How Biosimilars Are Reimbursed and Coded: A Practical Guide to Medicare Part B Billing

When a doctor gives you a biosimilar instead of the original biologic drug, it’s not just a switch in medication-it’s a shift in how the system pays for it. Unlike generic pills, which are chemically identical to their brand-name counterparts, biosimilars are highly similar but not exact copies of complex biologic drugs. That difference changes everything when it comes to billing. If you’re a provider, pharmacist, or even a patient trying to understand why your bill looks different, knowing how biosimilars are coded and reimbursed under Medicare Part B isn’t optional-it’s essential.

How Biosimilars Are Different from Generics

It’s easy to assume that biosimilars work like generic drugs. They’re cheaper, they treat the same condition, and they’re approved by the FDA. But the similarity ends there. Generic drugs are small-molecule chemicals made through straightforward chemical synthesis. Biosimilars are large, complex proteins made from living cells. Even tiny changes in the manufacturing process can affect how they behave in the body. That’s why the FDA doesn’t call them "interchangeable" unless they’ve passed extra tests-most biosimilars aren’t automatically interchangeable.

This complexity is why Medicare doesn’t treat them like generics. With generics, one HCPCS code covers all versions. With biosimilars, each one gets its own code. That’s not a bureaucratic hiccup-it’s a deliberate design to track which product is being used, how much it costs, and how much providers are paid.

The Two-Phase Evolution of Biosimilar Coding

Before 2018, all biosimilars for a single reference drug shared one HCPCS code. For example, if you gave Inflectra, Renflexis, or Abrilana-all biosimilars of Remicade-you billed them all under Q5101. The payment was a blended rate based on the average price of all those products. The problem? It punished early entrants. If Inflectra came in at $1,800 per dose and Renflexis later dropped to $1,500, Inflectra’s reimbursement still got dragged down by the lower price. That discouraged new biosimilars from entering the market.

In January 2018, CMS flipped the script. Each biosimilar now has its own unique HCPCS code. Inflectra got J7327. Renflexis got J7328. Abrilana got J7329. And so on. Payment is no longer a blend-it’s 100% of that specific biosimilar’s Average Selling Price (ASP), plus 6% of the reference product’s ASP. So if Remicade’s ASP is $2,500, and Inflectra’s is $2,000, you get paid $2,000 (100% of Inflectra’s ASP) plus $150 (6% of Remicade’s ASP) = $2,150 per dose.

This change made it fairer for manufacturers. But it also created a hidden incentive: providers still earn more from the higher-priced reference drug. That $150 add-on from Remicade is $30 more than what they get from Inflectra ($120). That’s real money when you’re giving hundreds of doses a month.

How Payment Is Calculated: The 106% Rule

Medicare Part B pays for all injectable and infused drugs-including biosimilars-at 106% of ASP. That’s 100% for the drug itself, plus a 6% add-on to cover handling, storage, and administration. It sounds simple, but here’s the catch: the 6% is always based on the reference product’s ASP, not the biosimilar’s.

So if you give Remicade, you get 106% of Remicade’s ASP. If you give Inflectra, you get 100% of Inflectra’s ASP plus 6% of Remicade’s ASP. The math always favors the original. For a $2,500 reference drug and a $2,000 biosimilar, the provider’s payment difference is $30 per dose. Multiply that by 100 doses a month, and you’re talking $3,000 extra in revenue just for sticking with the brand.

That’s why, even with a 20% price discount, biosimilar adoption in the U.S. still lags behind Europe. In countries like Germany or the UK, reimbursement is tied to the lowest price in the class. In the U.S., it’s tied to the highest. And providers notice.

HCPCS Codes: J-Codes and Q-Codes Explained

Every biosimilar gets a J-code (permanent) or a Q-code (temporary). J-codes are for drugs with enough market history to have stable pricing. Q-codes are temporary, used while CMS gathers enough ASP data to assign a permanent J-code. The first biosimilar for a new reference drug usually gets a Q-code. Once six months of sales data is in, CMS replaces it with a J-code.

For example, when Inflectra launched in 2016, it started with Q5101. By 2018, it got J7327. Today, there are over 30 FDA-approved biosimilars, each with its own code. You can’t guess them-you have to check the CMS quarterly updates. Outdated codes are the number one reason for claim denials. One oncology practice reported 22% of their initial rejections came from using last quarter’s code.

CMS publishes these codes and payment rates in the Medicare Physician Fee Schedule, updated every April, July, October, and January. If you’re billing, you need to check these files every quarter. No exceptions.

The JZ Modifier: A New Layer of Complexity

On July 1, 2023, CMS added another layer: the JZ modifier. This modifier tells Medicare that no drug was wasted during administration. For drugs like infliximab biosimilars, which come in single-dose vials, it’s common to have leftover medicine. But if you use the whole vial-no waste-you must append JZ to the claim.

If you forget JZ when there’s no waste, your claim gets denied. If you use JZ when there was waste, you risk an audit. One gastroenterology clinic in Ohio said their billing staff now spends 30% more time just verifying discarded amounts. It’s not just paperwork-it’s a new compliance burden.

What Happens in Real Clinics?

A 2022 survey of 217 cancer centers found that 68% had billing confusion during the 2018 code transition. Forty-two percent had claims denied because someone used the wrong code. Even now, three years later, practices still report errors. Why? Because coding isn’t just a pharmacy issue-it’s a team effort. The nurse gives the drug. The pharmacist verifies the vial. The billing clerk enters the code. One mistake anywhere, and the payment stalls.

Successful clinics use a dual-check system: pharmacy staff confirm the product and code before the claim is submitted. One study showed this cut error rates from 15% to under 3%. That’s not just efficiency-it’s lost revenue recovered.

Providers also struggle with payer differences. Medicare Part B pays 106% ASP. Medicare Advantage plans often pay 100-103% ASP. Commercial insurers? It’s a wild west-some pay 100%, some pay 110%, some don’t cover biosimilars at all. You can’t assume anything. You have to check each plan’s policy.

Why U.S. Adoption Is Slower Than Europe’s

The U.S. biosimilar market hit $12.3 billion in 2022. That sounds big. But it’s only 18% of the total biologics market. In Europe, biosimilars make up 75-85% of the same market. Why the gap?

It’s not just pricing. It’s payment structure. European countries use reference pricing: they set one payment rate for the whole class, and manufacturers compete to be the cheapest. The lowest price wins. In the U.S., the reference product’s price still drives the add-on. That means the most expensive drug sets the baseline for everyone else’s reimbursement.

Analysts at Avalere Health estimate that if CMS removed the reference product’s ASP from the biosimilar payment formula, adoption could jump 15-20 percentage points. That’s not speculation-it’s math. Remove the incentive to stick with the brand, and providers will switch.

What’s Next for Biosimilar Billing?

CMS is already looking at changes. In February 2023, they asked for public input on replacing the 6% add-on with a fixed-dollar amount. That would make reimbursement more predictable. Another idea? Least Costly Alternative (LCA) payment. If three or more biosimilars exist for one drug, Medicare would pay 106% of the volume-weighted average price-forcing everyone to compete on cost, not just list price.

MedPAC recommended LCA for high-volume drugs in June 2023. If adopted by 2025, it could change everything. But manufacturers are nervous. If reimbursement drops too fast, they won’t invest in new biosimilars. CMS is walking a tightrope: encourage competition without killing innovation.

What Providers Need to Do Today

If you’re billing for biosimilars, here’s your checklist:

• Always use the current HCPCS code from CMS’s latest quarterly update.
• Apply the JZ modifier only if no drug was discarded.
• Verify the product in the vial matches the code you’re billing.
• Double-check payer policies-Medicare Advantage and commercial insurers don’t follow the same rules.
• Train your entire team: nurses, pharmacists, and billers.
• Use manufacturer guides (like Fresenius Kabi’s) to reduce errors-they’re accurate and updated monthly.

Don’t rely on memory. Don’t assume. Don’t guess. The system is too precise-and too unforgiving-for shortcuts.

Final Reality Check

Biosimilars are cheaper. They work. They’re safe. But the billing system doesn’t reward you for using them. Right now, Medicare pays providers more to give the expensive drug. That’s not a flaw in the drug-it’s a flaw in the payment model.

Until that changes, adoption will crawl. Providers will keep choosing Remicade over Inflectra-not because it’s better, but because it pays more. Patients get the same clinical outcome. But the system? It’s still stuck in the past.

That’s the paradox of biosimilars in the U.S.: the science is ahead of the system.