At Medecision, we are committed to staying at the forefront of discussions about industry-wide issues—such as pharmaceutical drug pricing. Health economist Jane Sarasohn-Kahn gives her insights into the recent conversations surrounding Aduhelm, the recently FDA-approved drug treatment for Alzheimer’s disease.

By Jane Sarasohn-Kahn, MA, MHSA

It’s a perfect storm pitting patients and their families against pharmaceutical product pricing, public sector health care budgets, regulators and policymakers.

With the Food and Drug Administration’s (FDA) approval of Aduhelm, a new therapy for Alzheimer’s disease, we have a scenario worth exploring for what it means about healthcare financing care and innovation in America, especially as the nation emerges from the pandemic with competing budget priorities and political objectives.

The Heavy Burden of Alzheimer’s Disease

Let’s first define the key noun in this discussion: Alzheimer’s disease, a grave illness that causes progressive memory and cognitive decline in people given the diagnosis. There are approximately 10 million new cases of Alzheimer’s disease diagnosed every year around the world. In the United States, nearly 500,000 new cases of Alzheimer’s disease are expected each year, at a rate of a new diagnosis about every 65 seconds.

The economic cost of dementia is estimated at $305 billion, expected to reach $1 trillion as the U.S. population ages.

The condition also drives the growing burden on caregivers; between 2015 and 2020 in America, there was an increase of 8 million new caregivers.  Each year, more than 16 million Americans provide more than 17 billion hours of unpaid care for family and friends with Alzheimer’s disease and other causes of dementia.

Nearly twenty years had passed since a new drug was approved by the FDA to treat Alzheimer’s disease. Then …

Enter Aduhelm

On June 7, 2021, Biogen received FDA approval to market Aduhelm (aducanumab), the first drug designed to deal with the underlying disease progress for Alzheimer’s.

With that stroke of the proverbial FDA pen came an onslaught of reactions:

  • A bipartisan group of senators composed a letter to the Senate Finance Committee calling for a hearing to “examine the vexing new questions and challenges” that Aduhelm would pose to Medicare.
  • The Kaiser Family Foundation calculated that if just one-fourth of the 2 million Medicare enrollees who use a therapy for Alzheimer’s disease receive Aduhelm, spending on Medicare Part B would reach $29 billion for one year.
  • Senator Joe Manchin (D-WV) called for President Biden to fire FDA interim commissioner Janet Woodcock, MD, based on the Aduhelm approval.
  • “You reach for anything,” Marie Guercio, the wife of an Alzheimer’s disease patient, told USA Today; the article further quoted a Lenox Hill Hospital neurologist who empathized with patients and families, saying, “In a situation like this … there is a almost a stampede to the gate.”
  • Alan Weil, Health Affairs journal editor-in-chief, attested in a podcast that a 20% coinsurance for Aduhelm would be a heavy price for many Medicare beneficiaries to pay for the treatment (tallying to about $11,000), adding that a “thin reed of [clinical] evidence” going against the technical advisors at the FDA is a “questionable decision.”
  • The Institute for Clinical and Economic Review (ICER) calculated that a fair and cost-effective price for Aduhelm would run from $2,500 to $8,300 for one year’s therapy for each patient.
  • Three experts from the FDA advisory committee considering the new drug resigned over the Agency’s decision to approve Aduhelm, arguing against its clinical effectiveness.

Add to this debate the fact that on the drug’s label, there is no indication for which subset of the Alzheimer’s disease patient population the therapy is best-suited.

Aduhelm Pricing and Spending in Health Economic Context

 The firestorm is two-fold: first is the lack of FDA guidance on patients most likely to benefit from Aduhelm based on the clinical evidence for the treatment.

Second is the $56,000 list price for Aduhelm for one year’s course of therapy, about 7 times the high-end of ICER’s cost-effectiveness calculated price of $8,300.

Considering the total cost of administering Adulheim in the United States, take that list price, multiplied by the potentially multimillion U.S. patient population per year for whom Aduhelm could be prescribed.

About 6.2 million Americans have been diagnosed with Alzheimer’s disease, the vast majority of whom are over the age of 65—thus, Medicare-eligible. One estimate from the Centers for Medicare and Medicaid Services (CMS) is that 11% of all Medicare fee-for-service beneficiaries had claims with a diagnosis of Alzheimer’s disease or a related dementia in 2018, and 4% of beneficiaries had Alzheimer’s disease.

Aduhelm would be covered under Medicare Part B which pays for FDA-approved medications administered by physicians. This is a different component of Medicare drug spending than Medicare Part D which covers prescription drugs at retail.

The New York Times did the math on these numbers, calculating that Aduhelm could cost the U.S. government as much as the national budget spends on NASA (which had a $23 billion budget in FY2020). Based on the Times’ arithmetic, projected Aduhelm spending ranging between $6 billion and $29 billion would “dwarf” the cost of Medicare’s 10 costliest drugs from 2019, starting at the top with Eliquis for heart disease ($7 billion of spending from Medicare), Revlimid ($5 billion, spent for cancer), and Eylea ($5 billion treating macular degeneration).

The Kaiser Family Foundation also assessed the potential impact of the cost of Aduhelm on Medicare and beneficiaries.

“Even a conservative estimate would lead to a substantial increase in Medicare spending,” the KFF team forecasted. “In 2017, nearly 2 million Medicare beneficiaries used one or more of the currently-available Alzheimer’s treatments covered under Part D, based on our analysis of Medicare Part D claims data. If just one-quarter of these beneficiaries are prescribed Aduhelm, or 500,000 beneficiaries, and Medicare pays 103% of $56,000 in the near term, total spending for Aduhelm in one year alone would be nearly $29 billion,” surpassing spending on any other drug covered by either Medicare Part B or Part D.

In context, total Medicare spending for all Part B drugs was $37 billion in 2019, vis-à-vis the $29 billion projection for Aduhelm spending from the Foundation.

Consumers Like Regulating Drug Prices

Before the COVID-19 pandemic, most voters favored some form of government regulation on drug prices. This sentiment for drug price controls persists in the current endemic phase of the coronavirus, the Foundation found in its May 2021 Health Tracking Poll.

Nine in ten American adults favored allowing the federal government to negotiate with drug companies to get a lower price on medications that would apply to both Medicare and private insurance in that May 2021 study. This healthcare priority crossed political parties with a majority of Democrats, Independents and Republicans alike seeking efforts to limit the price of prescription drugs.

Another study conducted in May 2021 found broad support for government action to reduce prices on drugs and healthcare services. Gallup and West Health polled American adults on their healthcare priorities and found most people in the United States looking for a stronger role for the government to contain costs for drug price increases, negotiate prices for certain high-cost drugs that had no competitors, and to establish limits on prices hospitals charged in no-competition markets.

Drug Pricing Legislation With Aduhelm a “Poster Child” for the Issue

The bipartisan support for drug pricing legislation is shared by many in Congress, and was also a talking point for President Trump whose interview with TIME magazine prior to taking office quoted him saying to POLITICO that the drug industry was “getting away with murder” in terms of pricing.

In June 2021, Ron Wyden (D-OR) issued Principles for Drug Pricing Reform. These Principles laid out a proposal allowing Medicare to negotiate prices with pharma, addressing drug price increases, ensure employer and commercial health plans are part of drug price moderation, and align pricing reforms with scientific innovation.

David Mitchell, founder of Patients for Affordable Drugs and a member of the FDA Advisory Committee for Oncologic Drugs, said that Aduhelm could become “the poster child for drug pricing reform.”

The Future: Thinking Value and Value-based Drug Pricing

Marketplace dynamics for the drug pricing ecosystem includes health plans that are also concerned about the cost of prescription drugs as part of an AHIP advocacy campaign on “where does your health care dollar go?” In a graphic carving up a $1 bill, the first 21.5 cents go to Prescription Drugs, with the implication that 21.5% of healthcare costs are spent on medicines versus 19 cents on inpatient hospital costs, 19.8 cents on outpatient hospital costs, 2.2 cents on emergency department costs and so on.

As Dr. Steve Miller, Cigna’s Chief Clinical Officer, said in the company’s press release, “Despite only representing 2% of prescriptions, specialty medicines accounted for more than half of the total pharmacy spend” in 2020.

Cigna, the national health plan, announced its launch of a so-called “shared savings program” which will give patients eligible to be prescribed branded Remicade a $500 incentive (in the form of a $500 debit card for healthcare services and products) to switch to a biosimilar drug (which has a lower list price). Starting in July, two biosimilars will be available for Remicade patients: Avsola and Inflectra. (FYI, as of June 27, 2021, depending on the retail pharmacy, I found the patient-facing cost via GoodRx for Remicade was about $6,000, Avsola $1,500, and Inflectra just under $3,000).

With that in mind, on June 24, 2021, Lilly filed an application with the FDA for Breakthrough Therapy status for the approval of donanemab for the treatment of Alzheimer’s disease. This will expedite the review of the therapy in the same faster-track regulatory journey that Aduhelm traveled.

In the case of patients and families dealing with Alzheimer’s disease, we should expect that “stampede to the gate” for something people desperately yearn for and need.

Aduhelm may well be the poster child America needs to ignite a long overdue discussion about healthcare innovation, who pays, and who benefits.

We are only at the beginning of that dialogue and debate that health citizens, scientists, clinicians, payers and policymakers have not yet had about, ultimately, scarce healthcare resources and how they are allocated for the benefit of patients and their families.

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