Doctors stand to make thousands on a new Alzheimer’s drug even if they don’t believe it works. It reveals a ‘fundamentally flawed’ part of America’s healthcare system.

Doctors stand to make thousands on a new Alzheimer’s drug even if they don’t believe it works. It reveals a ‘fundamentally flawed’ part of America’s healthcare system.

  • It’s not clear if a newly approved Alzheimer’s drug is safe and effective. 
  • Even as many neurologists doubt Aduhelm’s benefits, they stand to make more money if they prescribe it.
  • Experts say it’s the latest example of the overdue need for reform to the US healthcare system. 
  • See more stories on Insider’s business page.

A controversial new Alzheimer’s disease drug has turned into a Rorschach test, Dr. G. Caleb Alexander said. 

Alexander, an epidemiologist and expert on drug safety and effectiveness is a member of the Food and Drug Administration’s advisory committee. That committee overwhelmingly recommended against approving the drug Aduhelm last November, saying it hadn’t shown it was effective. Even so, the FDA bucked the panel’s advice and approved the new Alzheimer’s drug in June

While many doctors are unconvinced about the drug’s benefits, but the FDA has left it up to physicians to interpret the data and decide whether to prescribe it. Some may view the drug as a viable treatment option where others don’t.

Alexander and other experts said a large pool of patients clamoring for any treatment options and how doctors are paid for drugs like Aduhelm could drive prescriptions. 

Under Medicare Part B, the government’s insurance system that pays for medical treatments given as infusions like Aduhelm, doctors are reimbursed for the average selling price, plus an extra 6%. 

This is a “fundamentally flawed” part of America’s healthcare system, said Craig Garthwaite, a professor of strategy at Northwestern University’s Kellogg School of Management.

“Aduhelm is the perfect storm of things to illustrate that we really need to do something about Part B pricing,” Garthwaite told Insider. “This system has needed reform for a while.”

Being an IV infusion and carrying a high price could spur doctors to use Aduhelm

Two factors that have nothing do with Aduhelm’s medical benefits could drive prescriptions. 

First, infused drugs like Aduhelm are covered under Medicare Part B. In addition to adding giving doctors an extra 6%  of the drug’s cost, Medicare also pays doctors to infuse the medicine. That still doesn’t include extra fees that may come from lab or blood tests. 

Secondly, the drug developer Biogen set a higher-than-expected list price for Aduhelm at $56,000 for a typical year of treatment.

Experts estimate that practices will make between $2,000 and $4,000 annually for each patient on Aduhelm.

An employer group that purchases healthcare benefits criticized the reimbursements in a letter to congressional leaders sent Monday.

“Medicare’s flawed Part B payment policy provides a financial incentive to clinicians to prescribe higher cost therapeutics drugs,” Employers’ Prescription for Affordable Drugs wrote.

The way doctors are paid for infused drugs isn’t new, but it can help explain how the US pays so much for medicine. A similar quandary developed a decade ago when many doctors kept using a more expensive eye treatment over a cheaper but comparable alternative.

Bernstein industry analyst Ronny Gal said Aduhelm “could become a major profit center” for neurology practices.

“Aduhelm’s high price may [give] physicians pause on ethical grounds, but from a purely economic perspective the high price enhances provider economics,” Gal wrote.

Already, Cleveland Clinic neurologist Marwan Sabbagh anticipates a surge in doctors training to become behavioral neurologists in the next few years.

Aduhelm’s weight on Medicare could spur more drug-price reform talks

With several million Americans diagnosed with Alzheimer’s, Aduhelm could break the Medicare system, experts said. 

Analysts estimate Medicare could pay anywhere from $6 billion to $29 billion per year for Aduhelm — far more than any other Part B drug, according to a recent New York Times analysis

The budget threat could spur drug-pricing reform, especially given Aduhelm’s high price and unproven benefits.

“$56,000 is not the price of hope,” Garthwaite said. “That’s the price of a drug that works.”

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