Biogen’s newly approved drug to treat Alzheimer’s disease is expected to become a multibillion dollar expense for Medicare. By one projection, spending on the drug for Medicare’s patients could end up being higher than the budget for the Environmental Protection Agency or NASA.
There’s little evidence that the drug, Aduhelm, slows the progression of dementia, but the Food and Drug Administration approved it this month. Analysts expect that Medicare and its enrollees, who pay a share 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 program on Medicare policy. “These are crazy numbers.”
Plenty of other drugs cost more than Aduhelm, which Biogen, of Cambridge, will price at $56,000 annually. What makes it different is that there are millions of potential customers, and the drug is expected to be taken for years.
The drug’s approval has aroused criticism from health policy experts and pharmaceutical researchers for its lack of proven effectiveness. Effective or not, if widely prescribed, it could have an overwhelming effect on Medicare’s budget because the public program covers the vast majority of the nearly 6 million Americans with an Alzheimer’s diagnosis.
There is little precedent for a sudden spending jolt of this size. Even at the low end of projections, Aduhelm would become one of Medicare’s most expensive drugs.
At the high end, analysts say the new drug could cause a 50 percent increase in Medicare’s annual spending on drugs delivered in hospitals and doctor’s offices (as Aduhelm, which is given intravenously, would need to be).
The comparisons here are approximate: A third of Medicare enrollees are covered through private Medicare Advantage plans that do not release detailed information on the drugs provided in doctor’s offices. To estimate that spending, we used the drug spending data for Medicare enrollees in the traditional public program and increased it to account for the missing share.
Spending on this scale, so suddenly, could have far-reaching effects for Medicare, its users and taxpayers. The addition of $29 billion a year to Medicare’s budget would be paid for by increases in both taxpayer spending and in the premiums paid by all Medicare users. Premiums might also go up for supplemental plans many Medicare beneficiaries buy to offset costs the program doesn’t pay directly. And the costs are likely to spill over into state budgets, where Medicaid pays premiums for low-income Medicare enrollees.
The FDA has asked Biogen to continue studying the drug until 2030, but prescribing could become widespread before there are any further public results on how well it works.
Allison Parks, a Biogen spokesperson, said the company would focus on reaching the type of patients who were studied in its clinical trials, “in the early symptomatic stage of the disease.”
The range reflects a variety of reasonable expert estimates. The high estimate, drawing on a Kaiser paper, assumes that about a quarter of the 2 million Medicare enrollees who currently take an Alzheimer’s treatment will take this one. The low one is based on a Cowen and Co. analyst estimate of $7 billion in total sales by 2023.
Estimating how many patients will use the drug is challenging. Aduhelm is not just expensive, but also somewhat hard to take, requiring monthly in-person visits to an infusion center. Patients who take it will be required to get multiple brain scans to look for side effects.
Demand may nevertheless be high from families who see an opportunity to intervene when faced with a devastating diagnosis. Until now, there have been few treatment options for patients hoping to forestall cognitive decline from the disease.
“There is something intrinsically hard about having a loved one, seeing the clock ticking, and saying, Well, let’s just wait,” said Dr. Steven Pearson, a primary care physician and the president of the Institute for Clinical and Economic Review (ICER). “It’s very hard to ignore the drive to do something.”
Doctors, who would administer this drug and be paid a percentage of the drug’s high price by Medicare for that work, may face financial incentives to say yes when patients ask for it.
“The implications of this one drug and the associated set of procedures are enormous,” said Rachel Sachs, a law professor at Washington University in St. Louis and an author of a recent essay in The Atlantic asserting that the drug could “break American health care.”