Big insurers are considering new ways to pay for Biogen’s $56,000-per-year Alzheimer’s drug. It could spark changes in how the US and insurers pay for drugs.

Big insurers are considering new ways to pay for Biogen’s $56,000-per-year Alzheimer’s drug. It could spark changes in how the US and insurers pay for drugs.

  • The price tag of new Alzheimer’s drug Aduhelm could squeeze Medicare and patients. 
  • Experts say the cost could prompt Medicare and private insurers to find new ways to pay for drugs.
  • Insurers Cigna and Humana are considering contracts to pay for the drug based on how well it works.
  • See more stories on Insider’s business page.

In June, the US Food and Drug Administration approved the first drug in nearly two decades to treat the devastating Alzheimer’s disease.

The controversial drug, Aduhelm, made by drugmaker Biogen, is meant to slow the progression of Alzheimer’s by removing a sticky plaque that builds up in the brains of some people with the disease. It’s not clear if it improves memory or cognition in patients.

Even so, the $56,000-per-year drug, and the cost of imaging needed to spot those plaques, threaten to strain both the finances of patients and Medicare, the federal insurance program for people 65 and older, as well as those with certain disabilities and health conditions.

Medicare could end up spending $29 billion in a single year should just 500,000 people get the drug, according to Medicare experts at the Kaiser Family Foundation.

Patients enrolled in traditional Medicare could be saddled with out-of-pocket expenses of $11,500 for one year for Aduhelm treatment. The cost of the drug is also likely to drive higher Medicare and supplemental insurance premiums.

Some experts say the price tags of Aduhelm and a pipeline of future high-cost treatments should encourage the federal government and private insurers to find new ways to pay for drugs, including arrangements in which payment is based on whether they work or not. Health insurers like Cigna and Humana are already thinking about entering into such “value-based” contracts.

Some big insurers are already considering different ways to pay for Aduhelm

Biogen said earlier this month that it’s already in talks with national insurer Cigna and other payers about striking up a value-based agreement so patients have access to the drug. Biogen said the two will track certain patient outcomes.

Biogen’s “list price is not where this conversation should end,” Tim Wentworth, the CEO of Cigna’s health services business, said during the Goldman Sachs Global Healthcare conference this month, according to a Sentieo transcript.

“I’d like to believe that they’re willing to stand behind this drug. That if it’s given to the patient for whom it’s indicated, that if it doesn’t work, that there’d be a mechanism to potentially get a payer back some or all of their investments,” he said.

Meanwhile, Humana CEO Bruce Broussard said during the company’s investor day on Tuesday that while Humana hasn’t yet had any detailed conversations about an outcomes-based contract for Aduhelm, it hopes to strike one up.

Broussard said Humana has paid for drugs based on outcomes, but those arrangements largely involve generic drugs and drugs with competition in the marketplace. A treatment like Aduhelm would be new territory.

“We would hope that we would be able to introduce and be able to develop that, but it would be something that I think would be unique and innovative as we think about our historical experience,” Broussard said.

Analysts at Capital Alpha Partners said in a research note June 8 that contracts based on patients’ health outcomes are difficult to work out administratively, but Aduhelm’s high-cost and potentially large patient demand could prompt the Centers for Medicare and Medicaid Services to propose one for the drug.

The agency, the analysts wrote, could test a new model through an demo with the CMS Innovation Center, which tests alternative payment models.

A pipeline of high-cost Alzheimer’s drugs could spark changes in how the US and insurers pay for drugs 

Alternative payment models for drugs are rare, and that’s in part because there haven’t been enough high-cost drugs with long-lasting benefits that threaten payers’ budgets, according to Darius Lakdawalla, an economist at the University of Southern California’s Schaeffer Center who has consulted for Biogen.

That’s poised to change as new treatments for Alzheimer’s and other drugs, like cell and gene therapies, hit the market, he told Insider.

“It is just a question of getting enough new drugs that challenge our existing payment model,” Lakdawalla said. “Those have been the exception rather than the rule, but I think we’re moving into an era when they will increasingly become more prevalent.”

Some experts have suggested a few other ways to pay for high-cost drugs, though they’re still mulling how those strategies would apply to a drug that must be taken for years.

Lakdawalla said there’s a long pipeline of Alzheimer’s drugs that aim to treat people earlier in life. That could create a problem: A commercial insurer may shoulder the high cost of the drugs, only to have that patient soon become eligible for Medicare. Medicare would then reap the benefits.

Payment for such drugs should be spread out over time, like a mortgage, so the payer shouldering the cost gets the benefit, he said. Otherwise, insurers might not cover the drug generously.

Another way to ensure costs don’t put too much strain on payer budgets is to strike up so-called subscription agreements with drug makers, said Pei-Jung Lin, project director for the Center for the Evaluation of Value and Risk in Health at Tufts Medical Center.

Under these agreements, which are sometimes called ”

Netflix
models,” governments or insurers make a fixed payment to the drugmaker, regardless of how many patients access the drug. Some states, including Washington and Louisiana, have tried paying for Hepatitis C treatments that way.

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