When the U.S. Food and Drug Administration approved a costly new drug for Alzheimer's disease, Aduhelm, earlier this year, experts warned that all of Medicare's more than 63 million enrollees could wind up paying the price.
That's exactly what is happening.
Aduhelm, which is priced at $56,000 a year, is one of the key factors driving a major increase in Medicare Part B premiums for 2022, according to the Centers for Medicare and Medicaid Services. The standard monthly payment will soar to $170.10, up from $148.50 this year, the agency announced late Friday.
About $10 of the premium spike is due to Aduhelm, a CMS official told CNN. The rest stems from a general increase in health care prices and usage, as well as from congressional action that limited the rise in Part B premiums for 2021 amid the coronavirus pandemic.
"This does show how just one drug could have a major impact on spending and premiums," said Tricia Neuman, executive director of the Kaiser Family Foundation's Program on Medicare Policy. "Without a change in current law, there's little the administration can do on its own to protect seniors."
The premium increase comes even though CMS has not yet determined whether and how it will cover Aduhelm, which also would involve additional expenses for testing, medical facility fees and doctors' charges. Medicare typically covers medications approved by the FDA, so if it opts not to do so for this Alzheimer's drug, it would be an exception.
The agency has no estimate on when the decision will be announced, the CMS official said.
But Medicare's actuaries must make sure that the program has sufficient funding in case Aduhelm ends up being covered, though the agency stressed that the premium increase does not imply that this will be the outcome.
"We must plan for the possibility of coverage for this high-cost Alzheimer's drug which could, if covered, result in significantly higher expenditures for the Medicare program," the agency said in a fact sheet.
Medicare Part B covers doctors' visits, outpatient hospital treatment, certain home health care, medical equipment and other services, including medications given in physicians' offices. Aduhelm is administered by doctors.
By law, the monthly premium must equal 25% of the estimated total Part B costs for enrollees age 65 and over. CMS must establish a premium level that will adequately fund projected Medicare spending and maintain an adequate reserve in case actual costs are higher than estimated.
If Medicare ultimately opts not to cover Aduhelm, it would require an act of Congress to reduce 2022 premiums, Neuman said. Annual premium changes in the future would reflect the decision.
Advocating to allow Medicare to negotiate drug prices
The Biden administration is using the premium surge to push for allowing Medicare to negotiate drug prices.
"This absolutely shows the need for prescription drug pricing reform," the CMS official said. "We have rising costs of drugs, and this is the impact of that."
Congressional Democrats are currently working out the final details of their $1.9 trillion budget reconciliation package that would empower Medicare to negotiate prices of certain costly medications administered in doctors' offices or purchased at the pharmacy.
The Health and Human Services secretary would negotiate up to 10 drugs in 2025. The number would rise to up to 20 medications starting in 2028. This controversial provision, which was dropped from the package and then restored after a deal was reached in the Senate, is a far more limited proposal than the one House Democratic leaders have backed in the past.
Determining the impact of Aduhelm
Whether Medicare will cover Aduhelm is not the only uncertainty surrounding the drug. The FDA's approval in June raised many questions and concerns about the process, the drug's efficacy and its price tag. Several congressional committees are looking into the approval process, and the agency's inspector general is reviewing it.
Just how many patients will receive the medication also remains to be seen. About a month after it initially approved Aduhelm, the FDA narrowed the group of patients who could receive it to those with mild cognitive impairment or milder stages of the disease.
Also, it's unclear how many doctors will prescribe it because of its questionable results, experts said.
Still, the impact on health care costs could be substantial.
If a million Medicare patients receive the drug, spending on Aduhelm would exceed $57 billion a year — far surpassing spending on all other Part B-covered drugs combined, Kaiser said in a June report. Also, that's roughly the same amount that Medicare paid for all hospital outpatient services in 2019.
By the mid-2020s, Aduhelm could constitute more than 1% of all national health spending and could increase total drug spending by more than 8%, according to a June estimate by Altarum, a nonprofit research and consulting group.
That assumes an uptake of about a million people who currently represent the low end of the estimated number of Alzheimer's patients with mild disease, or approximately 16% of the total, said Altarum.