’s become a major headache. A 2023 survey of gastroenterology practices found a 30% increase in billing staff time spent verifying discarded amounts. One clinic reported needing to track vial usage down to the milligram and log each patient’s dose separately. Without the JZ modifier, claims get denied. It’s not about money - it’s about compliance. And for small practices without dedicated billing teams, it’s a burden.

Billing staff overwhelmed by flying drug codes and rejected claims at a chaotic desk

Why Biosimilar Adoption Is Still Slow in the U.S.

The U.S. biosimilar market reached $12.3 billion in 2022, but that’s only 18% of the total biologics market. In Europe, biosimilars make up 75-85% of the market for the same drugs. Why the gap?

One reason is reimbursement. European countries often use reference pricing - meaning they set a single payment cap for all drugs in a class. If a biosimilar is cheaper, the provider keeps the difference as profit. In the U.S., the 6% add-on on the reference product’s ASP eats up most of that savings. A 2023 Avalere Health analysis estimated that removing the reference product’s ASP from the biosimilar’s reimbursement formula could boost adoption by 15-20 percentage points.

Another issue is confusion. When the switch to individual HCPCS codes happened in 2018, 68% of cancer centers reported billing errors. Some used the old code. Others mixed up J-codes. Claim denials spiked. Even now, 22% of initial rejections are due to outdated or incorrect codes. CMS updates payment rates quarterly, but not every practice checks the latest files. Fresenius Kabi, a major biosimilar maker, found that providers who used their official coding guides reduced billing errors from 15% to under 3%.

What’s Next for Biosimilar Billing?

There are signs the system is changing. In February 2023, CMS released a proposed rule asking for feedback on alternatives to the current 6% add-on. One idea: switch to a flat-dollar add-on - say, $100 per dose - regardless of the reference product’s price. Another: eliminate the reference product’s ASP entirely from biosimilar reimbursement. That would mean biosimilars get paid 100% of their own ASP plus 6% of their own ASP - making the financial incentive clearer.

MedPAC, the Medicare advisory group, also recommended in June 2023 that CMS create a “least costly alternative” payment model. For drugs with three or more biosimilars on the market, Medicare would pay 106% of the volume-weighted average price across all of them. That would reward providers for choosing the cheapest option - not just the one with the highest ASP.

If these changes happen, adoption could jump. RAND Corporation estimates that without structural reform, U.S. biosimilar use will plateau around 40-45%. With reform, it could hit 65-70% by 2030 - closer to European levels.

Split scene: U.S. clinic with trapped biosimilar vs. European clinic with flowing biosimilars and savings

What Providers Need to Do Today

If you’re a provider, here’s what you need to do right now:

  1. Verify the correct HCPCS code for each biosimilar you use. Check CMS’s quarterly Drug Pricing File - don’t rely on old notes.
  2. For infliximab and its biosimilars, always check if you need the JZ modifier. Track vial usage and discard amounts carefully.
  3. Train your billing team. A 2022 study showed practices that did 40-60 hours of staff training during the 2018 transition saw a 70% drop in claim denials.
  4. Use manufacturer guides. Fresenius Kabi, Sandoz, and Amgen all publish free coding and billing handbooks. One survey found 87% of providers rated them “helpful.”
  5. Monitor patient cost-sharing. Medicare Advantage plans sometimes have different copays for biosimilars. Make sure patients know what they’ll pay.

Bottom Line

Biosimilars aren’t just cheaper versions of expensive drugs. They’re complex biological products with a billing system built to track them - and sometimes, to hold them back. The current reimbursement model rewards providers for using the original biologic, not the biosimilar. That’s not a bug - it’s a feature of how the system was designed. But change is coming. Whether it’s fast enough to make a real difference in patient access and cost savings depends on whether policymakers decide to fix the financial incentives. Until then, providers who master the coding and billing rules will be the ones who can offer both the best care and the most cost-effective treatment.