Dan Gorenstein: Hey, and welcome to the third part of our special series about the fallout from the FDA’s controversial approval of the new Alzheimer’s drug aducanumab.

The decision, clouded by questions about the drug’s safety, efficacy and big cost, is sending shockwaves through the U.S. health care system.

So this week, we’re bringing you four conversations with people asking messy, difficult questions and reckoning with this moment.

Today, we hear the payer perspective.

From the studio at the Leonard Davis Institute at the University of Pennsylvania, I’m Dan Gorenstein, and this is Tradeoffs.

Mark Miller: This is precisely the scenario that, someone like me, dreads

DG: Mark Miller advised Congress on Medicare spending for 15 years. He’s also worked at the Centers for Medicare and Medicaid Services. Now he’s Executive Vice President for Health Care at Arnold Ventures, a philanthropy that, in full disclosure, also supports Tradeoffs.

So Mark, this new drug aducanumab comes with a hefty price tag of $56,000. A lot of that  is gonna be picked up by Medicare. That’s the public insurance program that covers some 50 million seniors.

Is Medicare ready to absorb potentially billions in new spending on this blockbuster drug?

MM: No, I don’t think it is a position to absorb billions on this drug or any other at this price tag. For years, the growth rate and Medicare has exceeded the resources that we have as a society to devote to Medicare. It’s growing faster than our GDP. And I just want to say, this is not an abstract problem, you know, for policy people and academics. Young people should care deeply about this problem. Their taxes are going into this program now, and there is a real generational question of whether this program or at least this program in its current form is going to be available for them.

So what do you do about it? You can try and generate more revenue through taxes and premiums. You can pay less for services and drugs. Narrow access to the services. And finally, you could cover fewer people under Medicare.

DG: So here comes aducanumab, and let’s assume that aducanumab is prescribed as widely as it could be. How much of a burden could this drug be on Medicare?

MM: So Dan, the Kaiser Family Foundation recently estimated I think conservatively if 500,000 people take this drug, it’s $30 billion in new spending. That’s annual. 30 billion annually. But as you know, there’s as many as 6 million people who have Alzheimer’s in this country. So just a different way to think about it. Think if 2 million take it. You’re looking at over a hundred billion dollars in new annual spend in Medicare. That is an increase that’s equal to one eighth of Medicare’s entire budget.

DG: Just for, just for one drug.

MM: Just for one drug, that’s right. And I want to be clear. I don’t want to be, you know, alarmist, but I do want to be alarmist because the indication is for the treatment of Alzheimer’s. And so if there’s not clinical protocol that would potentially limit or target its use, I’m not sure what slows this down.

DG: How long have you been in health policy? How many years?

MM: A long time. 30-some odd years. I don’t know. 

DG: In your three decades, have you ever seen one drug that could have this kind of impact on federal spending? Is this a bit of a unicorn situation or have we seen this rodeo before?

MM: This is, this is a problem. This isn’t even the Hep C where it was a high price tag, but there was a measurable effect. This is there’s a high price tag, and there’s very little evidence that this does anything. At this price and this potential population and it virtually or appears to [all] fall on Medicare, this is a huge event. 

DG: Mark’s talking about drugmaker Gilead’s hepatitis C drug Sovaldi, which originally cost $84,000 for a 12-week treatment…$1000 dollars a day…but it basically cures the disease.

So if we go with this Kaiser Family Foundation paper, 500,000 people will get on this drug.  Which represents an additional $29 billion in spending every year. Where will all these new billions of dollars be coming from?

MM: So just to set the table a little bit, the price of the drug is being set at $56,000. There’s an additional payment for the physician. Now, those dollars will come from two places. The Medicare program will pay 80% of that. The person taking the drug will pick up 20% of that through their co-insurance. Now most people have supplemental coverage, which will help them with that 20%, but many people do not. And that means they’ll be on the hook for as much as $11,000 out of pocket. And then not to mention, there’s going to be testing around this to qualify as well as to monitor the impacts and that can have additional out-of-pocket expenses.

DG: And people are also paying a premium on top of those out of pocket costs, right? 

MM: That’s absolutely right. Premiums are likely to go up as the entire Medicare program absorbs the cost of this drug. And to be clear here, Dan, that means everyone on Medicare, whether you are taking this drug or not, whether you have Alzheimer’s or not, you’ll see your premium go up.

DG: The big insurer, Cigna, recently told the New York Times that other costs associated with aducanumab, like MRIs, could be as high as $30,000 in the first year of treatment.

When we come back, what the government could do to stop this runaway train, and why Mark isn’t holding his breath. 

MIDROLL

DG: Welcome back. We’re talking with Mark Miller about the potential fiscal impact of the controversial new Alzheimer’s drug branded by Biogen as Aduhelm or more commonly known as aducanumab.

For more than a decade, Mark advised Congress on Medicare policy as part of the commission known as MedPAC.

As we’re all acutely aware, Mark, Medicare does not have the power right now to negotiate drug prices. What other tools or powers does the Centers for Medicare and Medicaid Services have to try to rein in spending on Biogen’s drug aducanumab?

MM: One way to think about what Medicare could do is to begin to think about coverage aand make a coverage determination. And as an insurer, Medicare could say, given the lack of evidence, we’re not going to pay for this. Or alternatively, Medicare could say, okay, not 6 million people, but people who have these indications will, you know, it will be covered. But a lot of the national coverage decisions rather than outright denials are more of these clinical indication things, you know. Lung volume reduction surgery is available to patients who have these indications, as opposed to outright we don’t cover it. Now you will find things like acupuncture for this. We’re not paying for that. But a drug of this disease, this magnitude, in this population, I’m not aware of a denial that comes anywhere close to this. 

DG: When Medicare does make a so-called ‘national coverage determination’ like Mark’s talking about…they’re generally not allowed to consider cost effectiveness.

But they are allowed to consider whether a service or drug is “reasonable and necessary.” 

And legal and policy scholars have already begun to scrutinize those two small words to see if they offer some room for Medicare to restrict the use of this drug.

DG: What do you think about the politics, the optics of Medicare telling potentially millions of people with Alzheimer’s that they can’t have this dose of hope, this first drug that’s come on the market in 20 years?

MM: There may be a national coverage determination process, but let me put it this way. If your question was, “Do you think there’ll be a decision that says, ‘No, you can’t have this drug’?” I don’t think that will happen.

DG: So Mark, you walked us through the impact this decision could have on people with traditional fee-for-service Medicare. And that’s about two-thirds of folks in the program. What’s this gonna mean for the other third people who have managed care plans through Medicare Advantage?

MM: So like the people in traditional Medicare, they will face cost sharing for the use of this drug. It’ll depend to some extent on their plan, but unlike traditional Medicare, they can’t buy supplemental insurance. So they will have to pay the co-payment or co-insurance out of pocket. And as we’ve already discussed, that can be a big bill. Now what Medicare Advantage as the plan may try to do is try to control spending through things like prior authorization or some clinical steps that you have to go through in order to get access to the drug. But there are questions of what those steps would be. And by and large, they have to follow the eligibility and coverage rules that are present in the traditional Medicare program that you were referring to a moment ago.

DG: The final question that I have, Mark, is does aducanumab and its price tag move the country one step closer? Does it move Congress one step closer to allowing Medicare to negotiate drug prices?

MM: It should. It probably won’t. This should be the case study for why a program like Medicare needs a range of tools, coverage and payment, in order to manage costs for the taxpayer and the beneficiary. Everybody is going to carry this cost — all the Medicare beneficiaries, all the taxpayers. This is the problem. This drug could really swamp this program, and to have no way to put the brakes on that? How much of this goes on before a premium becomes unaffordable?

DG: Mark, thanks for taking time to talk to us on Tradeoffs.

MM: Really appreciate it. Thank you, Dan. 

DG: There’s a couple other big players that aducanumab costs could hit. 

State Medicaid programs for people with low incomes and the Veterans Health Administration, who Biogen said in a press release they are actively negotiating an agreement with right now.

In that same press release, which came out the day Aduhelm was approved, the company also said it intends to enter a value-based contract with insurer Cigna, and that Biogen can help patients assess financial options.  

Details are scant. 

Biogen ended the press release with the promise that the drug’s $56,000 price tag will stay in place…for the first four years.

I’m Dan Gorenstein and this is Tradeoffs.