Column: How the FDA’s lousy judgment and a greedy drug company combined to hit Medicare members hard

The fallout from the Food and Drug Administration’s hasty approval of a new Alzheimer’s drug in June was predicted to be severe: Excessive pricing for a drug lacking strong evidence of effectiveness would impose heavy costs on the healthcare system nationwide, especially on Medicare.

That latter shoe has now dropped. The 2022 premium increase Medicare announced on Friday for Part B is one of the largest increases ever. According to the Medicare trustees, half the increase is directly due to the projected cost of Aduhelm, the drug approved by the FDA in June.

The case is a perfect illustration of how the government’s self-imposed powerlessness to control drug companies’ greed combines with the general dysfunction of the American healthcare system to hit consumers where it hurts the most, in the pocketbook.

The 14.5% increase in the minimum monthly premium for Part B, which generally covers services other than inpatient hospital care, will bring that premium to $170.10 a month, up from $148.50.

The trustees had projected an increase to $158.50, not counting what it would cost to cover Aduhelm, the brand name for a drug formally known as aducanumab. The $10 projected increase — that is, the non-Aduhelm portion — was based mostly on “rising prices and utilization across the healthcare system,” according to the Centers for Medicare and Medicaid Services.

Those figures apply to the premiums that will be charged to Medicare enrollees with annual incomes up to $91,000; premiums rise by steps for higher-income enrollees, topping out next year at $578.30 a month for those with incomes of $500,000 or more (a 41.7% premium increase for those beneficiaries).

The additional minimum premium increase of $11.50 for Aduhelm was imposed even though Medicare hasn’t formally decided whether to pay for the drug or, if so, for which Alzheimer’s patients in terms of their disease severity.

The coverage determination process is still underway, but Medicare officials said they’re duty-bound to “plan for the possibility of coverage for this high-cost Alzheimer’s drug which could, if covered, result in significantly higher expenditures for the Medicare program.”

Among other services, Part B covers drugs such as Aduhelm that need to be administered by a doctor. Inpatient services and nursing home and hospice care are covered by Medicare Part A, for which there’s no premium.

Part A does charge a deductible, which will increase next year by 4.85% to $1,556. After the deductible, patients pay 20% of Medicare charges for those services. Prescription drugs that can be taken at home are covered by Part D, for which a separate premium is charged.

The Part B premium is typically subtracted automatically from members’ Social Security checks. Since Social Security recipients will see a 5.9% cost-of-living increase next year — about $91 monthly for the average beneficiary — they’ll still see a net gain in their benefit. But about one-fourth of the increase will be eaten away by the Medicare premium hike.

To see why even Medicare members who aren’t Alzheimer’s patients will pay the price, let’s start with the FDA approval process.

The FDA gave Aduhelm the green light under its “accelerated approval” rules, which allow it to approve a drug before all conclusive evidence has been submitted. The agency said it would require Biogen to conduct another clinical trail to verify the drug’s benefit, and if that trial fails, it might seek to take the drug off the market. But that wouldn’t happen for at least a year or two.

The approval was issued despite the nearly unanimous opposition of the agency’s own scientific advisory committee that had examined results from the drug’s clinical trials. The 11-member panel rejected the drug in three key votes, concluding that clinical trials didn’t show that it was effective in slowing the course of Alzheimer’s.

In March 2019, Biogen and its Japanese research partner, Eisai Co., had halted their clinical trials because they didn’t show a slowing of cognitive decline in the trial subjects. A few months later, however, the companies resurrected the drug, asserting that new analyses of the trial data showed that it was indeed effective.

Many Alzheimer’s experts, including a majority of members of an FDA advisory panel, remained unconvinced, however.

“Four years from now, it is very unlikely that any Alzheimer patient will genuinely be better off as a result of aducanumab — at best slightly less worse, but no better,” one panel member observed. “Perfection may be the enemy of the good, but for aducanumab, the evidence doesn’t even rise to ‘good.’ … The evidence shows it will offer improvement to none, it will harm some of those exposed, and it will consume enormous resources.”

The author of those words, neurologist David Knopman of the Mayo Clinic, resigned after the FDA’s approval. Two other members also resigned, including Aaron Kesselheim of Harvard Medical School, who called the FDA’s action “probably the worst drug approval decision in recent U.S. history” in his resignation letter.

Biogen took the ball handed it by the FDA and ran with it, pricing the drug at a sky-high $56,000 a year. Never mind that the Institute for Clinical and Economic Review, an independent think tank devoted to judging the relative medical and financial merits of new drugs, estimated the proper price for Aduhelm at $3,000 to $8,400 a year.

Biogen’s pricing is expected to prompt insurance companies to narrow the patient population for which they’ll cover Aduhelm. The clinical trials focused on treatment of patients with early manifestions of the disease. The FDA’s approval, however, didn’t specify any target population.

Medicare may have less latitude than private insurers in reaching its coverage decision, as it is required by law to cover any drugs approved by the FDA, within certain limits. The campaign to allow Medicare to negotiate with drug companies over pricing is directed chiefly at Part D prescriptions, though proposals on the table would also cover some Part B drugs.

Biogen executives were shameless about the potential profits they expect to be reaped from the full price. “We believe Aduhelm represents a significant long-term growth driver with modest revenue in 2021 ramping to a multibillion-dollar U.S. sales opportunity over the next several years,” Chief Financial Officer Michael McDonnell told Wall Street analysts the day after the FDA action.

The company’s stock soared by about 45%, to a peak of $414.71, in the days after the FDA approval, though it has since fallen back to earth. At midday Monday, the shares were trading on Nasdaq at $272.86, below its closing price of $286.14 the day before the FDA action.

Warnings about the fiscal impact of Aduhelm followed the FDA approval. Even if only 500,000 Medicare members were placed on the drug, the Kaiser Family Foundation observed as a conservative estimate, total spending for Aduhelm in one year alone would be nearly $29 billion, more than the spending on any other drug covered by Part B or Part D.

“To put this $29-billion amount in context, total Medicare spending for all Part B drugs was $37 billion in 2019,” the foundation reported. By law, Medicare pays doctors 103% of the price of a new drug covered by Part B. If 1 million patients took the drug, the foundation calculated, the cost would be “roughly the same that Medicare paid for all hospital outpatient services in 2019.”

Moreover, since Part B pays only 80% of the costs of treatment, members taking Aduhelm could be on the hook for about $11,500 per year. Since the drug doesn’t cure Alzheimer’s, that cost could recur year after year until their death. It comes to almost 40% of the $29,650 median income of Medicare Part B members.

It gets worse. Because the clinical trials revealed that about 30% of patients receiving a high dose of Aduhelm experienced brain swelling, patients will have to undergo regular MRI tests to watch out for this dangerous side effect. They’ll have to pay their 20% share of those, too.

Plainly, no one in America can escape the burden of unregulated pricing by drug companies, even for a product of doubtful efficacy and even for consumers who aren’t taking the drug in question.

The great benefit of the Aduhelm case may be that it will brings home the effect of high drug prices to 62.7 million Medicare beneficiaries, who may feel it every month when they receive Social Security checks that fall short of what they expected.

They might respond by increasing pressure on politicians to enact some form of price regulation on the drug industry. In that light, the FDA and Biogen may have done us all a big favor.