A $57B drug? Medicare faces a massive bill for Biogen's Aduhelm—even if it limits coverage

Biogen biologics plant in Denmark
With criticism mounting, Biogen issued a lengthy response Wednesday promising to work with public and private insurers to ensure Aduhelm doesn't break their budgets. (Biogen)

"Cruel," "unconscionable" and "simply unacceptable" were some of sharp words critics used to describe Biogen's whopping $56,000 list price for a year’s worth of Alzheimer’s drug Aduhelm soon after it crossed the FDA’s finish line. 

“Who the hell can afford that?” questioned Sen. Bernie Sanders (I-VT). That’s what Washington is now trying to work out, as thousands of Medicare beneficiaries line up for the first FDA-approved Alzheimer's drug in nearly two decades.

The Kaiser Family Foundation found Aduhelm's bill to Medicare could hit $29 billion for just one year. That's nearly five times the FDA's own budget and over three times the size of the CDC's—not to mention more than twice the amount of Biogen's own 2020 sales. And that kind of wallop to Medicare will likely push up premiums for all 56 million enrollees, KFF's recent report said.

All that spending would come for a drug with foggy benefits, at best, critics argue. Some are pleading with the Centers for Medicare and Medicaid Services (CMS) to soften the fiscal blow by limiting the pool of Alzheimer’s patients who would qualify for treatment while additional studies are carried out. But the CMS process could take months—and the additional testing up to nine years—and Biogen isn’t waiting to ship out Aduhelm in the meantime. 

"I would say this is the most controversial FDA approval in many years, and it takes what was controversial about previous approvals and makes it more extreme," Rachel Sachs, a law professor at Washington University in St. Louis, said in an interview.

RELATED: Biogen's shockingly broad Aduhelm label—and $56K price—set up a $10B launch, analysts say

The drug's list price may not be the only burden for Medicare. Right now, patients have to pick up the tab for diagnostic tools like PET scans to detect Aduhelm's primary target—amyloid plaque in the brain—but a medtech industry group and some top companies are pressing CMS to cover the $3,000-plus scans as well. 

Lawmakers are taking notice. In a letter Wednesday, Sens. Elizabeth Warren and Bill Cassidy called on the Senate Finance Committee to hold a hearing on the drug's costs and the financial challenges facing Medicare.

With criticism mounting, Biogen issued a lengthy response Wednesday promising to work with public and private insurers to ensure Aduhelm doesn't break their budgets. The Cambridge, Massachusetts-based drugmaker didn't say whether it would discount Aduhelm's price but did reiterate its promise to forgo price hikes for four years.

Still, the drug might have been worth at least $50,000 if it actually halted the progress of dementia, said David Whitrap, vice-president for communications at the Institute for Clinical and Economic Review (ICER). Before Aduhelm's approval, the drug-cost watchdog estimated the drug should cost $8,300 per year—at most. 

"We don't think there's anything necessarily stingy about what we considered a fair price for this treatment," Whitrap said in an interview. "Even at the low end of our fair price, we're talking about a blockbuster treatment." 

Medicare's enormous bill

Roughly 6 million Americans have Alzheimer’s, and most of them are covered through Medicare. Biogen said Wednesday it's targeting only those in the early stages, which is an estimated 1 million to 2 million patients. 

Juliette Cubanski, a KFF deputy director on Medicare policy, jotted out a few estimates in the foundation's recent report. In 2017, about 2 million Medicare beneficiaries used an Alzheimer’s treatment. Aduhelm cost to Medicare

In KFF's conservative estimate, say just a quarter of those 2 million patients—or 500,000—take Aduhelm. Given that Medicare typically reimburses providers slightly above the actual cost of a new drug, total spending for Aduhelm alone would be $29 billion, Cubanski figured. That's about 78% of Medicare's total 2019 spending on Part B drugs, which are the prescriptions administered by doctors.

Bump that up to 1 million people, and the cost to CMS goes to $57 billion. That's not only well above total spending for all of Part B, but more than Johnson & Johnson, the biggest drugmaker on the planet, brought in last year with its entire worldwide portfolio of prescription drugs.

Because Part B is partially financed through premiums, costs for all Medicare beneficiaries are set to climb. It's tough to estimate how much premiums might rise, Cubanski said, but if Medicare covers it, they will. 

“The likelihood is that Medicare covers this drug,” Cubanski said. “And in that case, the cost of covering the medication is going to be paid not just by the patient who takes it, but by everybody who’s enrolled in Medicare Part B.” 

What Medicare can do 

Medicare doesn't have to roll over and accept the charge, critics argue. CMS could restrict Aduhelm’s "almost shockingly broad" label, as some analysts put it, to a subset of patients who would benefit most from the treatment—like those studied in clinical trials, for instance—through a so-called national coverage determination (NCD). 

In most situations, Medicare will cover an FDA-approved medication deemed “reasonable and necessary," so CMS usually hews closely to the FDA’s label, which specifies which patients are eligible, Cubanski noted. But the picture with Aduhelm is murky. 

Juliette Cubanski
Juliette Cubanski (Kaiser Family Foundation)

The agency’s accelerated approval came after intense controversy over whether Aduhelm—a monthly infusion that’s not curative—actually helped patients at all. The FDA's own expert advisors voted against approval, and advisory committee members have quit in protest.

“The problem here is that we’re talking about spending a huge amount of money on something that provides no clinical value or almost no clinical value,” Sachs said. 

The FDA used the removal of amyloid plaque as a surrogate endpoint, rather than an actual clinical outcome, such as slowing cognitive decline. While the agency argued reducing amyloid plaque would ultimately benefit patients, the amyloid theory has failed miserably in other drug trials.

RELATED: Key senator calls for Woodcock's removal as FDA fallout from Biogen Alzheimer's approval heats up

Many experts, including some of the FDA's own staff, still aren't sold, according to internal documents released on Tuesday. In its summary of the Aduhelm review, the agency disclosed that its top brass granted Aduhelm accelerated approval despite objections from statisticians. 

The FDA gave Biogen nine years to conduct a follow-up trial to determine whether its drug actually does benefit patients' daily lives, rather than simply clearing plaques—plenty of time for the drugmaker to reap billions regardless, critics argue. Biogen says it's aiming to finish the trial ahead of schedule.

But will Medicare do it?

Uncoupling CMS’ coverage from the FDA’s approved label would set a “very important precedent,” and would “pave the way for future reforms of prescription drug reimbursement and spending going forward,” Sachs recently wrote in Health Affairs.

Rachel Sachs
Rachel Sachs
(Washington University in St. Louis)

KFF’s Cubanksi noted that Aduhelm is “a good candidate for that process, given the price of the drug and given the questions about the effectiveness of the medication.” Without an NCD, there would likely be varying local coverage determinations (LCDs) that could give some patients access to Aduhelm in some areas while denying coverage in others, Cubanski added. 

A CMS spokesperson said the agency is “reviewing the FDA’s decision regarding aducanumab and will have more information soon.” CMS Administrator Chiquita Brooks-LaSure, has declined to tell reporters how the agency will proceed.

RELATED: Biogen's $56K price on Aduhelm 'simply unacceptable,' Alzheimer's Association says after vouching for FDA approval

While Medicare technically has the authority to determine what’s medically reasonable and necessary beyond the FDA’s say, essentially all outstanding NCDs and LCDs are for physician services and testing, not drugs, Bernstein analyst Ronny Gal wrote in a Monday note to clients. 

In fact, after combing through the active list of LCDs for pharma products, Gal said “virtually all actually expand coverage beyond the labeled indications." None limited the drug’s use beyond the label. 

“It is fair to point out that Aduhelm is unique in its size and we do believe that eventually a decision would limit aducanumab to its trial population, but it is exceedingly hard to see them doing more than that,” Gal wrote. 

Aduhelm could wreak havoc on states as well. Their Medicaid programs are required by law to cover essentially all FDA-approved drugs, Sachs said. Some low-income Medicare beneficiaries are dually enrolled in Medicaid, so the state-funded program could end up covering Aduhelm for those patients, as well as any too young to qualify for Medicare. 

That was the scenario that played out with Gilead’s hepatitis C drug Sovaldi in 2013. That drug was priced at a lofty $84,000 for a treatment course, well above Biogen’s Aduhelm. But Sovaldi was a cure for hep C, critics point out, and there were no questions about its effectiveness. 

And even though each patient only took Sovaldi for a few months, states were forced to ration access because, unlike the federal government, states can’t go into debt to cover higher spending, Sachs said, adding that beneficiaries eventually sued for access and won. 

“It was a budgetary challenge for states, but here we’re dealing with an even larger patient population and a drug that’s certainly not a cure,” Sachs told Fierce Pharma. 

Diagnostic dilemmas 

While Aduhelm’s list price has received plenty of buzz, CMS also faces the question of how to go about diagnosing patients. Although not required by the FDA, many physicians are likely to test whether a patient has amyloid in the brain, either through PET scans or spinal fluid tap. 

That isn't routine practice, given that Aduhelm is the first amyloid-targeted therapy on the market, said Biogen U.S. president Alisha Alaimo on a call earlier this month, adding that there are no reimbursed tests to detect the plaques. 

Although the lumbar punctures involved in a cerebrospinal fluid (CSF) test are more invasive than PET imaging, Biogen executives maintained on a call in early June that the drugmaker will need reimbursement for both. The company has been working with Labcorp and Mayo Clinic Laboratories to expand access to the spinal-tap tests.

The company and medical imaging heavyweights like GE Healthcare and Eli Lilly have also pushed Medicare to fix the potential PET scan bottleneck. The group, along with industry trade group Medical Imaging and Technology Alliance (MITA), asked CMS last fall to reconsider its 2013 decision to only reimburse the scans in research studies. 

“It’s going to become even more important to make sure the right patients—those with the amyloid plaque—get access to the treatment,” said Susan Bunning, industry director at MITA.

The problem is that “it does take a long time” for the reconsideration process to play out, Bunning noted. MITA’s request is still pending. 

"It seems like there's going to be intense demand for this drug that will exceed doctors' ability to actually give it to their patients," KFF's Cubanski said. "And then who pays for it is the question on everybody's mind." 

Even then, Biogen is expected to reap billions. Although Wall Street has issued a range of sales forecasts, Aduhelm is set to become one the world's top-selling drugs nonetheless.

Analysts have recently predicted peak sales of around $10 billion, although some have said it could go to $50 billion. Even the conservative forecast would place it in the top 10 best-selling drugs worldwide. 

But Biogen's charge to Medicare could end up costing the pharma industry. Sen. Ron Wyden, D-Oregon, who has chastised Biogen for its "unconscionable" price tag, said he's already working to draft prescription drug price reform legislation. 

"Let’s understand, it is not a cure, like some other recent breakthrough drugs have been," Wyden said at an HHS budget hearing. "Patients could be on Aduhelm for years at a time after their diagnosis, multiplying the overall cost of treatment.”

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