The Food and Drug Administration’s decision to grant wide-ranging approval to the controversial, pricey new Alzheimer’s drug Aduhelm will have an eye-popping impact on Medicare finances. The question is exactly how big the impact will be.
Estimates of how many seniors on Medicare will actually take Aduhelm, which has a list price of $56,000, vary wildly. Some experts have guessed at relatively low patient interest, around 500,000 people. Biogen, the company behind the drug, has put its target population far higher, around 1 million to 2 million people.
But technically, since the FDA approved the drug for every Alzheimer’s patient, not just those with early-onset disease, the number could skyrocket toward 5.8 million, the number of adults over 65 with Alzheimer’s.
Medicare spending on Aduhelm isn’t just an abstract number. Precisely how big spending ends up being will have financial consequences for all taxpayers, and for all Medicare patients who could see higher monthly premium payments.
It’s impossible to predict with certainty how many people will take Aduhelm. It’s unclear how many patients would want it, given the significant safety risks and uncertainty about whether it actually slows down disease progression. It’s not clear yet how insurers will cover the drug or even how long patients will stay on the drug or how broadly physicians will prescribe it. It will also take time for the drug to reach its peak population, as more people are diagnosed with early-stage Alzheimer’s.
The interactive below shows exactly how big that impact could be, depending on how many people take it, compared to the Medicare program’s current spending on every single drug administered by doctors, across the entire country. (Medicare pays for drugs administered by doctors differently from those patients might pick up at a pharmacy.)
The graphic reflects the best available data about Medicare spending, but the estimate is imperfect because private Medicare plans, which cover more than a third of Medicare beneficiaries, don’t report detailed information about drug spending.
A Biogen spokesperson said the potential range of 1 million to 2 million people is based on patients with mild dementia symptoms. The company said it doesn’t expect all those patients to use the drug since some patients may not be good candidates for the drug, and since testing and administration processes are complex and specialists have limited capacity. The company also expects uptake to be gradual over a number of years.
Analysts at the nonpartisan Kaiser Family Foundation estimated Aduhelm could cost the Medicare program $29 billion per year if 500,000 Medicare patients take the drug. If uptake is at the highest end of Biogen’s target population, at 2 million, the Medicare cost could be more than $100 billion. As the New York Times noted, even the smaller of those two estimates is more than the government currently spends on staffing the entire Centers for Disease Control and Prevention, or NASA.
If all 5.8 million Medicare-eligible adults with Alzheimer’s took the drug, it would cost $334.5 billion — or nearly half the budget of the entire Department of Defense, which was $703.7 billion this year. Put differently: $334.5 billion would buy the government more than 4 million Tesla Model Xs.
Medicare hasn’t yet announced in what situations it will cover the drug, which could affect how many adults can afford it. Health and Human Services Secretary Xavier Becerra said on Thursday that the agency is taking the decision seriously, as Alzheimer’s is a life-changing condition for patients.
“We’re going to be making some pretty heady decisions about how it’s treated, how or if it will be reimbursed, how much, and so forth, so stay tuned,” Becerra said.
Commercial insurers will likely follow the government program’s rules, which will further affect the drug’s reach. Biogen, however, hinted last week that if uptake is higher than expected, it may reconsider its price.
Another important variable is how long physicians choose to keep patients on Aduhelm, even if symptoms of cognitive decline progress, said Sean Dickson, director of health policy at the West Health Policy Center.
The pressure to keep patients on the drug may be heightened because there aren’t any alternatives currently available, said Altarum Institute health consultancy fellow and research team leader George Miller.
Aduhelm’s price and volume will likely make it the number one expenditure drug in hospitals and clinics in the next two to three years, according to Eric Tichy, the vice chair of pharmacy formulary at the Mayo Clinic Health System.
A couple of the drugs that Medicare spends the most money on have prices similar to Biogen’s price tag for Aduhelm; Bristol Myers Squibb’s cancer drug Opdivo, for example, also costs about $60,000 per patient.
But the sheer volume of potential Alzheimer’s patients is what makes its cost to Medicare so staggering. While even modest uptake of Aduhelm could cost $29 billion, the next-highest most costly drug to Medicare, Regeneron’s macular degeneration drug Eylea, cost the program one-tenth of that total.
Patients could still face obstacles to getting care, including potentially paying thousands of dollars in cost-sharing depending on what kind of insurance they have. Travel to infusion appointments and finding a caretaker to accompany older adults could be other barriers to uptake, said Kaiser Family Foundation Deputy Director of Medicare Policy Juliette Cubanski.
The cost and potential scale of the Aduhelm patient population is an unprecedented challenge for the Medicare program, Cubanski said, and is especially notable given the drug’s uncertain clinical benefit.
“There were large projections before, but nowhere near as large as we are talking about Aduhelm,” Cubanski said.
This STAT analysis incorporates only spending on the drugs themselves, not add-on costs like high-tech scans and monitoring for potential side effects.
While these costs could add up, Tichy said it might make sense for insurers to screen patients, even if screenings are expensive, to make sure only patients who are good candidates take Aduhelm given its expensive cost and uncertain treatment timeline.
Update: This story was updated to reflect that estimates of total Medicare spending on physician-administered drugs include only beneficiaries on public plans.