Pricing of Aducanumab Brings Out Flaws in Drug Payment Models

By | June 26, 2022

The recent approval of Medicare to extend insurance reimbursement for the new Alzheimer’s drug, only when taken as part of randomized clinical trials, highlights the various issues surrounding the FDA approval of Aducanumab for treatment. This approval process for trial usage only accentuates the necessity for further investigation into this new drug that received an expedited review and approval while containing questionable benefits.

Moreover, the current pricing model underlines the need for additional data and the realization that the manufacturer might not be forthright with their results once approval for payment occurs. Much of this is driven by the pricing ($56,000) per patient per year. This amount is ten times the benchmark suggested by the Institute of Clinical and Economic Review, which attempts to set the pricing on the value a medication delivers.

These conversations and results point out the inherently flawed payment mechanism for new drugs, which manufacturers determine. Furthermore, they establish their product pricing according to the market’s competitiveness, the physicians’ willingness to prescribe, and the fact that Medicare will reimburse, consequently forcing the entire payor market to follow suit. Hence, prices are determined by what the manufacturers ascertain the market will pay, regardless of their actual value.

In the case of Aducanumab, presumably, they banked on the increasing diagnoses of Alzheimer’s Disease, the reality that there are limited treatment options available, Medicare’s history of reimbursement, and the mounting pressure put on physicians by families. Thus, they predicted there would be an acceptance of the high cost despite the insufficient data. In other words, there are few available treatment options; it is being paid for by someone else, so why not try it?  Not apparent to the layperson is the reality that the “someone else” is all of us, tax-paying citizens.

Let’s consider an entirely different mechanism for payment is possible. Fast-track a new drug onto the market, priced at a level compatible with the current data and disease state being treated. When beneficial new data is uncovered, then permit the price to increase. If the information does not show increased benefits, allow the price to drop. This methodology is genuinely market-driven. Undoubtedly, pharma will argue that this model will disincentivize research and development, and there are no guarantee prices will be increased and accepted by the market. Of note, this type of scaling occurs in Germany, where the number of new drugs coming to market has not, in fact, lessened.

As we move to value-based payment models, we must do so for all components of the healthcare ecosystem. Additionally, the payor and regulatory arms must work in unison for the betterment of all, including the affordability of treatment. As manufacturers answer to a different calling, the public equity market, we have an inherent disconnect between what is beneficial for society and what is advantageous for business. Yes, we can bridge this difference, but it will require new and innovative payment models.