Alzheimer’s disease, Aduhelm, and the impact on Medicare

By Ali M. Heinrich and Kali Schweitzer

14 February 2022

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The Alzheimer’s Association estimates over 6 million people age 65 or older in the U.S. have Alzheimer’s disease as of 2021. This equates to about 1 in 9, or 11%, in the Medicare eligible population who are living with Alzheimer’s disease.¹ In this article, we discuss why Aduhelm has become controversial, what the Medicare stakeholder considerations and impacts are, and what the implications are of the recent CMS proposed coverage decision.

We aim to appeal to a wide range of audiences throughout the healthcare industry and general population, where we discuss Aduhelm’s impacts through varying perspectives. In particular, we seek to answer the following questions:

How has Alzheimer’s disease historically been treated and why is Aduhelm different?
Why is Aduhelm in the spotlight?
How does the cost of Aduhelm compare to existing treatments today?
How impactful is the availability of Aduhelm to Medicare beneficiaries and other stakeholders?

What does the preliminary CMS National Coverage Determination (NCD) mean for beneficiaries, Medicare Advantage Organizations (MAOs), and other Medicare supplemental coverage entities?
What else should beneficiaries and MAOs be considering?
How does this differ for traditional Medicare, Medicare Advantage, and Medicare supplemental coverage?

The focus of this article is on traditional Medicare and Medicare Advantage. However, we do highlight various impacts on other supplemental coverages, such as MedSupp, employer-sponsored insurance, and Medicaid.

Executive summary

Alzheimer’s disease has been in the spotlight recently with the launch of a new drug, Aduhelm™, manufactured by Biogen and Eisai Co., Ltd. Aduhelm was given FDA approval through an accelerated pathway in June 2021, causing division in the medical and pharmaceutical industries². Both the high annual price (which the manufacturer cut on January 1, 2022 nearly in half, from $56,000 to $28,200³) and questions around its effectiveness⁴ had Medicare beneficiaries, Medicare Advantage organizations (MAOs), and other Medicare supplemental coverage entities keeping a close eye on the Centers for Medicare and Medicaid Services (CMS) decision on Aduhelm’s coverage.

Aduhelm is the first FDA approved treatment that is aimed at slowing the progression of Alzheimer’s disease by targeting beta-amyloid, which is believed to be the cause of cognitive and functional decline.⁵ Approved treatments on the market today treat symptoms rather than altering the disease progression. Although Aduhelm has the potential of being life changing for many, it also has led to some hesitancy in the medical field, dividing many physicians and hospitals across the country. Not only is the estimated annual price tag of $28,200 (a significant decrease from the original $56,000 cost)3 a potential financial barrier to beneficiaries with Alzheimer’s disease, but there are also concerns around the efficacy of this treatment and the prevalence of side effects emerging from various trials.⁶

Alzheimer’s disease impacts a significant portion of Medicare beneficiaries, so recent news has shifted the focus to CMS and its anticipated coverage decision. CMS released a proposed National Coverage Determination (NCD) on January 11, 2022, stating beneficiaries would only be covered when participating in qualifying clinical trials, which have not yet been formally determined.⁷ At the time of this publication this decision has not been finalized, and CMS has given the public 30 days to comment. However, in light of this preliminary decision, MAOs and other supplemental coverage entities should consider the implications of Aduhelm’s coverage on their beneficiaries and financials. There is currently no precedent on coverage of Aduhelm, so the final CMS decision is expected to set the stage for other insurers to follow.

Aduhelm is administered intravenously, so it is provided in a hospital or other outpatient setting.⁵ In contrast to other treatments on the market today, which are administered orally and covered under a Medicare beneficiary’s Part D benefit, Aduhelm would be covered under Part B. Assuming the final CMS decision is to cover Aduhelm, even if in limited capacity, Medicare stakeholders, including beneficiaries, MAOs and other supplemental coverage entities, and the government should expect financial impacts:

Beneficiaries in both fee-for-service Medicare (FFS) and Medicare Advantage would be expected to spend a significant amount out of pocket (typically 20% cost sharing) to pay for the drug, facility, and physician services, while enrollees in Medigap (i.e., “MedSupp”) plans or enrollees with other supplemental coverage (e.g., employer-sponsored insurance or Medicaid) may have Part B cost-sharing covered (total or in part) by the supplemental coverage insurer. Those enrolled in a Medicare Advantage plan have the benefit of a maximum out of pocket (MOOP) that ensures annual patient cost sharing cannot exceed $7,550 in 2022,⁸ whereas FFS members without supplemental coverage do not. Additionally, all Medicare beneficiaries have incurred a nearly 15% Part B premium increase for 2022, partially due to the expectation of Medicare coverage of Aduhelm, per CMS.⁹
MAOs and other insuring entities at risk (e.g., MedSupp carriers and other risk-takers) may need to be prepared to incur significant costs for beneficiaries treated with Aduhelm, particularly because they will reach their MOOP more quickly than beneficiaries not treated with Aduhelm (in the case of MAOs), or Aduhelm costs may represent a significant increase to the costs currently covered by supplemental plans (MedSupp carriers and others). Additionally, MAOs should be cognizant that a migration of beneficiaries with Alzheimer’s disease (with FFS coverage and no supplemental coverage) into Medicare Advantage could occur given the positive financial impact a MOOP could have on a beneficiary anticipating taking Aduhelm.
The Federal Government will also need to be prepared to fund these additional costs. Even though Aduhelm’s cost was recently cut nearly in half, and the proposed CMS coverage decision considerably limits those eligible for coverage, the drug’s annual costs, in addition to facility and other physician costs, could still be significant. These will be funded through a combination of Part B premium increases and additional taxpayer funding.

What is Alzheimer’s disease and how is it treated?

Alzheimer’s disease begins when abnormal buildups of proteins form amyloid plaques and tau tangles in the brain. These plaques and tangles lead to the loss of function of neurons in the brain, which subsequently causes cognitive difficulties, such as memory loss, impaired judgement and reasoning, and impaired sensory processing.⁶ The disease is progressive, with symptoms gradually worsening over time, resulting in severe debilitation and, ultimately, death.¹¹

Although scientists’ understanding of Alzheimer’s disease has improved in recent years, the cause is still largely unknown.¹² At this time, treatment options do not provide a cure or change the underlying disease progression, but are primarily limited to treating cognitive, behavioral, and functional symptoms.⁶ Available treatments include cholinesterase inhibitors (donepezil, rivastigmine, and galantamine) and N-methyl D-aspartate (NMDA) antagonists (memantine).¹³ These therapies are primarily taken orally, so for years, Medicare beneficiaries have had access to these medications through a prescription drug (Part D) plan. Figure 1 outlines each current treatment approved by the Food and Drug Administration (FDA) and when it was approved.

Figure 1: Alzheimer's disease therapy timeline

What’s changing?

In June 2021, the FDA granted accelerated approval of a new drug, Aduhelm, manufactured by Biogen and Eisai Co., Ltd.¹⁴ Aduhelm is a biologic drug that is the first and only potentially disease-modifying therapy to be approved for the treatment of Alzheimer’s disease. Aduhelm was approved through an accelerated approval pathway, which is a process used for a drug that provides a meaningful advantage over existing treatments of a serious or life-threatening illness. Accelerated approval is based on an expected result but is not yet formally proven. In the case of Aduhelm, the expected result, also known as the surrogate endpoint, is beta amyloid plaque reduction, which is thought to delay the progression of the disease.⁵

This contrasts with standard FDA approvals that are based on proven clinical outcomes, or results that are proven through phase 4 trials.¹⁵ The FDA has given Biogen Inc. and Eisai Co., Ltd. nine years to complete the phase 4 trial, and in December 2021, the manufacturers announced their plans for the study.¹⁶ Once complete, the FDA will review the results, and if clinical benefits are proven, traditional approval will be granted. If clinical benefits are not proven, there is the potential for the drug to be removed from the market.

Current landscape of Aduhelm

In the first few months of Aduhelm being available, uptake has been notably slow. Biogen reported in the third quarter of 2021, sales were approximately $300,000.¹⁷ This equates to about 20 people starting treatment, assuming the original $56,000 average annual price. This is likely due to a variety of reasons:⁴

Insurer coverage is currently limited or non-existent.
The medical industry is currently divided on opinions of this drug, resulting in some large hospital systems, such as the Cleveland Clinic and Massachusetts General Hospital, refusing to prescribe Aduhelm.⁴
Those affected by Alzheimer’s disease and currently eligible for Aduhelm may be hesitant given recent news, the division among medical providers, and the likelihood of adverse side effects.
The timing of FDA approval coincided with the COVID-19 pandemic, which caused an overall decline in medical services.

The divisiveness among insurers and medical providers is largely due to questions around the indication, efficacy, safety, and cost of Aduhelm, as follows:

Indication: Upon initial approval, the label for Aduhelm was broad, indicating it could be initiated for any level of disease severity. However, the early-stage trials only contained participants with mild severity. This was a major source of concern for prescribing physicians, and only a month after accelerated approval, the FDA narrowed the drug’s label to limit use to those with mild cognitive impairment or dementia.¹⁸
Efficacy: There are currently questions around the surrogate endpoint and whether Aduhelm actually results in delayed disease progression. Results from the phase 4 confirmatory trials may not be known for several years.
Safety: In recent phase 3 clinical trials (EMERGE and ENGAGE), approximately 40% of participants experienced amyloid-related imaging abnormalities (ARIA), also known as brain swelling or bleeding. Of the 425 participants that experienced ARIA, 362 experienced swelling and 64 stopped participation altogether.⁶
Cost: Biogen’s initial price was about $56,000 annually, but on December 20, 2021, they announced a price reduction of approximately 50%, effective January 1, 2022, for a new average cost of $28,200 annually.³ One of the biggest concerns during the initial roll out was patient access, where the high cost was a large financial barrier to most. However, as shown in Figure 2 below, this updated price still exceeds all the existing treatments’ annual costs.

Figure 2: Average annual drug cost for Alzheimer's disease therapies

Source: https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Information-on-Prescription-Drugs/MedicarePartD

Figure 2 summarizes the average annual cost for each Alzheimer’s disease therapy in the market today, shown separately for brands and generics (if a generic is available), and listed in order of highest 2019 utilization (Aricept / donepezil) to lowest utilization (Razadyne / galantamine). Annual costs are calculated from the CMS 2019 Medicare Part D Drug Spending Dashboard, which include all costs, such as the plan payments, beneficiary cost sharing, manufacturer coverage gap discount program payments, and low-income subsidies, but exclude manufacturer rebates or additional price concessions.¹⁹

For brands, excluding Aduhelm, costs range from about $1,575 to $4,100 per year. For generics, where over 95% of utilization is currently, the annual costs range from about $90 to $1,250. It is clear the current cost of Aduhelm sets it apart from all others in the market today, even with the recent news of price cuts.

However, unlike these other therapies which are primarily orally administered and covered through the Medicare Part D benefit, Aduhelm is administered every four weeks through intravenous infusions in a physician’s office, clinic, or hospital, and as a result, is expected to be covered through a Medicare beneficiary’s Part B benefit. This is an important distinction because Part B (or medical insurance) is available to all Medicare beneficiaries, either through traditional Medicare fee-for-service (FFS) or a Medicare Advantage plan, whereas Part D is only available to those who elect coverage, either through a Medicare Advantage Prescription Drug (MAPD) plan or a standalone Prescription Drug Plan (PDP).

What does this mean for Medicare beneficiaries?

As of January 2022, there are 63.8 million Medicare beneficiaries, and approximately 29.0 million (or 45% of the total Medicare population) are enrolled in a Medicare Advantage plan.²⁰ Medicare Advantage plans are private plans offered through MAOs that offer benefits at least as rich as traditional Medicare. Although those with Alzheimer’s disease make up approximately 11% of the total Medicare population1, many implications discussed below impact all Medicare beneficiaries, not just those with Alzheimer’s disease.

As discussed above, Aduhelm is expected to be considered a Part B drug. Typically, Part B drug coverage decisions are determined at the regional level through Local Coverage Determinations (LCDs). However, CMS occasionally employs a National Coverage Determination (NCD) for drugs and medical technologies. ^21,22 In the case of Aduhelm, CMS opted to open an NCD analysis beginning in July 2021, which allowed for careful review of the drug and establishment of a national coverage policy.

CMS released its proposed decision on January 11, 2022, which stated CMS proposes covering Aduhelm under Coverage with Evidence Development (CED) in CMS approved clinical trials and trials supported by the National Institutes of Health (NIH).²³ This proposed decision came after CMS evaluated over 250 documents of published evidence and reviewed feedback received from over 130 public comments.⁷

The final NCD is expected to be announced by April 11, 2022, after public comments on the proposed coverage policy are reviewed. In the meantime, coverage determinations will continue being made at the local level on a claim-by-claim basis.⁷

Even though a proposed decision has been released, the final outcome of the NCD analysis remains unknown. Assuming there is a possibility the proposed policy will differ from the final, there are a few potential paths CMS could take in its final coverage determination:

Limited coverage: Aduhelm use could be restricted to certain levels of disease severity, disease biomarkers, age groups, or prescribers. In other words, only Medicare beneficiaries meeting certain criteria would be eligible for drug access and coverage through Medicare.
Exclusive coverage: CMS could cover Aduhelm through a CED, where coverage would only be approved for patients enrolled in clinical trials for the drug. This is currently the proposed policy. At the end of the trials, CMS may reconsider the coverage decision.²⁴ Since trials span multiple years to analyze long-term effects, CMS could have a CED in place for several years before making a coverage decision.
No coverage: CMS could issue a full denial to Aduhelm, meaning Medicare would not cover the drug for any beneficiaries under any circumstances. If CMS completely denies coverage for Aduhelm, or if patients do not meet the finalized NCD criteria, beneficiaries still wishing to take Aduhelm would have to pay 100% out of pocket or consider alternative treatment options.

Impacts to stakeholders in Medicare FFS, Medicare Advantage, and other Medicare supplemental coverage sources

As noted above, the annual list price for Aduhelm will average approximately $28,200 effective January 1, 2022. Medicare providers administering Part B drugs receive reimbursement at 106% of the average sales price (ASP),²⁵ where ASP is usually very similar to the list price. The 6% markup includes payment for providers’ storage and handling of the drug. Assuming an annual list price of $28,200, this results in a provider reimbursement of nearly $30,000 for Aduhelm. This $30,000 amount is the basis for calculating Medicare patient cost sharing.

$28,200 annual list price x 106% ≈ $30,000 provider reimbursement

Prior to the announcement of the CMS proposed coverage policy, Biogen estimated approximately 50,000 of those with Alzheimer’s disease would begin treatment with Aduhelm in 2022.³ If we assume all of these are Medicare eligible, this results in an increase in total Medicare expenditures of $1.5 billion for 2022 under Biogen’s estimates.

However, if the CMS proposed policy becomes final, the number of beneficiaries eligible for Aduhelm would be limited to a few thousand.²⁶ If we assume just 1,000 beneficiaries will participate in the various CMS approved and NIH supported trials, additional annual Medicare expenditures could top $30 million. Clinical trials typically last several years, so these costs would be incurred annually for as long as trials last. Note, these estimates do not include the costs for associated physician services, facility charges, and PET scans (not currently eligible for Medicare payment for Alzheimer’s disease beneficiaries, but will be covered if required by an approved trial²³), all of which CMS indicated are eligible to be covered in addition to the drug itself.⁷ These estimates also assume costs prior to any drug specific discounts or price concessions, or accounting for the magnitude (if any) of offsetting medical cost savings of avoided services or drug cost savings of additional treatments achieved through taking Aduhelm.

If these trials provide definitive results in slowing the progression of Alzheimer’s disease, CMS may re-evaluate and expand coverage for Aduhelm. Biogen estimated nearly 1.5 million people with Alzheimer’s disease are considered “early stage” and could be eligible for Aduhelm.²⁷ Even if a quarter of those eligible for Aduhelm receive the drug, this would increase Medicare expenditures by a few billion dollars annually. Since this drug is not expected to cure, but rather slow the disease progression, these annual costs may be incurred for multiple years.

The estimated costs of Aduhelm would impact various stakeholders, including the government, MAOs and supplemental Medicare beneficiary coverage and programs (e.g., MedSupp carriers, employer-sponsored insurance plans, and Medicaid), Medicare beneficiaries, and taxpayers. These stakeholders would be affected in the following ways:

The Federal Government would need to be prepared to fund the costs incurred by FFS beneficiaries, or 80% of the drug (106% of ASP) plus physician and facility costs for its administration. This would come from some combination of taxpayer funding and Part B premium increases, as discussed more below.
MAOs and other insuring entities at risk (e.g., MedSupp carriers and other risk-takers) may need to be prepared to incur significant costs for members taking Aduhelm.

MAOs typically cover 80% of Part B drug costs, but beneficiaries taking Aduhelm are likely reach their maximum out of pocket (MOOP), resulting in plans effectively paying more than 80% of the costs (once a Medicare Advantage member reaches the MOOP for the calendar year, the plan is responsible for all subsequent costs for the remainder of the year). This could cause premium increases for many plans. It could also result in a shift of patients with Alzheimer’s disease from traditional Medicare without supplemental coverage (which does not have a MOOP) to Medicare Advantage (which requires a MOOP on all plans).
Other entities, such as MedSupp, cover most, if not all, beneficiary cost sharing incurred from FFS coverage. These entities are at risk for 20% of the drug costs, physician services, and facility costs. Depending on the expectation of utilization, premiums could subsequently increase for these coverage types as well.

FFS Beneficiaries treated with Aduhelm and without other supplemental coverage will likely spend approximately $6,000 annually out of pocket for the drug itself (based on the $30,000 reimbursement cost outlined above). Beneficiaries without other supplemental coverage would also be responsible for 20% of all physician services and facility charges related to the monthly infusion. As mentioned above, unlike Medicare Advantage, there is no annual cap on out-of-pocket costs for Medicare FFS.

FFS Beneficiaries with a MedSupp plan would likely only see some premium increases, on top of the federal Part B premium increases, since their plan is responsible for the FFS cost sharing portion of total costs.

Medicare Advantage Beneficiaries would be expected to pay out of pocket cost sharing similar to FFS beneficiaries without supplemental coverage, but only up to their MOOP. Per CMS regulations, MOOPs cannot exceed $7,550, although many plans offer significantly lower limits. Also, as noted above, plan-specific premiums may increase for many plans on top of increases to the federal Part B premium.

There are a few additional considerations that are broad consequences of Aduhelm coverage:

1. Medicare Part B premium increases: Part B premiums must be paid by every Medicare beneficiary, whether under FFS or a Medicare Advantage plan. On November 12, 2021, CMS released the 2022 premiums for Parts A and B. For 2022, the monthly

Part B premium is $170.10, an increase of $21.60 each month, or 14.5% over 2021 premium of $148.50.⁹ This is one of the largest increases in the history of the program.²⁸ CMS stated one reason for the increase was uncertainty around the use of Aduhelm, and that, according to the CMS fact sheet, “our projection in no way implies what the coverage determination will be, however, we must plan for the possibility of coverage for this high-cost Alzheimer’s disease drug, which could, if covered, result in significantly higher expenditures for the Medicare program.”⁹

At this point, Part B premiums for 2022 can likely only be adjusted through an act of Congress. The Secretary of Health and Human Services, Xavier Becerra, is currently advocating for Part B premiums to be reevaluated, particularly due to the large price cuts from Biogen.²⁹

2. Medicare Advantage payment rate increases: Payments to MAOs are adjusted by CMS based on the geographic distribution of its enrollees through what is known as payment rates. Payments are further adjusted for the risk of the population using a risk score based on enrollees’ medical characteristics in the prior year. Each year, CMS releases the payment rates for the following calendar year, which are based on typical monthly spending for a FFS beneficiary in that county. CMS simultaneously releases updates to the risk adjustment model. Usually for new benefits covered under the Part B benefit, such as treatment with Aduhelm, CMS will increase payment rates accordingly. Where appropriate, these treatments may also be reflected in the risk adjustment mechanism as well.

When CMS does not include costs for a new benefit required by legislative action or an NCD in payment rates (which will be the case for treatment with Aduhelm in 2022), CMS reviews the expected MAO spending on the new benefit to determine if the increased payments represent a significant cost.³⁰ If the significant cost threshold is met (for 2022, this is roughly $200,000 per treatment or about $1 per member per month³¹), then CMS will assume the costs of the benefit until payment rates are adjusted. Other services associated with the new benefit that were previously covered by Medicare (here, the facility and physician administration costs) would still be the responsibility of the MAO.³² Costs for a PET scan would also be covered by CMS, if the significant cost threshold is met, as outlined in the proposed NCD.²³

3. Medicare Advantage and other Medicare supplemental coverage premium increases:

As discussed above, MAOs will be at risk for covering the majority of costs of the drug, facility charges, and physician administration costs. While adjustments to payment rates for MAOs will help offset some of the additional costs the plans will incur, overall utilization levels are uncertain and the payment rate increase may not cover all of the expected cost increases. In particular, plans that expect to enroll a disproportionate share of patients taking Aduhelm may see premium increases on top of the Part B premium increase.
For supplemental coverages, such as MedSupp, entities will be at risk for the member cost sharing of Aduhelm and all associated additional services, which is 20% of all costs. Since member premiums are the main source of revenue for these plans, a direct increase in expected costs will result in a direct increase in member premiums.

Conclusion

There remains a significant amount of uncertainty around Aduhelm’s use and future expected costs. The CMS final NCD will be critical and will be a pivotal moment for not only those affected by Alzheimer’s disease but all Medicare beneficiaries and insurers across the country.

Caveats and limitations

Ali M. Heinrich is a consulting actuary for Milliman, a member of the American Academy of Actuaries, and meets the qualification standards of the Academy to render the actuarial opinion contained herein. To the best of her knowledge and belief, this information is complete and accurate and has been prepared in accordance with generally recognized and accepted actuarial principles and practices.

Kali J. Schweitzer is a pharmacist with Milliman. She has a doctorate of pharmacy degree and is a registered pharmacist in the United States. To the best of her knowledge and belief, this information is complete and accurate.

The material in this report represents the opinion of the authors and is not representative of the view of Milliman. As such, Milliman is not advocating for, or endorsing, any specific views contained in this report related to Aduhelm or the Medicare Advantage program.

This report is intended to summarize the current landscape of Alzheimer’s disease treatments and the impact from a new treatment, Aduhelm, recently given accelerated FDA approval. This information may not be appropriate, and should not be used, for other purposes. We do not intend this information to benefit, and assume no duty of liability to, any third party that receives this work product. Any third-party recipient of this report that desires professional guidance should not rely upon Milliman’s work product, but should engage qualified professionals for advice appropriate to its specific needs.

The credibility of certain comparisons provided in this report may be limited, particularly where utilization of existing drugs is low.

In preparing our analysis, we relied upon public information from CMS and Biogen, which we accepted without audit. However, we did review it for general reasonableness. If this information is inaccurate or incomplete, conclusions drawn from it may change.

¹ https://www.alz.org/media/documents/alzheimers-facts-and-figures.pdf.

² https://www.usnews.com/news/health-news/articles/2021-07-23/doctors-divided-over-use-of-controversial-new-alzheimers-drug.

³ https://investors.biogen.com/news-releases/news-release-details/biogen-announces-reduced-price-aduhelmr-improve-access-patients.

⁴ https://www.npr.org/sections/health-shots/2021/11/08/1052833252/cost-and-controversy-are-limiting-use-of-new-alzheimers-drug.

⁵ https://www.alz.org/alzheimers-dementia/treatments/aducanumab.

⁶ https://jamanetwork.com/journals/jamaneurology/fullarticle/2786606?guestAccessKey=780a06bd-61e8-4a6b-9602-6b26f1bb1275&utm_source=For_The_Media&utm_medium=referral&utm_campaign=ftm_links&utm_content=tfl&utm_term=112221.

⁷ https://www.cms.gov/newsroom/press-releases/cms-proposes-medicare-coverage-policy-monoclonal-antibodies-directed-against-amyloid-treatment.

⁸ https://www.medicareinteractive.org/get-answers/medicare-health-coverage-options/medicare-advantage-plan-overview/maximum-out-of-pocket-limit.

⁹ https://www.cms.gov/newsroom/fact-sheets/2022-medicare-parts-b-premiums-and-deductibles2022-medicare-part-d-income-related-monthly-adjustment.

¹⁰ https://www.alzheimers.org.uk/about-dementia/types-dementia/alzheimers-disease.

¹¹ https://www.nia.nih.gov/health/alzheimers-disease-fact-sheet.

¹² https://www.alz.org/alzheimers-dementia/what-is-alzheimers.