How a single new Alzheimer's drug could blow up the federal budget

WASHINGTON — A new pharmaceutical treatment may or may not be effective at slowing the effects of Alzheimer’s disease, but it’s already causing heartburn in Washington.

The FDA’s surprise approval of the drug, Aduhelm, despite near-unanimous opposition from an independent advisory panel, has the potential to explode the federal budget and move an already simmering debate over drug prices in Congress and the White House onto the front burner.

The stakes surrounding the issue are enormous. For Alzheimer’s patients, Aduhlem, made by Biogen, is the first approved treatment intended to slow the progression of the disease, even if modestly. But it faces questions about both its efficacy and cost, an estimated $56,000 per year.

If approved by Medicare, it could single-handedly cost the government hundreds of billions, even trillions, of dollars, and seniors and their families thousands of dollars a year.

Biogen has said its drug, which is intended for patients in the disease’s early stages, may apply to as many as 1.5 million people. An analysis by the nonpartisan Kaiser Family Foundation estimated that if even just 1 million were approved for treatment under Medicare, which covers the vast majority of about 6 million estimated Alzheimer's patients, it would cost the government $57 billion a year. That’s $20 billion more than Medicare Part B spent on all drugs combined in 2019.

Medicare patients without additional insurance would also be on the hook for up to 20 percent of the cost of their treatment, about $11,500 per year. And premiums could spike for supplemental plans that cover the treatment.

Three members of the independent FDA panel that advised against approving the drug have resigned in protest, arguing that there is insufficient and conflicting evidence regarding its benefits and a risk of side effects. They say further trials are needed to answer those concerns. The Centers for Medicare & Medicaid Services ultimately will decide whether federal health programs will cover the treatment and under what circumstances, but they tend to follow the FDA’s lead.

It all has observers worried that the country may be heading for the worst of both worlds, one in which taxpayers and patients alike are squeezed like never before by a costly treatment whose benefits are questionable.

“It’s in many ways a version of other drug pricing and FDA debates we’ve had over the last several years, but it turns the knobs up to 10,” said Rachel Sachs, a law professor at Washington University in St. Louis who researches health policy.

“You have the perfect storm of a drug where there's questions about whether it’s effective at all, the patient population is very broad, and there's a potential here to spend a very large amount of not just taxpayer dollars, but also seniors’ dollars.”

Saying no to covering the drug, however, would also mean saying no to families desperate for help.

Prominent Alzheimer's advocates celebrated the FDA decision, arguing that it offered new hope against the disease where none existed and that it would encourage more companies to develop treatments. But they also share concerns about the cost.

“We believe it will pose an insurmountable barrier to many,” said Robert Egge, chief public policy officer of the Alzheimer’s Association, which supported the drug’s approval.

The news comes as lawmakers are considering a series of potential measures to reduce the price of drugs. Americans pay over 2.5 times as much for brand-name prescription drugs as other countries, according to a study by the RAND Corporation, and politicians in both parties have explored ways to close the gap in recent years. Medicare is currently not allowed to negotiate drug prices, leaving the government with little leverage over costs.

Lawmakers leading drug reform efforts expressed shock at Biogen’s price.

“Unconscionable,” Sen. Ron Wyden, D-Ore., said in a hearing last week.

“Who the hell can afford that?” Sen. Bernie Sanders, I-Vt., asked reporters.

In a letter to President Joe Biden, Sen. Joe Manchin, D-W.Va., slammed the FDA's decision to overrule its independent advisory panel and asked the president to nominate a new agency head to replace acting commissioner Janet Woodock in response.

"Dr. Woodcock is not the right person to lead the FDA," he wrote.

But while proposed policy changes on the table might have a significant impact on drug prices overall, perhaps even saving hundreds of billions of dollars, it’s not clear they’d immediately address issues raised by the new drug, experts told NBC News. Critics of pricing reform efforts, including the drug industry, also argue that reducing profits by too much could discourage research into new treatments.

H.R. 3, a bill backed by the Democratic leadership, would authorize the federal government to negotiate over the most used drugs and set a maximum rate for public and private purchases that’s tied to international prices. A proposed rule by the Trump administration would also tie some Medicare drugs to prices abroad. A bill co-written by Wyden and Sen. Chuck Grassley, R-Iowa, would penalize drug manufacturers who raise prices faster than inflation.

But Aduhelm is a new drug and it’s not yet clear if other countries will approve it or negotiate a different price. Biogen has also said it doesn’t plan to raise the price for at least several years. Its price also wouldn’t trip a proposed provision in H.R. 3 that would allow negotiations over drugs whose starting price is more than the median household income.

“There is no one silver bullet to deal with drug prices in the U.S.,” said Juliette Cubanksi, deputy director of the Program on Medicare Policy at the Kaiser Family Foundation. “There are different options that could be implemented simultaneously that would handle the problem from different angles.”

Biogen, in a statement, said that it was "committed to providing access to Aduhelm for patients across a spectrum of financial situations" and that its price "reflects the overall value this treatment brings to patients, caregivers and society — and one that will enable continuous innovation."

The Institute for Clinical and Economic Review, a nonprofit that independently evaluates drug prices, concluded that Aduhelm justified an annual price of $2,500 to $8,300 based on current evidence. But if the more optimistic claims around the drug proved accurate, the price could be as high as $23,100. And a drug that truly halted the progression of Alzheimer’s, without curing it, would be worth roughly Aduhelm’s asking price, in part because it would save money by reducing existing treatment costs.

In the case of Biogen's new treatment, there's a debate over whether it has value at all. But the level of upheaval caused by just one drug points to difficult questions ahead about how to evaluate the relative benefits of new medicine as the population ages, more breakthroughs hopefully follow, and health care takes up a larger and larger share of the economy.

As America’s notoriously expensive medical system indicates, it’s a conversation that the country has often been squeamish about having. Several of the drug reforms on the table would effectively outsource the job to other countries by mimicking their prices, rather than instituting a formula of their own to determine value.

“Americans tend to want to have everything, and American politicians like to give Americans everything,” said Christopher Holt, director of health care policy at the right-leaning American Action Forum. “But you have to make a choice and be honest about what those trade-offs are.”