The U.S. Food and Drug Administration’s approval last week of Biogen Inc.’s Alzheimer's treatment aducanumab was a mistake based on weak evidence. The question now is just how much the U.S. will spend on a drug that may not help patients. No one but Biogen will like the answer.
Biogen priced its drug at about $56,000 a year, which is exceptionally high for a medicine targeting a large population like the 6 million Americans believed to have Alzheimer’s. But that’s not all: A misguided bit of U.S. health-care policy will compound the burden of its price.
Medicare pays doctors a fee worth 6% of the cost of any drug administered in their office, creating a substantial financial incentive to choose more expensive medicines regardless of merit. The fee is supposed to compensate doctors for local variation in the price of medicines and storage costs. Instead, it’s become part of a perverse feedback loop in which physicians favor expensive drugs, and drugmakers price aggressively to appeal to them and pad profits. Any logical system would encourage the opposite and limit unproven drugs like aducanumab, sold under the brand name Aduhelm. Instead, the U.S. will likely accelerate its use with hefty bonuses tied to its unjustifiable price. And Medicare Part B, which covers physician-administered medicines, cannot negotiate costs.
Aducanumab may accelerate spending growth and turn Medicare’s fee structure into a bigger profit engine. While most expensive medicines are approved for relatively small and specific groups and treat acute conditions like cancer, Alzheimer’s is an illnesses that can linger for years. The combination of price, an aging U.S. population, and the FDA’s perplexing decision to put few limits on prescribing aducanumab leads to some pretty scary math.
Suppose 675,000 patients take aducanumab by 2026. That's a reasonable estimate — Biogen’s drug is the first endorsed by the FDA as targeting a possible cause of the disease, and nearly 2 million Medicare beneficiaries take available medicines that only ease symptoms. In that case, annual spending on the drug could exceed the $37 billion that Medicare spent on all Part B drugs in 2019. Well over $1 billion would flow to physicians and hospitals from the add-on fee alone. Additional charges for patient visits, scans and infusions would further increase the cost to Medicare. And if doctors make the profitable and FDA-enabled choice to treat more advanced patients where the evidence of benefit is nonexistent instead of merely inconclusive (Biogen only studied the medicine in patients with mild Alzheimer’s), the cost could soar further and faster.
What can be done about this? The status quo is so obviously harmful that both the Obama and Trump administrations attempted regulatory fixes. President Obama eventually gave up in late 2016 under pressure from lobbyists, and the Trump version skipped procedural steps and remains stuck in court.
Broader reform that helps Medicare negotiate prices and more easily reject overpriced drugs has the best chance of averting a budget crisis, but a nearly deadlocked Senate stands in the way. Changing Part B’s costly reimbursement policy is more achievable, though, because President Joe Biden can do it by executive action. Moving from a percentage of inflated prices to a flat fee would be the most straightforward way to shift incentives away from expensive medicines. Biden’s administration could also consider value-based payments that encourage doctors to prescribe cost-effective medications backed by good evidence.
A payment shift wouldn’t single-handedly stop aducanumab from becoming an underserving blockbuster. But it would help physicians look at the shaky evidence behind its approval instead of their pocketbooks.
ABOUT THE WRITER
Max Nisen is a Bloomberg Opinion columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and Business Insider.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.©2021 Bloomberg L.P. Distributed by Tribune Content Agency, LLC