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The approval of Biogen’s Aduhelm continues to have ripple effects across healthcare. Most recently, it’s rattled the payer landscape for Medicare, potentially triggering longer-term changes to how the government approaches payments for high-cost drugs.
Last Friday, the US Medicare agency announced that limits to coverage of the high-priced Alzheimer’s drug Aduhelm could save Americans money on their public insurance premiums, but they’ll have to wait until 2023.
Standard monthly premiums for Medicare Part B — which covers services like hospital and outpatient care — increased by a mammoth 14.5% in 2022, jumping from $148.50 in 2021 to $170.10. The Centers for Medicare and Medicaid Services (CMS) raised prices, in part, to pad the government-run insurance provider’s reserve fund in anticipation of costs related to Aduhelm.
Since the drug’s approval, Biogen not only reduced the cost, but the CMS took the first step of limiting coverage of the treatment — prompting calls to roll back the premium hike.
The CMS issued a report in the wake of its review and found that beneficiaries should get a price adjustment from the cost savings on Aduhelm, but said that making this change midyear would not be “operationally feasible.” Instead, the savings will be reflected in the 2023 Part B premium price, which will be determined and announced in the fall on the CMS’s usual schedule.
Beneficiaries won’t necessarily see a price drop in 2023 — prices might just stay flat or increase by a smaller amount. CMS in its report said that the 2022 Part B premium would have still increased to $160.40 in 2022, even if the lower price for Adulhelm and the coverage restrictions were factored in.
While much of the price jump seen between 2021 and 2022 was related to Aduhelm, there were other factors as well, including an artificially low premium increase between those years when rates creeped up only slightly from $144.60 to $148.50 a month, says Corey Metzman, COO of Chapter, a Medicare advisory organization.
“Many people believe that was due to CMS’s and [the Department of Health and Human Services’] desire to limit the premium increase in the first full year of COVID,” Metzman says. So, in 2022 the CMS was in fact playing catchup when it came to costs.
Even so, the decision to pass along the cost savings related to Aduhelm is noteworthy.
“While not finalized until the fall, such a reduction would be tremendously helpful to the tens of millions of Americans paying Part B premiums each month,” Metzman says. “This reduction would be a major reversal relative to the 14.5% increase in this premium from 2021 to 2022.”
Regardless of the outcome, issues surrounding the effect of high-cost drugs’ effect on Medicare premium prices will likely not be put to rest by this price adjustment alone.
“Six and a half million Americans now suffer from Alzheimer’s — by 2050 that number is projected to be greater than 12 million,” Metzman says. As more costly drugs wind through the pipeline, 2022’s major premium increase may not be the last.
Calls for action
The CMS approved the 2022 premium hike in November 2021, following the June 2021 approval of Aduhelm. The drug made history as the first potentially approved disease-modifying treatment for Alzheimer’s disease.
Biogen initially priced the drug at $56,000 a year, but in January it cut the price to $28,200. In response, HHS Secretary, Xavier Becerra, called on the CMS to reconsider the premium hike. The 50% cut, he said, provided a “compelling basis,” to reconsider the price change.
Other organizations, including the National Committee to Preserve Social Security and Medicare amplified the call to reduce premiums in the wake of an April 2022 National Coverage Determination (NCD) that significantly scaled back coverage for the drug. The NCD limited payment to patients participating in approved clinical trials for Aduhelm and other amyloid-targeting drugs in this class, which are approved through the FDA’s accelerated drug approval pathway. Drugs in this category can still qualify for broader coverage outside of a clinical trial if they show evidence of a clinical benefit to patients and gain traditional FDA approval.
The decision was likely influenced by the controversy surrounding Aduhelm, which was approved by the FDA based on two late-stage trials with muddy and conflicting outcomes. The drug reduced amyloid protein in the brain, without having to show a direct clinical benefit, such as slowing cognitive decline. This led some to question whether the benefits of the drug were worth the cost.
While the NCD generated controversy, there was little question that the move would result in substantial cost savings for Medicare.
Figuring in the cost of high-price drugs
The CMS’s decision to limit coverage for Aduhelm has also impacted drug development across the industry. Pharma companies are probably not only going to be more wary about relying on the FDA’s accelerated approval process going forward, but might consider how approvals of similar high-priced drugs may affect Medicare premium prices going forward, Metzman says.
Some of this has to do with Aduhelm’s classification. Unlike many other drugs, Aduhelm is not covered under the Medicare Part D prescription drug benefit, but under Part B, which covers, among other things, outpatient doctor visits, home healthcare and preventive services, such as health screenings. It’s paid for under Part B because the drug needs to be administered in a clinical setting, Metzman says.
“Six and a half million Americans now suffer from Alzheimer’s — by 2050 that number is projected to be greater than 12 million.”
COO of Chapter
Under optional Medicare Part D prescription drug coverage, people can choose from various plans, depending on their individual needs.
“People will choose Part D plans based on the plan that covers their particular prescriptions at optimal cost, where cost is the sum of your premiums and the co-pays for those prescriptions,” he says. “And so, there is some built-in efficiency in that market. People who take no prescriptions or very few can choose cheaper Part D plans. People who take more will choose a plan with a higher premium, but their aggregate cost is lower than the alternatives.”
Part B offers no such flexibility, Metzman says. Costs related to Part B drugs are essentially shared by everyone through the premium price, regardless of whether they take a costly drug or not, Metzman says.
“If CMS were to approve more expensive drugs, the cost of those drugs has to be built into Part B premiums that are shared by everyone. They can’t be disproportionately paid for by the people who opt into a particular drug plan as it is on the Part D side,” he says.
Some may question whether the cost burden should be shifted to the people who need those drugs instead of charging everyone equally, as is the case today, he says.
“I think there’s also an argument that shouldn’t be the case, but it’s worth pointing out that’s effectively how things work with the Part D drug benefit,” Metzman says.
As more high-priced drugs become approved, there may be more interest in reexamining how prices are set and shouldered by Part B beneficiaries.