CMS Decision on Alzheimer’s Drug Is a Harbinger of Things to Come

Alzheimer’s patients and their loved ones cheered last year when the Food and Drug Administration approved Aduhelm, the first new treatment for the debilitating disease in 20 years.

The celebration, however, was premature. The approval set off a melee in Washington over whether Medicare would cover Aduhelm. Answer: for most patients, it won’t.

This is the first of the epic battles to come over coverage of breakthrough new medications. From now on, political meddling in Americans’ medicine cabinets will be intense as Medicare seeks ever-greater authority to set prices for drugs.

The Aduhelm decision was fraught for many reasons. First was that Medicare authorities deviated from all routine by restricting access to an FDA-approved use of a drug. Never before has CMS used this power.

Second, Medicare restricted access to an entire class of drugs based solely on Aduhelm’s clinical trial results. So much for following the science.

Third, in order to have a chance to get Aduhelm at all, patients must participate in a clinical trial. That means some will receive a placebo — an ethically dubious proposition for a drug the FDA has approved. Making matters worse, those receiving the placebo will pay coinsurance costs out-of-pocket despite having no potential for clinical benefit.

Fourth, CMS applied the clinical trial restriction to drugs using FDA’s “accelerated approval” process designed to speed treatments to patients. New treatments may forgo this process to reduce the risk of Medicare bureaucrats limiting access to their products. New treatments will therefore take longer to reach patients.

Finally, while Medicare officials couched their objections in terms of the need for more clinical study, their real concern was transparently the cost the government would incur paying for the treatment — notwithstanding the potential health benefits for millions of people.

Once the Centers for Medicare & Medicaid Service (CMS) said no to Aduhelm, the nation’s private insurers, as expected, followed suit. The drug has all but disappeared from the market.

In context, the government’s move on Aduhelm is the latest in a multi-dimensional chess game designed to transfer control of healthcare decisions to Washington by giving government officials the authority to control prices.

Under current law, federal officials are explicitly prohibited from negotiating with drugmakers over the price of Medicare medications. That task falls to health insurers contracted by Medicare. This aggressive negotiation has been effective, resulting in discounts averaging 25 to 35 percent — in some cases, discounts reach 90 percent. The Congressional Budget Office found that negotiations have been so effective that the average net price of prescriptions in Medicare’s drug benefit fell from $57 in 2009 to $50 in 2018.

Progressive lawmakers would love to take this negotiating authority away from health plans and empower political appointees and bureaucrats to set prices. Despite the evidence, they don’t trust the market and believe they can cut costs without risk by eliminating the profit motive throughout the system. But lawmakers have been unable to pass legislation to end the prohibition on government negotiating. The most recent attempt came in President Biden’s “Build Back Better” legislation, which floundered in December.

The Medicare determination for Aduhelm was an indirect step to the same end. Saying “no” to coverage was a way to test how to drive price negotiations. If Aduhelm’s developer came back with a price of pennies on the dollar, Medicare’s restrictions on coverage would likely have vanished overnight. The government would have made its point and pocketed its victory, confident that other drug developers got the message.

So they would, but the message would be to quit investing in potential blockbuster treatments that mainly benefit older Americans. Medicare officials know perfectly well that price controls, whether direct or indirect, will slow or cut off the flow of expensive new medications in the drug pipeline. That’s not an unintended consequence of gaining the control they want and have seized in the Aduhelm case. It’s the purpose. The question is whether seniors and lawmakers who want to preserve our world-class system of medical innovation will let them get away with it.

There are plenty of smart ways to reduce the cost of prescription drugs. Turning every new drug approval into a vitriolic public policy battle devoid of scientific reason and indifferent to patient welfare isn’t one of them.

Joel White is the president of the Council for Affordable Health Coverage, a nonprofit advocacy organization that seeks to lower the cost of healthcare for all Americans.