Advocates of lowering prescription drug prices are beginning to use an expensive new Alzheimer's drug to make the case for reform, but actually addressing the therapy's price raises complicated policy challenges.
Why it matters: Democrats may be positioning themselves to push policy measures that assign value to drugs and then price them accordingly. If successful, that could be a huge blow to the pharmaceutical industry.
The big picture: Many of the policies that aim to lower drug prices are rooted in the belief that Americans shouldn't pay so much more than the rest of the world for drugs, and that old drugs shouldn't be able to become significantly more expensive over time.
- But Biogen's Aduhelm is a brand-new drug that isn't yet approved in any other country.
- To truly address its launch price, policymakers will have to grapple with big questions that the U.S. system currently avoids: How should we determine the value of a drug, and who gets to make that decision?
- Right now, drug companies make pricing decisions based almost entirely on what the market will bear, and Medicare generally covers drugs that get approved by the FDA.
What they're saying: "This is the scenario where the health technology assessments done in other countries become valuable," said Walid Gellad, a medicine and health policy professor at the University of Pittsburgh.
- "They have a country-wide mechanism in place to try and identify a fair price for the drug, based on the incremental benefit it brings. We don’t have that in the US."
Between the lines: Democrats' most prominent drug legislation is a House bill that gives Medicare the power to negotiate drug prices, and then allows private insurers access to those prices as well.
- The bill uses prices paid by other countries — or reference pricing — to cap what the U.S. will pay for that same drug. If there isn't an international reference price, the bill allows Medicare to pay a maximum of 85% of the average manufacturer price.
- Biogen has said Aduhelm will have a list price of $56,000, which critics say is many times its value. To these critics, a price ceiling of $47,600 may not be enough of an improvement.
What we're watching: During the campaign, President Biden proposed giving an independent review board the power to determine the Medicare rate for new drugs that don't have any competition.
- Sen. Ron Wyden, the chairman of the Finance Committee, recently called out Aduhelm by name in a document outlining the principles that will guide the Senate's drug pricing bill, a hint that the Senate's legislation will take a different direction than the House's.
- "Many [drugs], like the recently-approved Alzheimer’s drug Aduhelm, launch at prices far beyond any reasonable justification of the clinical value to patients, caregivers, or society. Medicare does not currently have the requisite tools to ensure a fair price for such a drug," the document states.
The bottom line: "Any kind of process for valuing new drugs like Aduhelm take you immediately into the controversial quagmire of how to quantify improvements in quality of life for people," said KFF's Larry Levitt.
- "Aduhelm presents the added complication that it’s not even very clear yet that it will improve people’s quality of life."
Go deeper: How other countries set their drug prices