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

When a doctor prescribes a biosimilar instead of the original biologic drug, the billing process isn’t as simple as switching 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 biologic medicines. This difference changes everything when it comes to how providers get paid and how claims are submitted to Medicare. If you’re a clinician, pharmacist, or practice administrator, understanding how biosimilars are coded and reimbursed isn’t optional-it’s essential to avoid claim denials and lost revenue.

How Biosimilar Reimbursement Works in Medicare Part B

Medicare Part B covers drugs given in doctor’s offices and outpatient clinics, including most biosimilars. The payment system for these drugs is based on a formula: 100% of the product’s Average Selling Price (ASP) plus a 6% add-on. This formula applies to both the original biologic and its biosimilar versions. But here’s the catch: the 6% add-on isn’t based on the biosimilar’s own price. It’s calculated using the ASP of the original reference product.

For example, if Remicade (infliximab) sells for $2,500 per dose and Inflectra (its biosimilar) sells for $2,000, Medicare pays the provider 106% of $2,500 for Remicade-that’s $2,650. For Inflectra, Medicare pays 100% of $2,000 plus 6% of $2,500-that’s $2,000 + $150 = $2,150. The provider makes $500 less on the biosimilar, even though the biosimilar costs less to buy. That $500 difference isn’t just about profit-it affects whether a clinic chooses to use the cheaper option.

This system was designed to encourage biosimilar entry into the market, but it’s created an unintended problem. Providers earn more money per dose when they use the more expensive reference product. A 2020 analysis by MIT’s Dr. Mark Trusheim found that this structure creates a financial disincentive to switch. Even when a biosimilar is 20% cheaper, the provider’s reimbursement difference is only $30 per dose. That’s not enough to overcome long-standing habits or administrative inertia.

The Shift from Blended Codes to Product-Specific Codes

Before 2018, all biosimilars for the same reference product shared one HCPCS code. For infliximab biosimilars, that was Q5101. CMS paid a blended rate based on the average price of all biosimilars on the market. That meant if Inflectra came in at $2,000 and Renflexis at $1,800, the payment was averaged out-say, $1,900. But that created a "free rider" problem. The first biosimilar to enter the market bore the cost of price competition, while later entrants rode on the lower ASP without being penalized. Manufacturers had little incentive to price aggressively.

In January 2018, CMS changed the rules. Each biosimilar now gets its own unique HCPCS code. Inflectra got J7321. Renflexis got J7322. Each is paid based on its own ASP plus 6% of the reference product’s ASP. This change gave manufacturers a stronger reason to compete on price: their reimbursement directly reflected their own market price. It also gave CMS better data to track which biosimilar was actually being used.

But this change came with a steep learning curve. A 2022 survey by the Community Oncology Alliance found that 68% of cancer clinics experienced billing confusion during the first six months after the switch. Claim denials spiked because staff were still using the old blended code. Practices that didn’t update their electronic health records or pharmacy systems saw a 12-15% error rate in billing. The fix? Dual verification: pharmacy staff confirm the drug administered, and billing staff cross-check the correct HCPCS code before submission. Clinics that did this reduced errors to under 3%.

What Codes Do You Use? J-Codes, Q-Codes, and the JZ Modifier

Every FDA-approved biosimilar gets a permanent J-code or a temporary Q-code. J-codes are for long-term use. Q-codes are temporary, used during the first few months after approval while CMS finalizes the permanent code. For example, when a new biosimilar for adalimumab hits the market, it might start with Q-code Q5103 and later switch to J-code J7620.

Since July 1, 2023, a new modifier-JZ-became mandatory for infliximab and its biosimilars. The JZ modifier means "no drug was discarded." If a provider draws up a full dose and uses every bit of it, they must add JZ to the claim. If there’s leftover drug (like from a 100mg vial used for a 50mg dose), they don’t use JZ. This was introduced to prevent overbilling for discarded amounts. But it’s added complexity. One gastroenterology practice in Ohio reported a 30% increase in billing staff time just to verify discarded amounts and update claims correctly.

Providers must check CMS’s quarterly updates. Payment rates change every three months. Outdated codes or incorrect ASP values are the #1 reason for claim denials. Fresenius Kabi, a major biosimilar manufacturer, released a 2023 coding guide that 87% of surveyed providers rated as "helpful." But only 58% of providers feel CMS’s official documentation is sufficient to handle real-world billing issues.

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. Compare that to Europe, where biosimilars hold 75-85% market share in the same drug classes. Why the gap?

It’s not just about price. It’s about reimbursement structure. In Europe, many countries use reference pricing or tendering systems. If a biosimilar is cheaper, it gets preferred status. Providers get paid the same amount regardless of which version they use. That removes the financial incentive to stick with the expensive drug.

In the U.S., the 6% add-on tied to the reference product’s ASP creates a hidden barrier. Even when biosimilars are 28% cheaper on average, the provider’s reimbursement difference is often less than 10%. A 2023 Avalere Health analysis estimated that if the add-on were based only on the biosimilar’s ASP-not the reference product’s-utilization could jump by 15-20 percentage points.

Some experts, like Dr. G. Caleb Alexander from Johns Hopkins, argue that the current system is "necessary but flawed." The product-specific coding is good for tracking, but the payment structure doesn’t reward cost savings. MedPAC, the Medicare advisory committee, has proposed a "consolidated billing" model where all biosimilars and the reference product in a class are paid the same rate-106% of the volume-weighted average ASP. That would eliminate the incentive to use the expensive version.

What Providers Can Do to Get Paid Right

If you’re managing a clinic or pharmacy, here’s what actually works:

1. Update your EHR and billing system every quarter with the latest HCPCS codes from CMS’s Physician Fee Schedule.
2. Train pharmacy and billing staff to match the administered product with its exact code-no shortcuts.
3. For infliximab products, always check if the JZ modifier applies. Document discarded amounts clearly.
4. Use manufacturer guides (like Fresenius Kabi’s or Sandoz’s) as a reference-they’re often clearer than CMS’s official documents.
5. Implement a two-person verification system: one person selects the drug, another confirms the code before billing.

Practices that followed these steps saw claim denial rates drop from 15% to under 5%. The time saved on resubmitting claims and chasing payments more than makes up for the initial training cost.

What’s Next? The Future of Biosimilar Billing

CMS is actively reviewing the 6% add-on structure. In February 2023, it issued an Advanced Notice of Proposed Rulemaking asking for feedback on alternatives: a fixed-dollar add-on, or removing the reference product’s ASP from the biosimilar payment entirely.

By 2025, we may see "least costly alternative" (LCA) policies for biosimilars with three or more competitors. Under LCA, Medicare would pay 106% of the lowest-priced option’s ASP, regardless of which one the provider chooses. That would be a game-changer.

Right now, biosimilar adoption in the U.S. hovers around 35% for mature products. Analysts predict it could hit 45-50% by 2027 under current rules. But if the payment structure changes, it could jump to 65-70%-closer to European levels.

The bottom line: billing for biosimilars isn’t just about paperwork. It’s about aligning financial incentives with patient care. Until providers are rewarded for choosing lower-cost options, the savings won’t fully reach patients or the system.

Next Steps for Providers

Start by auditing your last 50 biosimilar claims. Check for:

• Correct HCPCS code (not the old blended code)
• Use of JZ modifier for infliximab products
• Consistency between the drug administered and the code billed

If you find errors, schedule a staff training session using the manufacturer’s coding guides. Update your EHR templates. And don’t wait for CMS to send you an update-check their website quarterly. The system isn’t perfect, but it’s manageable if you stay ahead of the changes.