Here’s how one drug can be responsible for 50% of the hike in Medicare’s Part B premiums

Personal Finance

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Medicare beneficiaries may already be aware that the big jump in their 2022 Part B premiums is partly due to the cost of a single drug.

Yet why all enrollees are picking up the tab for Aduhelm — a controversial new medicine designed to slow cognitive decline with Alzheimer’s disease — may be unclear. Adding to the confusion is the fact that Medicare itself has not yet officially approved coverage of the biologic, which comes with an estimated annual price tag of $56,000 per patient.

“Clients are pretty upset about the increase and many have asked why,” said Danielle Roberts, co-founder of insurance firm Boomer Benefits.

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The standard monthly premium for Part B, which covers outpatient care and durable equipment, will be $170.10 next year, up $21.60 from $148.50 this year. Medicare’s trustees had estimated this summer that 2022’s premium would be $158.50.

About half of the increase is attributed to the potential cost of covering Aduhelm, which was approved by the Food and Drug Administration in June. It is the first new medicine for the disease in nearly two decades, and the first one approved by the U.S. regulators to slow cognitive decline in individuals living with Alzheimer’s.

The okay for the drug, manufactured by Biogen, came despite some objections in the scientific community about its effectiveness and side effects, which include brain swelling and bleeding. Medicare is expected to issue its coverage determination — i.e., whether it will be limited to certain patients under certain conditions — in the spring.

“Medicare’s coverage decisions are not really tied to the price of a drug but whether it’s recommended for the treatment of a particular disease,” said Juliette Cubanski, deputy director of the program on Medicare policy at the Kaiser Family Foundation. “The FDA’s approval is taken as a proxy for ‘this is a recommended product.'”

While Medicare Part D provides prescription drug coverage, some medicines are administered in a doctor’s office — as with Aduhelm, which is delivered intravenously — and therefore covered under Part B.

And by law, the Centers for Medicare & Medicaid Services is required to set each year’s Part B premium at 25% of the estimated costs that will be incurred by that part of the program. So in its calculation for 2022, the agency had to account for the possibility of covering Aduhelm.

Roughly 6 million Americans suffer from Alzheimer’s, a degenerative neurological disease that slowly destroys memory and thinking skills, and has no known cure. It also can wreak havoc on the lives of families and friends of those with the disease.

It’s such an eye-popping number for one drug that hasn’t shown itself to be the miracle cure that everyone is hoping drug companies will come up with for Alzheimer’s disease.
Juliette Cubanski
Deputy director of the program on Medicare policy at the Kaiser Family Foundation

Most of these patients are age 65 or older and generally enrolled in Medicare, which covers more than 63 million individuals. In 2017, about 2 million beneficiaries used one or more of the then-available Alzheimer’s treatments covered under Part D, according to the Kaiser Family Foundation.

If just one-quarter of those beneficiaries — 500,000 — were to be prescribed Aduhelm, total spending on that drug alone in one year would be nearly $29 billion, the foundation’s research shows. By comparison, total Medicare spending for all Part B drugs was $37 billion in 2019.

“It’s such an eye-popping number for one drug that hasn’t shown itself to be the miracle cure that everyone is hoping drug companies will come up with for Alzheimer’s disease,” Cubanski said.

She also said this type of situation — a pricey drug that must be covered by Medicare and ends up driving up premiums — could happen again.

“There’s no mechanism in place to prevent it from happening,” Cubanski said. “Drug companies invest billions in research and development and are always looking for blockbuster treatments for any number of diseases, and we do want effective drugs to come to market.”

Additionally, although there’s a proposal in Congress that would let Medicare negotiate the price of some drugs starting in 2025, new biologics like Aduhelm would have 13 years before they could potentially be subject to price negotiations. Biogen, meanwhile, has said it would not raise its price on the drug for four years.

The proposed congressional changes — which are included in the Build Back Better Act — also would limit beneficiaries’ out-of-pocket spending for Part D drugs to $2,000 per year. However, because Aduhelm would be delivered under Part B, that cap would not apply.

Beneficiaries generally pay 20% of Part B services unless they have additional insurance that either picks up that coinsurance (a Medigap policy) or offers a different copay and an out-of-pocket maximum (a Medicare Advantage Plan).

The Aduhelm situation highlights the ripple effect that expensive drugs can have, said David Lipschutz, associate director and senior policy attorney for the Center for Medicare Advocacy.

“Even the possibility that Medicare could provide coverage for Aduhelm sent Part B premiums up,” he said.

There is the chance that if Medicare approves coverage of the drug, the program won’t end up spending as much as anticipated. 

“It’s possible that physicians may not be very enthusiastic about prescribing it, given the side effects that were observed in both clinical trials before the approval and since then among patients,” Cubanski said. “That could cause uptake to be less than the manufacturer is hoping.”

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