Medicare is expected to cost billions of dollars in a newly approved drug for the treatment of Alzheimer’s disease. Medicare spending on the drug for patients could be higher than the budgets of the Environmental Protection Agency or NASA, according to one forecast.
There’s little evidence that the drug Aduhelm slows dementia progression, but the Food and Drug Administration approved it this month. Analysts believe Medicare and its participants, who pay a portion of their prescription drug costs, will spend $ 5.8 billion to $ 29 billion on the drug in a single year.
“It’s unfathomable,” said Tricia Neuman, executive director of the Kaiser Family Foundation’s Medicare Policy Program. “Those are crazy numbers.”
Many other drugs cost more than Aduhelm, which is made by Biogen and will cost $ 56,000 annually. The difference is that there are millions of potential customers and the drug is expected to be used for years.
The approval of the drug has met with criticism from health politicians and pharmaceutical researchers because of its lack of proven effectiveness. Effective or not, when widely prescribed, it could have an overwhelming impact on Medicare’s budget as the public program covers the vast majority of the nearly six million Americans diagnosed with Alzheimer’s.
There is hardly any precedent for a sudden spike in spending on this scale. Even at the lower end of the forecast, Aduhelm would become one of Medicare’s most expensive drugs.
On the high end, analysts say the new drug could increase Medicare’s annual spending on drugs delivered in hospitals and doctor’s offices by 50 percent (as should Aduhelm, which is given intravenously).
The comparisons here are approximate: one-third of Medicare members are covered by Medicare Advantage private plans, which do not provide detailed information about medication provided in doctor’s offices. To estimate this spending, we used drug spending data from Medicare participants in the traditional public program and increased it to account for the missing portion.
Spending on this scale could suddenly have far-reaching implications for Medicare, its users and taxpayers. The addition of $ 29 billion a year of the Medicare budget would be covered by increases in both taxpayers’ spending and the premiums paid by all Medicare users. Premiums could also increase for supplemental plans that many Medicare beneficiaries purchase to offset costs that the program does not pay directly. And the cost is likely to spill over into national budgets, where Medicaid pays premiums for low-income Medicare members.
Congress, budget experts, and several White Houses have spent years suggesting ways to reduce spending on Medicare, a large and growing portion of the federal budget. But many of these proposals are difficult to achieve politically – and most would save less than Aduhelm’s projected cost.
“It takes so much work to make savings that are really much smaller than that one drug would cost,” said Joshua Gordon, the director of health policy for the Federal Responsible Budget Committee, who says he pondered the challenges all the time has raised von Aduhelm since its approval.
Cost projections vary as analysts are unsure how many patients will ultimately use the new drug. The approval of the F.D.A. could apply to anyone diagnosed with Alzheimer’s. However, the drug was developed for a smaller group of around 1.5 million patients who are in the early stages of the disease. Analysts are still unsure of who doctors are recommending treatment for and which families to try. The F.D.A. has asked Biogen to continue researching the drug through 2030, but the prescription could become widespread before more public results on how well it works.
Allison Parks, a spokeswoman for Biogen, said in an email that the company would focus on reaching the type of patients studied in the company’s clinical trials, “in the early symptomatic stages of the disease.”
The range reflects a large number of reasonable expert assessments. The high estimate, based on a Kaiser paper, assumes that about a quarter of the two million Medicare enrollments currently receiving Alzheimer’s treatment will take it. The low value is based on an estimate by analysts at Cowen and Company of total sales of $ 7 billion by 2023.
It is difficult to estimate how many patients will take the drug. In addition to being expensive, Aduhelm is a little difficult to take and requires monthly personal visits to an infusion center for treatment. Patients taking it will need to do multiple brain scans during their treatments to look for any side effects.
And the side effects themselves – about 40 percent of patients in a clinical study showed signs of brain swelling – can deter some patients from trying the drug and cause others to stop taking it. (The many scans – and treatments for more serious side effects – would also be covered by Medicare.)
There are six million Medicare members who do not purchase supplementary insurance who may have to pay 20 percent of drug bills, in this case $ 11,200 a year.
Nevertheless, there can be great demand from families who see an opportunity to intervene in the face of a devastating diagnosis. To date, there have been few treatment options for patients hoping to prevent cognitive decline from the disease.
“It’s inherently difficult to have a loved one, watch the clock tick, and say, well, let’s just wait,” said Dr. Steven Pearson, General Practitioner and President of the Institute for Clinical and Economic Review (ICER). ). “It’s very hard to ignore the urge to do something.”
- A new year, a new budget: Fiscal year 2022 for the federal government begins October 1, and President Biden has announced what he plans to spend from that point on. But all expenses require the approval of both chambers of Congress.
- Ambitious total expenditure: President Biden wants the federal government to spend $ 6 trillion in fiscal year 2022 and total spending to rise to $ 8.2 trillion by 2031. This would push the United States to its highest sustained federal spending level since World War II, rising to over $ 1.3 trillion over the next ten years.
- Infrastructure plan: The budget outlines the desired first year of the president’s investment in his American Jobs Plan, which will fund improvements to roads, bridges, public transportation and more for a total of $ 2.3 billion over eight years.
- Family plan: The budget also addresses the other major spending proposal that Biden has already launched, his American Families Plan, which aims to strengthen the United States’ social safety net by expanding access to education, lowering childcare costs, and bringing women in the world of work are supported.
- Compulsory programs: As usual, mandatory spending on programs like Social Security, Medicaid, and Medicare is a significant part of the proposed budget. They grow with the age of the American population.
- Discretionary issues: Funds for the individual budgets of the agencies and executive programs would reach around $ 1.5 trillion in 2022, an increase of 16 percent over the previous budget.
- How Biden would pay for it: The president would fund his agenda in large part by increasing taxes on businesses and high earners, which would begin to reduce budget deficits in the 2030s. Administrative officials said tax increases would fully offset employment and family plans over the course of 15 years, which the budget request supports. In the meantime, the budget deficit would stay above $ 1.3 trillion each year.
Physicians who give this drug and receive a percentage of the high price of the drug from Medicare for the work, may have financial incentives to say yes when patients ask.
“The effects of this one drug and its associated procedures are enormous,” said Rachel Sachs, professor of law at Washington University in St. Louis and author of a recent essay in The Atlantic alleging that the drug “affects American health hurt “might care.”
Private insurers can create barriers to treatment so that patients can do additional tests or demonstrate that other options have not worked. However, under normal circumstances, Medicare will cover drugs approved by the F.D.A. allowed are. Medicare decides which drugs are covered based on whether they are “appropriate and necessary” rather than how much they cost.
Medicare is required to initially pay this type of drug to the attending physician at the list price plus a 3 percent fee. And then, after about a year on the market, it pays the average retail price plus 6 percent. For pharmaceuticals with competition, this average price can be considerably lower than the sticker price. But for a drug like Aduhelm, which is the first of its kind, the drug manufacturer is not allowed to offer doctors any discounts.
Medicare, which covers 61 million Americans aged 65 and over, has some tools in place to help contain the costs. It might choose to cover the drug in a way more restricted than that of the F.D.A. Approval, a departure from normal practice.
Or it could do something even more unusual: an unexpected alliance of proponents has suggested that Medicare put the drug on a randomized experiment to evaluate how well it works – in some parts of the country they pay to cover the drug, but in others Not. Such policy experiments were authorized under the Affordable Care Act, but never has one been used to limit the coverage of a drug in this way.
Other countries will most likely control Aduhelm’s cost by negotiating a lower price with Biogen or simply refusing to buy. Most will consider the drug’s effectiveness when deciding what to pay for. So far, the drug has not been approved anywhere else in the world.
Medicare can’t do that. Because of the way she pays for medication under current law, she has no way of negotiating the price. The Democrats are increasingly supporting laws that change this. The House of Representatives passed bill in 2019 that would give Medicare the power to negotiate some prices, but it died in the Senate. In April lawmakers reintroduced the same bill to the House of Representatives.
President Biden supports enabling Medicare to negotiate drug prices, but has not included the policy in his proposed American family plan.
Dr. ICER’s Pearson has estimated that if the effectiveness of the new drug were taken into account, a fair price would be $ 2,500 to $ 8,300.
“It will be interesting to see if this leads to a discussion about fair prices in the United States,” he said. “In the eyes of most people, this looks like a great example of a price that just doesn’t match the evidence.”
Methodology: Estimated current Medicare Part-B drug spending was taken from the Centers for Medicare and Medicaid Services Part-B drug spending dashboard and increased 54 percent to include Medicare beneficiaries included in Medicare Advantage Plans are registered. Given the demographics of who participates in which program, this assumption may overestimate current drug spending.)
Medicare Part D drug spending was funded directly by the C.M.S. Part D Drug Spending Dashboard and may be an overestimate as these numbers do not include all of the discounts paid to drug plans.
The high estimate of Aduhelm’s spending comes from a paper by the Kaiser Family Foundation. The low estimate is derived from an overall sales estimate from Cowen and Company and adjusted to include an estimated 80 percent of Alzheimer’s patients who were enrolled in Medicare at the onset of their disease – and Medicare’s initial 3 percent payment to doctors for overheads and administration .