The $56,000 price tag is a rational response to an irrational insurance system, says a Berkeley Public Health economist in an opinion piece in this week’s New England Journal of Medicine.
Biogen priced its controversial Aduhelm (aducanumab), its controversial Alzheimer’s drug, at $56,000 a year because of a complicated web of policies that incentivize high prices, according to James Robinson, Ph.D., M.P.H.
In an opinion piece in this week’s New England Journal of Medicine, Robinson, who is a health economics professor at Berkeley Public Health, says that Aduhelm’s price is a window into the problems with drug pricing and payment in the U.S. He says the problems should be addressed by giving the Medicare the power to negotiate prices and by putting drugs through formal health technology assessments to establish their value
“The $56,000 price for aducanumab is a rational manufacturer response to an irrational insurance system,” Robinson wrote.
Robinson identifies three aspects of drug pricing and coverage that he says lead to high prices:
The price paid by Medicare Part B is pegged the average sales price (ASP). Drugs that are infused such as Aduhelm are covered under Medicare Part B, and currently the price that the Part B program pays is pegged average sales prices, minus any discounts and rebates Robinson explained. The average sales price is the price that private insurers pay. As result, drugmakers have an incentive to price their drugs as high as possible and Medicare, even though it is large purchaser, ends up being a price taker rather than a price maker. “Medicare needs to lead not follow private insurers,” Robinson argues. The dependence on ASP also spares CMS from having to take on health technology assessments, which Robinson notes is a “politically volatile process.”
“Buy and bill” by hospital clinics and physician practices. With “buy and bill,” hospital clinics and physician practices buy drugs from the manufacturers and then charge insurers and Medicare a mark-up. Medicare pays 4% to 6% above the acquisition costs and private insurers, even more. “In the context of buy-and-bill distribution, price moderation by the manufacturer would reduce providers’ revenues and dampen, rather than boost, their enthusiasm for prescribing the drug,” Robinson wrote.
Costing sharing blunts competition on price. Medicare covers 80% of the price of Part B drugs. With Medicare shouldering that share of the price, price differences seen by patients aren’t large enough to incentivize manufacturers to compete on price, in Robinson’s view. “It could be said that Medicare imposes too much cost sharing on low-priced options and too little on high-priced ones,” he suggested. In Germany, cost sharing changes, so patients don’t see any cost when they pick a low-cost option— a biosimilar, for example — but may pay full price if they pick an expensive one.