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

When a doctor gives a patient a biosimilar drug like Inflectra or Renflexis instead of the brand-name Remicade, the billing process isn’t as simple as handing over a generic pill. Unlike traditional generics, biosimilars don’t get lumped into one billing code. Each one has its own unique identifier, and how much the provider gets paid depends on a complex formula tied to the drug’s actual selling price. This isn’t just paperwork-it directly affects whether a clinic chooses to use a cheaper biosimilar or sticks with the more expensive original.

How Biosimilar Coding Works Today

Since January 2018, every FDA-approved biosimilar has been assigned its own HCPCS code. These are either J-codes (permanent) or Q-codes (temporary, until a permanent code is issued). For example, Inflectra (infliximab-dyyb) uses J1747, while Renflexis (infliximab-abda) uses J1748. These codes are not interchangeable. If a provider bills J1747 but gave Renflexis, the claim will be denied.

Before 2018, all infliximab biosimilars shared one code: Q5101. That created a big problem. If one biosimilar came in at a lower price, the reimbursement rate was averaged across all products. That meant manufacturers of cheaper biosimilars got paid less than they should’ve-because the system rewarded the more expensive options. The 2018 change fixed that. Now, each biosimilar gets paid based on its own Average Selling Price (ASP), plus 6% of the reference product’s ASP. That’s the key: the 6% add-on isn’t based on the biosimilar’s price. It’s based on the brand-name drug’s price.

How Reimbursement Is Calculated

Here’s the math: Providers are paid 100% of the biosimilar’s ASP, plus 6% of the reference biologic’s ASP. So if Inflectra’s ASP is $2,000 per dose and Remicade’s ASP is $2,500, the provider gets $2,000 + (6% of $2,500) = $2,150. That sounds fair-until you compare it to what they get for Remicade itself. For Remicade, they get $2,500 + (6% of $2,500) = $2,650. That’s a $500 difference per dose. Even though Inflectra is 20% cheaper, the provider still makes $500 more per dose by giving the brand-name drug.

This structure creates a hidden financial incentive to avoid biosimilars. A 2020 study from MIT’s Center for Biomedical Innovation showed that for every $100 saved on the drug cost, providers only gained $6 in reimbursement-because the 6% is tied to the higher-priced reference product. In Europe, where reimbursement is based on the lowest price in the class, biosimilar adoption hit 80%. In the U.S., after five years, infliximab biosimilars still only make up about 35% of the market.

The JZ Modifier: A New Layer of Complexity

On July 1, 2023, CMS added another rule: the JZ modifier. This modifier must be added to claims for infliximab and its biosimilars when no drug is discarded. That means if a vial contains 100 mg and you use all of it, you report the JZ modifier. If you throw away 20 mg, you don’t. This sounds minor, but it added real work. A gastroenterology practice in Ohio reported a 30% increase in billing staff time just to track discarded amounts. The goal was to prevent overbilling when providers used multiple vials for one patient. But the system doesn’t always account for real-world variability in dosing.

Providers who missed the JZ modifier in the first few months saw claim denials. Training became essential. Fresenius Kabi, a biosimilar maker, released a detailed coding guide in 2023. In a survey of 120 clinics, 87% said it helped reduce billing errors. But that’s still a lot of extra work for a system that should be simpler.

What Providers Actually Experience

A 2022 survey of 217 cancer centers by the Community Oncology Alliance found that 68% had trouble with billing during the 2018 transition to individual codes. Forty-two percent had claims denied because the wrong J-code was used. Even now, 22% of denials come from using outdated codes-because CMS updates pricing every quarter, and many clinics don’t check the new list.

One oncology clinic in Texas switched to a dual-verification system: the pharmacist checks the drug vial, and the billing staff cross-references it with the HCPCS code before submitting. That cut their error rate from 15% to under 3%. But not every clinic has the staff or budget for that.

And it’s not just Medicare. Medicare Advantage plans, which cover many patients, often pay differently-sometimes only 100% to 103% of ASP, without the 6% add-on. Commercial insurers vary even more. So a provider might get $2,150 from Medicare but only $1,900 from a private plan for the same drug. That inconsistency makes financial planning nearly impossible.

Why This Matters for Patients and the System

The real cost of this system isn’t just in billing errors. It’s in missed savings. The U.S. spent $12.3 billion on biosimilars in 2022, but because reimbursement doesn’t fully reward cost savings, adoption is slow. If the 6% add-on were based on the biosimilar’s own ASP instead of the reference product’s, Avalere Health estimates biosimilar use could jump by 15 to 20 percentage points. That could save Medicare billions.

Right now, biosimilar manufacturers time their launches to match CMS’s quarterly payment updates. They know the first few months after a launch are critical. But the system still favors the original drug. Even when biosimilars are 20-30% cheaper, providers often stick with the brand because the profit margin is higher.

What’s Next?

CMS is reviewing whether to change the 6% add-on structure. One proposal would tie the add-on to the biosimilar’s own ASP. Another, from MedPAC, suggests blending all drugs in a class-paying 106% of the weighted average price across all versions. That’s how Europe works. It’s simpler and pushes providers toward the cheapest option.

But changing the system isn’t easy. Drugmakers worry that if reimbursement drops too much, they won’t recoup R&D costs. CMS wants to encourage competition but also protect patient access. Right now, the system is stuck in the middle: it allows biosimilars to exist but doesn’t give providers a strong reason to choose them.

The future of biosimilars in the U.S. depends on whether policymakers can fix the payment mismatch. Until then, the billing process will remain confusing, the incentives will stay misaligned, and the savings will stay out of reach.