Part I: Price-Gouging An Unproven Treatment, Setting Out-of-Control Launch Prices
Despite unprecedented attention on the crisis of prescription drug affordability, Big Pharma maintained the industry’s profits-over-people approach in 2021. From repeatedly hiking drug prices, engaging in anti-competitive tactics to undermine competition, price-gouging patients and taxpayers for unproven treatments and pushing debunked innovation rhetoric to oppose drug pricing solutions — Big Pharma had a bold year of bad behavior.
Big Pharma’s audacious approach to business-as-usual over the last year helped the industry score blockbuster profits and bank more than $1.7 trillion in cash — even as more than one-quarter of Americans faced financial uncertainty affording their medicines.
On top of this year of bad behavior, Big Pharma can be expected to maintain an annual tradition of ringing in the New Year with a fresh round of price hikes on brand name prescription drugs beginning on January 1. In the countdown to these New Year price hikes from Big Pharma (the fourth major round of Big Pharma price hikes during the COVID-19 pandemic), CSRxP’s “Dose of Reality” series will explore the egregious actions of the industry over the past year, as a reminder, that policymakers in Washington must act to hold Big Pharma accountable and lower drug prices for the American people.
Today, we’re exploring Big Pharma’s price-gouging on an unproven treatment, Biogen’s Alzheimer’s drug Aduhelm.
BIOGEN’S EGREGIOUS PRICE TAG ON UNPROVEN ALZHEIMER’S TREATMENT
Earlier this year, the U.S Food and Drug Administration (FDA) approved Big Pharma company Biogen’s drug aducanumab, brand name Aduhelm, to treat Alzheimer’s, despite a lack of evidence supporting the medication’s clinical benefit for patients. The FDA chose to approve Aduhelm as a treatment for Alzheimer’s in June despite the drug receiving zero votes in favor of approval from the FDA’s own expert advisory panel.
Following the controversial approval of this unproven treatment, Biogen set an egregious $56,000 price tag for Aduhelm. In an analysis, The Institute for Clinical and Economic Review (ICER) concluded a fair annual price for Aduhelm, barring major new evidence to support the drug’s efficacy, would fall between $2,500 and $8,300. With the $56,000 list price in place, ICER estimates the Big Pharma company will stand to make more than $50 billion in annual profit from the drug that may bring little to no clinical value to patients.
Biogen’s pricing of Aduhelm is set to dramatically increase costs for patients, taxpayers and the U.S. health care system. In November, the Centers for Medicare and Medicaid Services (CMS) announced Medicare Part B premiums for outpatient beneficiaries will increase by $21.60 in 2022 — telling the media, “that about half the increase is attributable to contingency planning if the program has to cover Aduhelm, a new $56,000-a-year medication for Alzheimer’s disease.” The Part B premium increase, a 14.5 percent jump, is the largest single increase by dollar-amount in the program’s history.
The Biogen pricing of Aduhelm could also result in out-of-pocket costs as high as $11,500, pricing many consumers out of the treatment.
The hit will also be substantial for taxpayers. The analysis found that the U.S. government may have to allocate as much as $57 billion in federal spending on Aduhelm for patients who qualify for the drug. That figure puts the government’s allocation on par with its commitment to NASA for the year.
Patient advocates, physicians and researchers, clinical experts, drug pricing advocates and even Wall Street analysts expressed opposition to or questioned the drug’s egregious launch price.
The Alzheimer’s Association harshly criticized Biogen for the price, calling it “simply unacceptable,” and added that “for many” it would cause an “insurmountable barrier to access.”
Ronny Gal, Senior Biopharmaceuticals Research Analyst at Bernstein said of Biogen’s pricing, “[The price is] taking advantage of the weak U.S. pricing scheme…such a high cost will facilitate new management strategies and could be a catalyst for movement on drug price reform.”
“Aducanumab is marginally effective at best,” said Karl Herrup, Professor of Neurobiology at the University of Pittsburgh School of Medicine, and Jonathan Goulazian. “Perhaps most important of all, however, aducanumab can never be made widely available. It is far too expensive: the company set a wholesale price of $56,000 per year. Yet, given the fear of Alzheimer’s disease, millions of U.S. residents over age 65 will surely want it. This will only serve to emphasize the disparities in care accessibility that our system is already struggling with. Were Medicare to begin coverage, the projected costs of treating all eligible recipients would quickly overwhelm the resources of the system.”
BIG PHARMA’S OUT-OF-CONTROL LAUNCH PRICES ON THE RISE
Aduhelm, as a treatment with unproven and doubtful efficacy, is a particularly egregious case study in Big Pharma’s greed — but it is far from an outlier in terms of out-of-control launch prices for new brand name products from the pharmaceutical industry.
Researchers at Duke University’s Fuqua School of Business released a study in June that found launch prices for new drugs have doubled since 2005 – driving up taxpayer spending in the Medicare Part B program. The study found that between 2005 and 2010, Medicare Part B drug spending increased from around $13 billion per year to $16.5 billion per year, at an annual growth rate of four percent. But from 2010 to 2015, Part B drug spending increased at a nearly nine percent annual compound growth rate – from $16.5 billion to north of $25 billion over those five years.
The study’s authors argue that this increase is due to the fact that taxpayers are on the hook for reimbursing drug companies for whatever price they charge for drugs in the Part B program, and therefore there is a “perverse incentive” that “induces firms to front-load their launch pricing – beyond even the profit-maximizing price – in order to win higher reimbursement.”
To put it simply, by setting higher and higher launch prices on new drugs, Big Pharma companies are numbing people to just how high some of their new launch prices are – a process that enables them to charge even greater prices in the future – as the Duke University researchers argue.
Big Pharma’s out-of-control launch prices have been particularly evident in oncology treatments.
A 2018 study from IQVIA’s Institute for Human Data Science found median launch prices for new cancer drugs more than doubled from 2013 to 2017, from around $79,000 for a course of treatment to over $160,000 for a course of treatment. The IQVIA study also found that every single new cancer drug brought to market in 2017 had a price tag over $100,000.
While Big Pharma continues to set higher and higher launch prices on prescription drugs, patients and taxpayers are left to pick up the tab, underscoring the need for lawmakers to act and hold Big Pharma accountable.
Read more on market-based solutions to hold Big Pharma accountable HERE.
Stay tuned this week as we continue to shine a light on Big Pharma’s Year of Bad Behavior.