Can Medicare Afford to Foot the Bill for New Alzheimer's Drugs?

Research Corner
July 25, 2023

Soleil Shah, MD, MSc, Research Reporter

Soleil Shah writes Tradeoffs’ Research Corner, a weekly newsletter bringing you original analysis, interviews with leading researchers and more to help you stay on top of the latest health policy research.

This week I’m diving deep into the sky-high cost of new Alzheimer’s drugs and what it could mean for Medicare’s future. For even more on drug prices, stay tuned for this Thursday’s Tradeoffs episode explaining how Medicare will soon begin to flex its historic new power to negotiate drug prices.

I also want to recommend another health care newsletter, Hospitalogy, that delves even more into the business side of the industry. I personally find its writer Blake Madden’s insights into trends like hospital mergers and vertical consolidation in the ways health care’s delivered very useful in rounding out my weekly diet of health policy news. It’s free to subscribe.

Thanks for reading.

Can Medicare Afford to Foot the Bill for New Alzheimer’s Drugs?

This time last year, the outlook for a new wave of Alzheimer’s treatments seemed bleak.

Medicare had just declined to reimburse most uses of Aduhelm, the first new Alzheimer’s drug in 20 years, citing concerns over safety and a lack of efficacy. Critics were skewering the FDA for approving Aduhelm in the first place despite questionable clinical evidence that it works.

Today, that tide seems to be turning. New drugs that attack early stage Alzheimer’s in a similar way to Aduhelm — fighting the brain protein amyloid — are seeing more success.

Medicare agreed earlier this month to fully cover Leqembi, priced at $26,500 a year. And a promising clinical study published just last week raised hopes for a third drug in this category.

Some doubts still linger about the safety and efficacy of this new class of drugs, but they appear to be gaining traction. And that raises a new question: Can we afford them all?

New Alzheimer’s drugs would add billions to Medicare’s tab

Recent analyses  —  one in JAMA and another by the Kaiser Family Foundation (KFF)  —  focused on Leqembi’s costs. Both publications shed light on just how expensive this new wave of therapies could be.

In JAMA, Julia Cave Arbanas and colleagues estimated that between 86,000 and 217,000 eligible patients with mild dementia would take Leqembi. If that’s the case, the researchers say, Medicare could wind up paying between $2 billion and $5 billion a year.

Those costs include both the drug and about $7,000 a year in scans and monitoring for side effects, which, in a large clinical trial, included brain swelling, bleeding and headaches in more than one out of every 10 patients taking Leqembi.

KFF’s analysis goes further, assuming that eventually an even broader swath of Alzheimer’s patients might clamor for this drug. They found that if 10% of all Alzheimer’s patients took Leqembi, Medicare’s tab could soar to $18 billion — not including scans or additional treatment costs.

In other words, this one new drug could single-handedly increase what Medicare spends in total on all Part B drugs (medications administered by clinicians rather than those taken by patients at home) by up to nearly 50% a year.

Arbanas and colleagues also estimated patients’ out-of-pocket costs for the drug could reach nearly $7,000 per year. Although the Inflation Reduction Act (IRA), passed in 2022, will soon limit out-of-pocket spending for retail drugs (those covered by Part D), that law does not apply to Part B drugs.

KFF’s analysis also raised the prospect that monthly Part B premiums for all Medicare beneficiaries — not just those taking Leqembi — could soon rise too, as they did in response to Aduhelm’s approval.

So, what would we get for all that extra spending on new medicine?

The large clinical trial for Leqembi in people with early Alzheimer’s disease found that infusions of the drug every two weeks slowed cognitive decline, such as struggles with memory or functioning at home, by about 27% over an 18-month period.

While the idea of slowing decline by any amount of time may hold strong appeal for patients and their families, some clinicians warn that the drug does not reverse Alzheimer’s, and its effects are modest enough that they could go unnoticed in real time. Other critics note that, for various reasons, the drug’s benefits seem likely to accrue disproportionately to patients who are white and wealthy.

The other reality that Eric Widera, a geriatrician and professor at the University of California, San Francisco, reiterated to me is that these drugs do not ultimately stop this terrible disease.

And that means, he said, they do not prevent many of the other costs that add up as Alzheimer’s progresses.

“These drugs don’t prevent people from going into nursing homes or developing severe dementia in the future,” Widera said. “So we’re not preventing those costs — we’re just delaying them by a quarter- to a half-year.”

High launch prices highlight holes in the Inflation Reduction Act

With last year’s passage of the IRA, Democrats promised to rein in runaway prescription drug costs. But the arrival of this costly new class of drugs highlights some of the law’s shortcomings, like the lack of an out-of-pocket spending cap in Medicare Part B.

“Medicare coverage alone is not enough to make these drugs, with their extremely high price tags, affordable for these patients,” Juliette Cubanski, the author of KFF’s analysis, told me.

The IRA also lets Medicare begin to negotiate the prices of some top-selling drugs — but only after they have been on the market for several years. For many new treatments, Medicare still has little choice but to pay a very steep price.

 Three Other Studies You Might Have Missed…

  • Private equity ownership of hospitals, nursing homes, hospice care and specialty clinics consistently led to higher costs for patients or insurers and had mixed impacts on the quality of medical care (The BMJ)

  • Patients and insurance companies paid more for cancer drugs from hospitals participating in the 340B Drug Pricing Program — which offers those hospitals discounted drugs — compared to hospitals not participating in 340B (JAMA Health Forum)

  • Psychiatrists are less likely to accept different types of health insurance, especially Medicare and Medicaid, than other types of doctors (Psychiatric Services)