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Biogen’s Alzheimer’s drug could cost Medicare billions of dollars a year, report finds

A pedestrian walks past Biogen Inc. headquarters in Cambridge, Massachusetts, on Monday, June 7, 2021.

Adam Glanzman | Bloomberg | Getty Images

Biogen‘s pricy new Alzheimer’s drug, Aduhelm, could cost Medicare billions of dollars a year, according to an analysis published Thursday by the non-profit Kaiser Family Foundation.

The Food and Drug Administration on Monday approved the company’s drug, the first medication cleared by U.S. regulators to slow cognitive decline in people living with Alzheimer’s and the first new medicine for the disease in nearly two decades.

The biotech company said it is charging $56,000 for an annual course of the new treatment, higher than the $10,000 to $25,000 price some Wall Street analysts were expecting. That’s the wholesale price, and the out-of-pocket cost patients will actually pay will depend on their health coverage.

Alzheimer’s disease is estimated to affect more than 6 million Americans, the vast majority of whom are age 65 and older. Biogen has said it expects about 80% of Alzheimer’s patients to be covered by Medicare, the federal health insurance program for the elderly.

It is still unclear how many Medicare beneficiaries will take Biogen’s drug, but even a conservative estimate would lead to a “substantial increase” in Medicare spending, according to KFF.

In 2017, nearly 2 million Medicare beneficiaries used one or more Alzheimer’s treatments covered under Medicare Part D, according to KFF, which analyzed claims data. The group said if a quarter of those beneficiaries are prescribed Aduhelm instead and Medicare pays 103% of $56,000 in the near term, “total spending for Aduhelm in one year alone would be nearly $29 billion.”

Aduhelm will be covered under Medicare Part B, KFF said, which generally covers FDA-approved physician-administered medications.

“If 1 million Medicare beneficiaries receive Aduhelm, which may even be on the low end of Biogen’s expectations, spending on Aduhelm alone would exceed $57 billion dollars in a single year – far surpassing spending on all other Part B-covered drugs combined,” the group said. Total Part B spending was $37 billion in 2019.

Biogen has faced some criticism from Wall Street analysts and advocacy groups who questioned how the company could justify the price, especially as medical experts continue to debate whether there’s enough evidence that the drug actually works and the industry faces criticism over drug prices.

On a call with investors Tuesday morning, Evercore ISI analyst Umer Raffat congratulated the Massachusetts-based company on the drug’s U.S. approval before asking executives to explain its price.

“I do think there’s a disconnect between some of the words that you’ve shared in your press releases, like responsibility, access, health equity, versus the price point, especially given the primary care population,” he told executives.

Biogen executives said Tuesday the total price figure for the new treatment is “substantiated” by the value it is expected to bring to patients, caregivers and society. They insisted the price is “responsible,” noting the disease costs the U.S. billions each year.

The company has committed to not raising the price of the new drug over the next four years. That being said, executives said they are “open-minded” and suggested they could rethink the price as the company assesses demand over the next few years.

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