Biogen on Tuesday set an estimated annual price of $56,000 for its landmark Alzheimer's drug, spurring concerns among policy experts about how the drug will be covered for affected patients. But several other factors could affect how the drug is priced and paid for, experts say. 

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Background

Biogen originally sought FDA approval for the drug in 2019, after a company analysis of clinical trial data found a high dose of aducanumab provided a small benefit in slowing cognitive decline and that the drug was effective at removing beta-amyloid. However, the study had never been fully completed because an initial analysis of the data had found the drug was unlikely to benefit patients, and a separate study also had found no effect on cognitive decline.

In 2020, a panel of independent experts convened by FDA reviewed the clinical trial data, determined there was not enough evidence to suggest the treatment had significant benefit for patients, and recommended against approval. Some patient groups, however, advocated strongly for approval, especially because Alzheimer's patients have few other medical options to slow their cognitive decline.

Ultimately, FDA on Monday opted to issue Biogen a conditional approval for the drug—branded Aduhelm—that requires the company to conduct a large clinical trial to confirm that removing beta-amyloid proteins actually leads to cognitive benefits for patients. If that trial fails, FDA could rescind the drug's approval.

Notably, FDA approved the drug for all Alzheimer's patients, Axios reports, rather than for only the narrower subset of mildly impaired Alzheimer's patients it was tested against. According to Biogen, more than 900 sites around the nation may soon be able to start administering the drug.

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Following FDA's approval, Biogen announced the drug would be priced at $56,000 per year. According to the New York Times, some policy experts have voiced concerns about that cost, especially given the number of patients who could be eligible, the additional expense of required screenings and monitoring for patients who receive the drug, and uncertainty about its efficacy.

According to Axios, roughly six million Americans are estimated to have Alzheimer's, most of whom are covered through Medicare, and an additional 500,000 Americans are diagnosed with the disease each year. And Alzheimer's patients, according to the Mayo Clinic, live an average of three to 11 years post-diagnosis.

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Given Aduhelm would be delivered via monthly infusions, the drug would be covered through Medicare Part B, which covers IV medications administered in doctors' offices. Medicare Part B generally pays 106% of the average sales price of the drugs it covers, which means if it decides to cover the drug without restrictions, drug expenditures could run into the billions—or even tens of billions—of dollars.

According to analysts at Cowen, for instance, if the drug is used to treat just 8% of Americans with mild Alzheimer's by 2025, it could yield $7 billion in revenue by 2025. In comparison, Medicare Part B's most significant cost expenditure in 2029 was $2.9 billion for the macular degeneration drug Eylea, followed by $2.7 billion for the cancer medication Keytruda.

In addition, because traditional Medicare patients must pay a 20% coinsurance rate on medications after meeting their deductible, some patients may face more than $10,000 in annual out-of-pocket costs, Juliette Cubanski, a Medicare policy expert at the Kaiser Family Foundation, said.

Ultimately, those costs could drive up insurance premiums. "A therapy of this cost is going to have enormous implications for everyone," said Joseph Ross, a pharmaceutical policy expert at Yale University, who sits on a committee that advises Medicare on some coverage decisions. "And by everyone, I literally mean you, too. There's going to be some 60- and 70-year-olds on your plan. If they start getting this treatment, you will see your premiums will go up."

Moreover, according to the New York Times, the drug could require several thousands of dollars in additional costs for screening and monitoring patients. For instance, Cigna COO Steve Miller said additional costs related to administering the drug—including routine MRI scans to monitor for potential side effects—would likely total about $30,000 per patient in the first year of treatment, plus about $15,000 in subsequent years.

Bigger-picture outlook

However, there are several other facts that could affect the drug's ultimate price tag—and who bears the cost.

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For instance, Medicare could opt to launch a "coverage determination process," which examines clinical data on drug performance to assess whether the program should limit coverage. In addition, the drug could trigger Medicare's "significant cost" policy, under which Medicare Advantage plans wouldn't be liable for paying Aduhelm claims—at least in 2022. Instead, "the traditional Medicare program … would pay those claims," Axios reports.

Presently, according to a CMS spokesperson, the agency is reviewing FDA's decision, which the spokesperson said "provides hope to families, caregivers, and the older Americans living with Alzheimer's who rely on Medicare for health coverage."

Meanwhile, private insurers are still determining the best way to approach covering the drug, Axios reports. For instance, a Humana spokesperson said the insurer would "look to [CMS] for guidance," while Cigna said it has collaborated with Biogen on a "value-based contract."

Cigna has not shared additional details on that contract. However, Miller said he believed his company and most other comparable insurers likely would cover the drug only for patients with mild cognitive symptoms and higher-than-average levels of amyloid.

Debate over the drug cost could also spur debate and change at a broader level on drug pricing overall, Axios reports. "It's always been the worry that if you get a super-expensive drug that is targeted toward a huge population, that that is going to be a turning point in how we deal with health care spending," Walid Gellad, a health policy professor at the University of Pittsburgh, said. "And that's what this drug is."

For his part, Biogen CEO Michel Vounatsos in a letter Tuesday said the company's price for the drug "reflects the overall value this treatment brings to patients, caregivers, and society—and one that will enable continuous innovation."

For instance, among other steps the company has taken, Vounatsos said Biogen has pledged to not increase the drug's price for the next four years; to enter into value-based agreements with payers and insurers, including Cigna and the Veterans Health Administration; and to continue investing in more than 30 developing clinical programs aimed at treating Alzheimer's and other diseases (Owens, Axios, 6/9; Herman, Axios, 6/8; Robbins/Belluck, New York Times, 6/8).