Let us leave to history whether BIIB’s recently approved Alzheimer’s drug is effective. As conflicts abound and technology makes grass roots or Astroturf organizing – take your pick – of citizen petitions easier, FDA approval has turned into a fun house of mirrors in some cases.
With a $60k price tag and Sovaldi on our mind, what we should think about is what FDA approval and the certain-to-be-requested National Coverage Determination means to Medicare Advantage MLRs and to the Direct Contracting Program. Consensus peak is $10B. Medicare Part B is a $35 billion program so a $10B expense for a single drug is meaningful.
Incentives for Prescribing. Unlike other conditions addressed by most high priced drugs, Alzheimer’s affects millions of people a year, almost all of them Medicare eligible. Since most of the Alzheimer’s population is covered by Medicare, the ability to restrict utilization will mostly be limited by law and politics.
Abuhelm is a Part B drug for which substantial incentives exist for prescribing and administration. Hospital-based clinics and their employed physicians will benefit from the 340(B) discounts. These discounts can range from 25-50% of list price. In turn, the hospital or clinic will be reimbursed by Medicare at the manufacturer’s price, keeping the difference to support operations.
While CMS has reduced the reimbursement for Part B drugs and reallocated funding to all outpatient providers, the list price is probably being set high to accommodate 340(B), hence providing greater headroom for the discount. Additionally, physicians are paid an add-on that is 6% of the drug’s price. When and if the sequester returns, that amount will be reduced to 4.2%.
As the 340(B) program is designed to benefit non-profit hospitals, uptake and therefore impact to the Medicare program will be determined by employed physicians at large non-profits and research centers. BIIB’s launch deck illustrates 900 launch sites, most in high population areas with research or otherwise integrated health system.
The FDA approval is, of course, predicated on the accelerated approval pathway. As such, BIIB will be conducting clinical trials for Aduhelm through late 2029. The best place to do that is at large research facilities used to accommodating protocols and which usually have a 340(B) program.
Physician Acceptance. While the incentives to prescribe and administer Aduhelm are enormous, we always try to assume that physicians will prescribe and administer every drug in a responsible manner. There is plenty of evidence, especially in oncology, to suggest that is not the case but it is difficult to model something like that.
The company believes that there are 1-2 million people who have been clinically diagnosed with Alzheimer’s being treated at or having access to one of the 900 sites they have chosen for launch. This number seems reasonably accurate.
There are about 6.2 million people living with Alzheimer’s according to the Alzheimer’s Association. Of those 6.2 million about 4.5 million are over 75 and likely have cognitive and physical decline that might make prescribing a new drug medically inappropriate. A portion of those are also going to be admitted to hospice and would not be eligible for therapy. Of the remaining, 1.7 million, most would live within a reasonable proximity to BIIB’s launch sites which are centered on high population areas.
The company’s focus at launch are specialists who may be able to form their own opinions of efficacy or at least be willing to see what works for a disease with few options.
The principle advocate for the disease, the Alzheimer’s Association, strongly endorsed the FDA’s decision. Their imprimatur will help assuage the misgivings of many physicians.
Finally, politics are going to play an outsized role. The Trump administration advocated for “right-to-try” and pushed the FDA to move more quickly and take more chances. This view of “what do I have to lose?” is shared by many patients, their caregivers and physicians. The "right to try" move is also part of the larger trend that has reduced the reverence for institutions of all types to nearly nothing.
Conditions of Coverage. Assuming physicians prescribe Aduhelm, the next determinant of uptake will be conditions of coverage. Under Medicare Part B a drug must be covered if it is “safe and effective,” suitable for Medicare patients and approved by the FDA. The FDA’s approval is generally prima facia evidence that a drug is safe and effective.
The company indicated yesterday that Medicare coverage will be available at launch under miscellaneous codes with a J-code assigned in 2022. Medicare Advantage plans will be releasing medical policies in the next several months, also according to the company.
Medicare Advantage plans are certain to ask for a National Coverage Determination and use the request to argue for limits on coverage. Bruce Quinn points out that one of those conditions could be that the patient be amyloid positive, based on clinical trial information. That conjecture was echoed by the company in their presentation yesterday. The FDA label is extremely broad: “indicated for the treatment of Alzheimer's disease” so there appear to be few other options, at least initially, to limit utilization.
The cost of Aduhelm is also likely to trigger Medicare Advantage’s “significant cost” policy which dictates that the drug be covered outside the MA benefit until it can be included in the Medicare cost trend. However, that puts the plans in a bit of a fix. If two years go by with physicians prescribing the drug while are patients are generally unaware who is paying for what, MA plans are going to be in the position of trying to put the genie back in the bottle using utilization management tools. That effort could be difficult if the drug becomes popular with patients and their families.
Another pickle for Medicare Advantage plans is that items ancillary to a carve out under the significant cost policy are not excluded. In this case, PET and CSF will need to be covered by Medicare Advantage plans even if the drug itself is temporarily excluded.
Since all the world is politics now, BIIB's comments about focusing on underserved populations should probably be taken as a signal to plan sponsors. Add that to what is likely to be a populist push by patients, their families and caregivers, the usual payer arguments are going to sound out of step with the public, even if they are right.
For these reasons, CI and BIIB struck a value-based agreement. CI knows CMS will require them to cover the drug at some point. BIIB knows CI, a minor player in MA, will want to cover the drug to attract members and to influence patient behavior and physician prescribing as early as possible.
So, in the short run, it probably pays plans to bear the higher cost for the drug to avoid even higher costs or membership loss later. That could put pressure on MLRs at a time they are expected to be facing headwinds post-COVID. The cost of Aduhelm may not be sufficient to move the needle on an MA plan at UNH, but it gets more meaningful with smaller plans like ALHC, CLOV, OSCR all of which have limited influence with large drug companies.
Direct Contracting. The impact on the Direct Contracting Entities will depend on which payment mechanism they have adopted. If they are using the Primary Care Capitation method, they will have no exposure to drug, specialists’ costs and the diagnostic related expenses. If, however, that have chosen the Total Cost of Care, they will be exposed to all Part A and B expenses, including drugs, specialists and diagnosis-related expenses.
The advantage a DCE will have over Medicare Advantage Plan is control over the referral pattern and the influence over the patient’s care. If, in fact, Aduhelm has the limited efficacy trials indicated, the primary care physician, as an educated consumer, will use that information to control use of the drug and specialists.
As far as we can tell, there is limited disclosure on PCC and TCC, so it is difficult to tell at this point who is exposed. In any event, because BIIB is targeting specialists, it seems unlikely the DCE’s will face too much overlap initially.
Call with questions and thoughts you might have on Direct Contracting especially.
Emily Evans
Managing Director – Health Policy
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