November 7, 2021
Aduhelm: Case Study on Paying for Health
by Paul Seegert
As the controversial Alzheimer's drug shows, the only solution to our broken healthcare payment model is the free market.
In July, I wrote an article that criticized the newly authorized Alzheimer’s drug Aduhelm. Six months later, the market response is heartening and, in my opinion, a case study in what it will take to fix the way that we pay for healthcare in America.
A review of the problem
The FDA approved the first new drug to treat Alzheimer’s in June. Of 11 scientists who reviewed the research and science behind the new treatment for the FDA, 10 voted against approval, and one was undecided. The FDA approved Aduhelm despite the lack of evidence that it either cures or slows the progression of the Alzheimer’s and has given the company nine years to conduct a confirmatory trial. Three of the scientists resigned as a result. The head of the FDA also took the very unusual step of asking for an investigation into unusual/informal contacts between the manufacturer and people at the FDA.
The drug price is set at a whopping $56,000 per year, and the real price tag is more like $100,000 when you include the cost of performing the infusion in a provider’s office, testing to monitor for brain bleeds, etc. With 6 million Alzheimer’s patients in America today, having just one in six get a prescription would drive costs of around $100 billion into the system. Total outpatient Medicare drug spending with pharmacy prescriptions was $136 billion for 2019.
A review of the last six months
Biogen and other analysts projected sales of $103 million this year, about $1 billion in 2022 and $5 billion-plus in 2023. However, the market has responded in a very encouraging way. Sales have just totaled $2 million thus far.
What happened? The Veterans Administration, several Blue Cross Blue Shield companies and most notably Medicare are not yet paying for the treatment. Highly respected medical institutions like Cleveland Clinic and NY City’s Mount Sinai have also chosen not to administer the drug. So have many well-managed, large employer health plans. All are waiting for real evidence the drug is effective in either slowing the development of or in curing Alzheimer’s disease.
See also: How Synthetic Data Aids in Healthcare
How we will make real progress
The free market is the only viable solution — if we can get to one in the way that we pay for healthcare.
I am often asked when we will see real progress in our insurance payment model. I typically laugh and say, “As soon as lobbying is no longer effective.” But that is not the end of the story. I more seriously share that we are seeing the problem get solved one employer at a time (another way of saying it will be solved by the free market). When employers build a health plan with a consultant that provides transparency around the actual cost of care and then build their plan to reward good consumption, it is amazing how quickly they can get to a place, where costs go down and quality goes up.
For change that will affect the system more broadly, we need government to ensure that we have rules in place that require transparency. Until that happens, we will be stuck handling the problem one employer at a time.