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 swapping one pill for another. Unlike generic small-molecule drugs, biosimilars are complex biological products made from living cells. And that complexity carries over into 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, knowing how this system works isn’t just helpful-it’s essential.

How Biosimilars Are Different from Generics

Many people assume biosimilars work like generics. They don’t. Generics are chemically identical to their brand-name counterparts. Biosimilars are highly similar, but not identical. They’re made in living systems, so tiny variations in manufacturing can affect how they behave in the body. Because of this, the FDA doesn’t approve them as "interchangeable" unless they meet extra requirements. And Medicare’s billing system treats them differently too.

Before 2018, all biosimilars for the same reference product-like infliximab-shared one HCPCS code: Q5101. That meant Inflectra, Renflexis, and others all got paid the same blended rate. But here’s the problem: if one biosimilar came in at a lower price, the others got a free ride. Providers had no financial reason to choose the cheaper option. The system rewarded the brand, not the savings.

The 2018 Shift: Product-Specific Codes

In January 2018, CMS changed the game. Each biosimilar now gets its own unique HCPCS code. Inflectra has J1747. Renflexis has J1748. And so on. This wasn’t just a paperwork change-it was a market reset.

Now, reimbursement is calculated as 100% of the biosimilar’s own Average Selling Price (ASP) plus 6% of the reference product’s ASP. For example, if Remicade (the reference) sells for $2,500 per dose and Inflectra sells for $2,000, the provider gets paid:

• $2,000 (100% of Inflectra’s ASP)
• Plus $150 (6% of Remicade’s $2,500 ASP)
• Total: $2,150 per dose

Meanwhile, Remicade itself gets paid $2,650 ($2,500 + 6%). That $50 difference might seem small, but over thousands of doses, it adds up. And it’s why many providers still default to the reference product-even when a biosimilar is 20% cheaper.

The JZ Modifier: A New Layer of Complexity

Starting July 1, 2023, CMS added another layer: the JZ modifier. This applies to infliximab and its biosimilars. It tells Medicare that no drug was discarded during administration. If a vial holds 100 mg and you only use 70 mg, the remaining 30 mg is discarded. You used to bill for the full vial. Now, if you use the entire vial with no waste, you add JZ to the claim. If you discard any, you don’t.

Why? To prevent overbilling. But here’s the catch: it’s created a paperwork nightmare. One gastroenterology practice in Ohio reported a 30% increase in billing staff time just to track discarded amounts. Pharmacies now need double-check systems: one person administers, another documents waste, and a third codes the claim. Mistakes mean denials-and delayed payments.

How Payment Rates Are Set and Updated

CMS updates biosimilar payment rates every quarter, based on ASP data submitted by manufacturers. The first biosimilar to enter a market gets a temporary Q-code and is paid at 106% of its Wholesale Acquisition Cost (WAC) until enough sales data exists to calculate ASP. After six months, it switches to a permanent J-code and gets paid based on real ASP.

Subsequent biosimilars skip the WAC phase. They jump straight into the existing payment structure. That means if Inflectra is already on the market at $2,000, Renflexis enters and immediately gets paid 100% of its own ASP plus 6% of Remicade’s ASP-no grace period.

These rates are published in the Medicare Physician Fee Schedule. Providers must check CMS’s website every quarter. Outdated codes are the #1 reason for claim denials. One survey found 22% of initial rejections came from using last quarter’s code.

Why Adoption Is Still Slow in the U.S.

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

The 6% add-on is the biggest culprit. It creates a perverse incentive. The more expensive the reference product, the more profit a provider makes-even when giving a cheaper biosimilar. A 2020 MIT analysis showed that for every dose of Remicade, providers earn $30 more than for Inflectra. That’s not a small margin-it’s a disincentive built into the system.

Even when biosimilars are 20-30% cheaper, providers often stick with the reference product. A 2022 survey of 217 cancer centers found that 68% experienced billing confusion after the 2018 code switch. Forty-two percent had claims denied in the first six months. Many practices still default to the brand because they’re not sure how to code correctly-or because they’re worried about audits.

What’s Next? Possible Reforms

There’s growing pressure to fix this. MedPAC (Medicare Payment Advisory Commission) has proposed a "consolidated billing" model. Under this idea, all drugs in a class-reference and biosimilars-would get paid based on the volume-weighted average ASP. That means if three biosimilars and one brand are on the market, everyone gets paid the same blended rate. It’s how Europe does it.

Another idea: remove the reference product’s ASP from the biosimilar add-on. Instead of paying 6% of Remicade’s price, pay 6% of the biosimilar’s own price. Avalere Health estimates this could boost biosimilar use by 15-20 percentage points.

CMS is currently reviewing these options. In February 2023, they released an Advanced Notice of Proposed Rulemaking asking for feedback. A change could come as early as 2025. But until then, the system stays the same-and so do the incentives.

What Providers Need to Do Right Now

If you’re billing for biosimilars, here’s what you must do:

1. Use the correct HCPCS code for each biosimilar. Don’t guess. Check CMS’s quarterly updates.
2. Apply the JZ modifier only if no drug was discarded. If you open a vial and use all of it, add JZ. If you discard even a drop, don’t.
3. Train your billing team. The 2018 transition showed that 40-60 hours of training per practice was needed. Don’t wait for a denial to realize your staff is out of date.
4. Use dual verification. Have a pharmacist confirm the drug given matches the code billed. Practices that do this reduce errors from 12-15% to under 3%.
5. Know your payer differences. Medicare Part B pays 106% ASP. Medicare Advantage plans often pay less-100-103%. Commercial insurers vary wildly. Always verify before administering.

Manufacturers like Fresenius Kabi now offer free coding guides. One survey found 87% of providers rated them "helpful." Use them. They’re your best defense against denials.

Why This Matters for Patients

Patients don’t always see the billing side-but they feel the impact. If providers avoid biosimilars because of reimbursement rules, patients pay more out of pocket. Medicare Part B patients pay 20% of the payment amount. If the provider gets paid $2,150 for a biosimilar versus $2,650 for the brand, the patient pays $430 instead of $530. That’s $100 per dose. Over a year, that’s thousands.

And it’s not just about cost. Biosimilars are just as safe and effective as the originals. The FDA requires them to meet the same high standards. But if the system doesn’t reward their use, patients may never get access to cheaper, equally good options.

Bottom Line

Biosimilar billing is a system built on data, not discounts. It tracks every dose, every code, every discarded milliliter. But it doesn’t yet reward the savings it was designed to create. The coding is precise. The payments are calculated. But the incentives? They’re still skewed toward the expensive drug.

Until the 6% add-on is restructured, providers will keep choosing the brand. Patients will keep paying more. And the potential of biosimilars-to cut costs without cutting care-will stay locked in the system.