Biogen Quickly Cuts Alzheimer’s Drug Cost After Payer Pushback

(Bloomberg) -- Biogen Inc. said it would cut the list price of its Alzheimer’s disease drug Aduhelm in half in the U.S., a move that comes after the treatment’s high cost spurred concerns that it could strain Medicare and health insurers.

The company said in a statement on Monday that it would reduce the annual list price of the treatment to $28,200 to lower out-of-pocket costs for patients and reduce “the potential financial implications for the U.S. health-care system.”

It is unusual for pharmaceutical companies to drastically reduce the cost of a medication soon after it is approved. Aduhelm won backing from the Food and Drug Administration in June, becoming the first new drug for Alzheimer’s in nearly 20 years. The memory-wasting disease affects some 6 million Americans, most of them elderly.

However, the treatment has faced skepticism from doctors and medical experts who aren’t certain that it works and from payers who viewed its $56,000-a-year cost as prohibitive. Private insurers say they need more evidence that Aduhelm actually slows the rate at which Alzheimer’s patients deteriorate. Last month, none of the 25 large insurers that responded to a Bloomberg News survey said that they found the drug to be “medically necessary.” 

Many payers have also been waiting to see whether Aduhelm will be covered by U.S. government health programs. Medicare, which covers 63 million elderly or disabled Americans, won’t make a final decision until April, though it had already elected to raise premiums and build a reserve to pay for the treatment in anticipation of demand. 

Shares of Cambridge, Massachusetts-based Biogen were down 1% at 11:49 a.m. in New York.

Cutting Costs

Cutting the price could help at least partially revive the drug’s commercial prospects after the blowback over its initial price tag. The company reported just $300,000 in Aduhelm sales in the third quarter. Biogen Monday said it estimates 50,000 people will start Aduhelm infusions in 2022. 

The Alzheimer’s Association, which said it had pushed for the company to lower the price, called the reduction a first step and said it “continues to advocate for equitable access to this treatment for those in the earliest stages of the disease who may benefit.”

The slow rollout of Aduhelm has weighed on Biogen, which is facing pressure on some of its older blockbusters, most pressingly its multiple sclerosis treatment Tecfidera. Aduhelm had long been expected to be an important part of the company’s future growth. 

Biogen said Monday that it plans to take a series of steps to cut costs that are expected to yield $500 million in annualized savings. Further details of those measures will be finalized in coming weeks and made public in the first quarter of next year, the company said. 

“These are difficult decisions necessary to sustain our mission to develop medicines for the most devastating neurological diseases. We must bring our cost base in-line so we can continue to invest in future innovation and growth,” Chief Executive Officer Michel Vounatsos said in the statement.

Looming Decision

The Centers for Medicare and Medicaid Services, known as CMS, should publish its draft policy in January on whether and under what conditions the agency will pay for Aduhelm. A final decision is expected in April. 

Aduhelm is already driving Medicare premiums higher. About half of next year’s increase in premiums for Medicare Part B, which covers outpatient care and physician-administered drugs, is to cover the potential cost of new Alzheimer’s drugs, Medicare officials said in November. As a result, people on Medicare will pay about $11 a month in 2022 to cover the cost of the drug and others that may follow.

Medicare premiums are set through a months-long regulatory process and it’s unclear whether they could be rolled back in response to price changes before the following year. Members of Congress including Senator Ron Wyden, a Democrat from Oregon, have urged the agency to reduce the amount of the increase.

CMS didn’t immediately respond to a request for comment.

After Biogen’s price change, CMS should reverse its premium increases in turn, said George Vradenburg, chair of the patient group UsAgainstAlzheimer’s. Medicare’s premium hikes were based on “unrealistic estimates” of how many people might take the drug, Vradenburg said.

“We fear that Medicare may be trying to constrain access to this drug in order to protect it from cost increases,” he said in an interview. 

Medicare isn’t formally permitted to consider the cost of a therapy in determining whether it’s “reasonable and necessary” and should be reimbursed, said Rachel Sachs, a law professor at Washington University in St. Louis. The agency is looking at equity issues and the drug’s impact on underserved populations, she said, and the price change could factor into that discussion.

It will also set a lower benchmark for drugs that follow. “You might expect the price change is going to impact the launch price of forthcoming products,” Sachs said.

Pricing Pressure

Despite the pressure on drug prices in recent years, experts offered few comparisons to Biogen’s cut. Richard Evans, an analyst at SSR Health who has followed drug-pricing issues for years, called the move quite rare. The only similarity he could think of were cholesterol cutting drugs that saw their prices slashed after years of weak sales.  

Debate over the merits of Aduhelm itself only increased people’s frustration with the $56,000-a-year price tag, Jefferies analyst Michael Yee said in a November interview. 

“Right now the great debate is if these drugs work,” Yee said. “How come we never go through this issue with other drugs? Because we have clearly positive data.”

Even the most vocal supporters of Aduhelm have said paying for the drug poses a bottleneck. Medicare remains the major barrier for prescribing Aduhelm, said Jeffrey Gelblum, a doctor at First Choice Neurology in South Florida. 

The clinic chain is currently treating about 100 people with Aduhelm. Private insurers are paying for the drug so long as patients qualify for it, he said. Medicare is approving claims on a case-by-case basis. 

“It’s not a matter of, ‘Oh my God, how am I going to afford $56,000’? It’s always been, ‘Will my insurance cover it?” Gelblum said. 

Competitors Threatening 

Cutting Aduhelm’s price could help sentiment among doctors and improve sales somewhat, Yee said in a note Monday, but there are still large barriers ahead, such as reimbursement for the tests needed to identify qualifying patients. 

Aduhelm may also face competition from similar drugs in the year ahead. Biogen and its partner Eisai Co Ltd have an application into the U.S. Food and Drug Administration for another experimental Alzheimer’s drug. Eli Lilly & Co. hopes to launch its own treatment in the new year. Should the drugs all be available, it could set up a showdown at least partially on price. 

Jonathan Liss, founder of Columbus Memory Center in Georgia, said Aduhelm was originally “far overpriced.” He  said he’s told Biogen representatives he thought the price was outrageous and the company did itself no favors by appearing so greedy. 

“From my own narrow perspective, I think they lowered the price because it wouldn’t be in line with likely competitors and they created a tremendous amount of bad feelings among the general Alzheimer’s population,” Liss said.

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