Medicare Could Drop Xolair From Price Talks as Biosimilar Launch Nears

A drug selected for the latest round of Medicare drug price negotiations stands to get dropped because a lower-cost biosimilar version of it is slated to hit the market this year. Xolair, one of the 15 drugs picked for the third cycle of the Medicare Drug Price Negotiation Program, faces removal because a cheaper biosimilar is set to enter the market before the negotiation period is over.

Drugs are disqualified from the negotiation program if they have a biosimilar—a product that is highly similar to an FDA-approved biologic and has no clinically meaningful differences—that is both licensed and marketed. If a selected drug later has a biosimilar enter the market, the Centers for Medicare & Medicaid Services must determine if it’s a true competitor. If so, the CMS must pull the selected drug from price negotiations.

Xolair’s selection is significant because a cheaper biosimilar is set to enter the market before the negotiation period ends, forcing the CMS to determine what to do about price talks. The negotiation period for the third round ends Nov. 1. A Genentech spokesperson said the company stands behind Xolair’s “substantial clinical and economic value” and has until Feb. 28 to decide if it will participate.

Under the third cycle, the CMS says that a drug must have received its initial licensure between Jan. 1, 2012, and Jan. 1, 2016, to be eligible for postponement, but Xolair was approved in 2003. The decision could affect other biosimilars in development if the program lowers the cost of the drugs they’re aiming to compete against, forcing biosimilars to enter the market at even lower prices.

The CMS says it will use a “totality of the circumstances” test to determine if robust and meaningful competition exists, which includes analyzing data on market availability, manufacturer agreements, and sales. Manufacturers have challenged the agency’s definition of bona fide marketing in court, arguing that the agency isn’t clear on what it will analyze to determine that there is true drug competition. The CMS, which has largely won in the challenges, argued that its bona fide marketing standard is needed to ensure a biosimilar is genuinely available, rather than it being a limited launch to dodge the negotiations.

Recent studies have indicated that selecting drugs with near-term biosimilar competition for negotiations may produce short-term savings, but surrender greater long-term savings that would be achievable through competition. The Association for Accessible Medicines has touted how biosimilars generated $56.2 billion in savings since 2015.

Biological drugs account for only 2% of US prescriptions but nearly half of prescription drug spending. Congress established a biosimilar approval pathway through the Biologics Price Competition and Innovation Act in 2009. As of June 2026, the FDA has approved 97 biosimilars, of which 25 have received interchangeability designations.

In June 2024, the FDA released updated draft guidance eliminating the expectation for switching studies—clinical trials that required patients to alternate between a biosimilar and its reference product. The agency cited a meta-analysis by FDA scientists showing no differences in safety or immunogenicity among patients who switched from a reference biological to a biosimilar. Some policymakers have since proposed that Congress eliminate the separate interchangeability designation entirely—a policy included in the Biden administration's fiscal year 2024-2025 budget and publicly supported by FDA leaders.

A new analysis published in the American Journal of Managed Care concludes that while reforming these standards is a necessary first step, it is unlikely to be sufficient on its own to transform the biosimilar landscape. State pharmacy substitution laws, which govern whether pharmacists can automatically substitute biosimilars, are often more restrictive for biosimilars than for generics. Many states require physician notification when a biosimilar is dispensed. Moreover, the FDA does not certify interchangeability between two biosimilars of the same reference drug, creating uncertainty about whether state laws permit substitution across multiple biosimilar versions. Pharmacy benefit manager reimbursement practices also pose a hurdle: while generic drug reimbursement incentivizes pharmacies to dispense the lowest-cost version, PBMs have treated biologicals and biosimilars separately. When several adalimumab (Humira) biosimilars entered the market in 2023, the brand-name product continued to account for more than 98% of prescriptions, likely due to substantial rebates offered by the manufacturer. The authors recommend amending state laws, addressing PBM practices, implementing educational campaigns for clinicians and patients, and potentially expanding Medicare's price negotiation authority to cover biologicals with or without biosimilar competition.