Biogen's high price for Aduhelm—plus the drug's broad label—could trigger drug pricing reform, analysts say

Moments after Biogen gained FDA approval for its Alzheimer’s disease drug Aduhelm, the company revealed its $56,000 per year list price.

Jarring price tag? Yes, considering analysts had expected the price to come in between $10,000 and $30,000 per year. For their part, independent cost watchdogs at the Institute for Clinical and Economic Review (ICER) said the drug would need to be priced between $2,500 and $8,300 per year to meet cost-effectiveness thresholds. 

More surprising to Bernstein analysts, however, was the FDA’s “almost shockingly broad” label, which makes Aduhelm available to all 6 million Alzheimer’s patients in the U.S. The sweeping approval, combined with the hefty price tag and the potential popularity of the drug as the first Alzheimer’s treatment to hit the market since 2003, could eventually have dire consequences for the industry, however, Bernstein analysts warn.

In a note to investors, analyst Ronny Gal says Aduhelm could ultimately be the tipping point for drug price reform in the United States. As a drug with "borderline efficacy," the price is "taking advantage of the weak U.S. pricing scheme," the analyst wrote.

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Under a conservative estimate, if roughly half of the 500,000 Alzheimer's patients diagnosed each year take the drug, the total cost to Medicare would be $10.7 billion annually, Gal wrote. That's equal to the top five drugs in Medicare combined (Keytruda, Eylea, Opdivo, Rituxan and Prolia).    

Several factors will help ensure big sales for Aduhelm, Bernstein analysts figure. For one, with Medicare footing the bill for most patients, there will be no organized resistance to its high price. 

For another, pharmacies and physicians will have a major incentive to distribute and prescribe the drug. Assuming a 5% buy-and-bill margin, a physician would make $2,800 a year for each patient on Aduhelm, according to the analysts.

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With its high price, Aduhelm could prompt pushback from payers and policymakers, Gal argues. See the historical example from Gilead's hep C drug Sovaldi, Bernstein analysts say. After an FDA approval for that drug back in late 2013, Gilead aggressively priced its hep C cure at $84,000 per treatment course.

“Pharmacy benefiting managers went to employers and promised to rein in drug costs if given more control to control formularies,” Gal wrote. The power PBMs gained through the action led to pressure on multiple drug categories such as insulins and asthma inhalers, he added.

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Meanwhile, changing dynamics in Washington, D.C., could add even more pressure.

“The support for the drug lobby has been gradually eroding,” Gal wrote. “The industry now relies on a modest majority of 4-5 senators and 20 house members to protect it from government intervention in pricing.”

Biogen’s pricing will likely be viewed negatively by fiscal conservatives, according to the analyst. Considering the less-than-stellar data for the drug, all of the factors could be "enough to shift the view within the critical narrow majority, with the argument being that the industry can’t be trusted to police itself,” Gal wrote.

Meanwhile, potential Alzheimer's competition looms from Lilly’s donanemab. If Lilly were to launch its candidate with a lower price, that'd create problems for Biogen's launch, the analyst wrote.