Medicare, the federal health insurance program that covers Americans over 65, is facing an impossible dilemma: Should it cover a new and expensive medication for Alzheimer’s disease, which afflicts 6 million Americans and for which there is no existing treatment, even though the drug might not actually work?
It is an enormous question. Alzheimer’s patients and other families with members who endure mild cognitive impairment that may progress to Alzheimer’s have been waiting decades for an effective treatment. For them, even a few more months of life with improved cognition, one more birthday party or a grandchild’s graduation, is the priority.
But the evidence on whether Biogen’s treatment, called aducanumab, is effective is, at best, mixed; the FDA approved it this week over the objections of its own advisory committee. And with a preliminary announced price of nearly $60,000 annually per patient, covering the treatment could cost upward of $100 billion a year, mostly to Medicare, which would almost double the program’s drug spending. Patients themselves could be on the hook for thousands of dollars in out-of-pocket costs.
What Medicare does about aducanumab will have major ramifications not only for the millions of patients who could potentially be eligible for the drug, but for the future of US health care writ large.
The dilemma results from a feature of the American health care system: Unlike in other countries, the federal government has little room to negotiate what Medicare will pay for treatments.
Independent analysts think the drug is worth more like $8,000, but Medicare has no authority to charge a lower price. Instead, the federal program is likely in effect obligated to cover the new drug now that it has FDA approval. The tools it has to make a determination about whether or not to cover aducanumab and for whom are fraught with legal and ethical risk.
The government now finds itself trying to figure out how to satisfy patients who desperately need help, even though scientists think this particular treatment lacks strong evidence for its effectiveness and policy experts warn it is setting up a budgetary nightmare for Medicare in the future.
“Every conversation we’re going to have for the next few years about health care access is going to be about this drug, whether implicitly or explicitly,” Rachel Sachs, a law professor at Washington University in St. Louis who studies drug pricing, told me this week.
The troubled path to aducanumab’s approval
Alzheimer’s is a terrible disease that robs people of their agency during the final years of their lives and robs families of the loved ones they once knew. The emotional and financial costs are severe. And as the number of Americans over 65 grows, those costs are only expected to increase.
In recent history, the decades-long search for an effective treatment or cure has been driven by what’s known as the amyloid hypothesis, which holds that plaque in the brain found in Alzheimer’s patients is at least in part responsible for the disease and removing that plaque could help relieve the symptoms.
Aducanumab, accordingly, targets the amyloid plaque. Clinical trials of the drug started in 2015 but were halted in March 2019 because it did not appear it would meet the threshold for clinical effectiveness established at the start of the trials. It appeared, in other words, as though the drug didn’t work.
Normally, that would be the end of the story. But an unexpected twist came a few months later when Biogen revealed that, after additional data analysis with the FDA, some patients in one trial had actually seen “better but ultimately mixed results,” as the authors of a Health Affairs post on the controversy put it. Biogen announced it would push ahead with seeking FDA approval in October 2019, with the FDA’s apparent support.
Then, in November 2020, Biogen and aducanumab faced what looked like the ultimate setback: The FDA’s advisory committee on neurological therapies voted the data did not demonstrate the drug was clinically effective. The vote was all but unanimous, with zero in favor, 10 nays, and one uncertain. They raised concerns about potential side effects, such as brain swelling in patients who were given high doses.
But, in defiance of its own advisory committee’s recommendation, the FDA granted aducanumab its approval on Monday. The news was welcomed by Alzheimer’s patient groups but roundly criticized by experts in drug development.
“The FDA … has failed in its responsibility to protect patients and families from unproven treatments with known harms,” the Institute for Clinical and Economic Review (ICER), an independent non-government group that gauges the value of new drugs, said in a blistering statement.
And the agency not only approved the drug over the advice of its scientific advisers, but it put effectively no restrictions on which patients with cognitive impairment should be given the drug, a decision that further stunned experts, as STAT reported.
“For the FDA to approve it and with a very broad indication, I was shocked,” Stacie Dusetzina, who studies drug costs at Vanderbilt University, told me. “I really expected them to say no, based on the body of evidence.”
Medicare almost always covers FDA-approved drugs
Now that aducanumab is approved by the FDA, the issue of coverage falls largely to Medicare; because of the age of the patient population most affected by Alzheimer’s, the federal program is likely to bear the brunt of the drug’s costs.
In practice, if the FDA approves a drug, Medicare will pay for it. Aducanumab would be covered through Medicare Part B, which covers outpatient care, because it is an infusion treatment administered directly by doctors. To be covered by Part B, medical care must be “reasonable and necessary” — a vague standard that has, for medications, historically been mostly synonymous with FDA approval.
Because the drug is covered by Part B, doctors will even have a financial incentive to prescribe it. For prescription drugs, the program pays physicians the average price plus 6 percent, a policy that both Presidents Obama and Trump proposed changing but nevertheless remains in place. Determining which patients would benefit from the drug requires expensive scans, and practices will be able to bill Medicare for those, too.
At the individual level, patients could face out-of-pocket costs anywhere from $0 for patients eligible for both Medicare and Medicaid, to $10,000 annually, since Medicare Part B can hold patients responsible for up to 20 percent of costs, advocates told me.
When I asked Russ Paulsen, chief operating officer of UsAgainstAlzheimer’s, about Biogen’s list price, he responded with an audible sigh, saying: “It’s a big number.”
He continued: “We care a lot about making sure the people who are disproportionately affected by this disease, which includes poor people, have the ability to access this drug.”
Medicare’s inability to determine the price it pays for aducanumab is a uniquely American problem compared to health systems in the rest of the developed world. Countries like Australia and the United Kingdom have independent boards that evaluate a new drug’s effectiveness and set a price based on that estimated value. The US pharma industry says the US system is important for encouraging innovation, and companies have made amazing breakthroughs, such as the hepatitis-C drugs that effectively cure that disease.
But, as the standards for approving have sometimes seemed to slip in recent years, the chances of the FDA approving very expensive drugs with only marginal benefits have risen.
“We don’t require prices to reflect the value of treatment, period,” Dusetzina said. “Companies can price their drugs as high as they want. Companies can also get drugs approved with little evidence.”
So Biogen is planning to charge $56,000 annually for aducanumab. ICER, which evaluates the estimated value of new drugs, estimates, based on the clinical evidence, that it’s worth more like $8,000; perhaps as little as $2,500 or as much as $23,100. Regardless, the price announced after Biogen secured FDA approval “far exceeds even this optimistic scenario,” ICER concluded.
“If we were talking about a cure for Alzheimer’s disease, we would figure it out,” Dusetzina told me. “It would be so important to address that burden on our society, we would need to figure it out.”
But aducanumab is not that drug, according to the available data. So what is Medicare to do?
Despite the tradition of honoring FDA approval, experts do not expect Medicare to simply announce it is going to cover the drug with no limitations. One option would be for the program to conduct “national coverage determination,” a lengthy review process to figure out whether to cover the drug and for which patients. (The price would not be on the table.)
The decision that would lead to is unclear. Many experts are urging Medicare to pursue what is called “coverage with evidence development”: essentially setting up its own clinical trial by authorizing aducanumab for use by some patients and collecting real-world data on their outcomes.
“I think it’d be a really smart move,” Dusetzina, who recently joined Medicare’s payment advisory board, said. “This is the perfect time to reevaluate why we need to consider value when we consider what is a fair price for a treatment.”
Along those lines, the private health insurer Cigna announced it would pursue a value-based contract with Biogen to cover the drug, though it did not provide any more details.
But for Medicare, none of these options are ideal. A previous attempt to set up coverage with evidence development for a new cancer drug in 2017 ended up being scuttled after pushback from the drug industry and doctors. Patients with Alzheimer’s and their families are desperate for treatment and will likely object if Medicare tries to restrict access to the drug while undertaking that data collection.
Alzheimer’s advocates are mindful of aducanumab’s cost to the US health care system as well as individual patients, and its potential limitations. They are not necessarily opposed to more evaluation of its effectiveness.
But their ultimate goal is to buy patients more time. As Paulsen told me: “This drug doesn’t do it perfectly, doesn’t do it amazingly well for every single person. But it’s the first one that does that.”
They say they worry about restricting access to patients who are living with this disease right now, for whom time is running out. They point out that cancer drugs with marginal benefits have also been approved by the FDA, with exponentially higher costs per patient than aducanumab.
“We do not want to see delays in the ability of patients and doctors to begin to discuss whether this treatment is right for them,” Robert Egge, chief public policy officer of the Alzheimer’s Association, said. “And if it is, if that’s their decision together, we want them to have access to it. What we do not want to see is a long protracted process that effectively delays the ability for people to begin this treatment now that approval has been given.”
The stakes are enormous — for everyone. The cost of expensive drugs ultimately trickles down in the form of higher premiums or taxes. As the investment advisory firm Capital Alpha DC pointed out this week in a note that warned the drug “could break the Medicare program,” the Medicare trustees are expected to issue a report any time now with an updated estimate of when the program’s hospital benefit might start to become insolvent — which could be as soon as 2024.
As Sachs told me: “It’s very difficult to see how our health system moves through this without significant negative consequences.”
Medicare’s inability to negotiate pharmaceutical prices has meant that a budget crisis is always just one drug approval away. With aducanumab, that crisis has arrived — even when evidence so far suggests there may be minimal benefit for patients in return.
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