Biogen's Aduhelm faces a key coverage decision next week. Which way will Medicare rule, and how much does it matter?

Bottle and box for Aduhelm, Biogen Alzheimer's medicine
The general hostility among healthcare organizations against Aduhelm suggests that a Medicare coverage probably won’t be able to turn the tide for Biogen sales-wise. (Biogen)

Amid its sputtering launch, Biogen expects to receive a draft decision on Aduhelm’s coverage on Medicare next week. Industry watchers have been calculating a range of potential scenarios, but whichever direction the ruling goes, doctor feedback suggests it may simply not matter that much.

A reimbursement decision on Aduhelm in Alzheimer’s disease from the Centers for Medicare and Medicaid Services (CMS) could go five different ways, with one that appears to be the most probable, a Jefferies team led by analyst Michael Yee wrote in a note this week. The government agency is due to deliver a preliminary decision on whether to cover the drug for elderly people by Jan. 12, with a final verdict scheduled for April.

Even with coverage in place, doctors may still refuse to prescribe the controversial Alzheimer’s drug. After Aduhelm’s approval, the Neurology Center in Washington, D.C., went so far as to ban Biogen sales reps from entering the offices.

Major health systems like Cleveland Clinic, Mount Sinai and Mass General Brigham, plus many university-affiliated hospitals at Johns Hopkins, University of California Los Angeles and the University of Michigan, have either boycotted Aduhelm or never prescribed it, Stat reports.

Some facilities already told the news site they don’t expect to change their stance even if CMS decided to cover Aduhelm.

RELATED: Biogen halves Aduhelm's price and plots cost cuts as Medicare decision on controversial Alzheimer's drug nears

Such a national coverage decision could be “tricky” from a financial perspective, the Jefferies analysts said, “because it could be complicated for the market to understand or interpret, and the market may not give full credit anyway in this tough market.”

An outright rejection could be one scenario. But that's only theoretical given the CMS hasn't refused coverage for an FDA-approved therapy in the last 15 years, the team noted.

CMS could also choose to limit coverage to the med's FDA indication. After an initial approval in June with a surprisingly broad label, Biogen and the FDA got together to restrict the label to patients with mild Alzheimer’s.

Alternatively, CMS could add additional coverage restrictions, further limiting the patient population, Yee’s team said. For example, patients carrying a genetic risk factor called APOE4 have been found to be more likely to experience a potentially life-threatening brain side effect called amyloid-related imaging abnormalities (ARIA) while on Aduhelm. The FDA label doesn’t exclude that patient group.

Yee labeled the above two scenarios as positive decisions that would provide “reimbursement consistency.” Two other situations are less favorable for the drug.

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The CMS could install coverage with an evidence development requirement. Under this pathway, reimbursement is offered under the condition of the patient’s participation in a clinical trial. Doing so will obviously limit the drug’s availability to big trial sites, the Jefferies team noted.

In the fifth scenario, the CMS would leave coverage to the discretion of Medicare Administrative Contractors. These are private health insurers that would arguably be more restrictive in their reimbursement decisions.

A decision in the latter two categories could slow the sales ramp and fuel the debate on peak sales potential for all amyloid beta-targeting antibodies like Aduhelm, Yee said. Eli Lilly is wrapping up a rolling submission of rival drug donanemab to the FDA, and Roche could have phase 3 readout from its gantenerumab in the latter half of 2022.

Among the five options, Yee figured coverage with evidence development (CED) is the most likely result. But investors may be confused by what a CED restriction would mean for Aduhelm, he added.

In a recent Bloomberg Opinion piece, drug pricing researcher Peter Bach of Delfi Diagnostics and University of California, San Francisco, cardiologist Rita Redberg also threw their support behind the CED pathway.

Cantor Fitzgerald analyst Louise Chen believes CED and coverage with specified restrictions are the most likely outcomes, as well. Additional restrictions could give CMS more flexibility as more data read out, she said in a Tuesday note to clients.

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Before the closely watched Medicare decision, Biogen made an unusual go-big-or-go-home move by slashing Aduhelm’s price in half to an annual maintenance cost of $28,200 for a patient weighing 74 kg (163 pounds).

Biogen’s hope is that the CMS will consider the lowered price in its decision. The company now estimates that about 50,000 patients would start on Aduhelm in 2022 if coverage were in place. That would mean $1.4 billion in annual sales after 2022. By contrast, Wall Street consensus has the drug’s sales at around $400 million to $500 million, which Yee believes is still too high.

Aside from potential Medicare coverage, reimbursement for PET scan of beta-amyloid also needs to improve for Aduhelm to achieve better market penetration, Yee pointed out. The FDA label currently requires MRI tests before starting treatment and prior to the 7th and 12th infusions to monitor for ARIA.