If you’re on Medicare, chances are you had a bit of a shock when seeing the 2022 Medicare Part B premium amount. It went up by $21.60, from $148.50 in 2021 to $170.10 in 2022. That’s a 14.5% increase, and is one of the steepest increases in Medicare’s history. So why was there such a significant increase, particularly when there was only a $3.90 increase between 2020 and 2021? The answer lies largely in the price of one drug, Aduhelm.
Aduhelm is a new Alzheimer’s drug that the Centers for Medicare and Medicaid Services (CMS) will cover, depending on evidence development. This means the evidence gathered in CMS-approved or NIH-supported randomized clinical trials which is needed to show that Aduhelm is “reasonable and necessary for the treatment of Alzheimer’s disease”. Yet this drug is so expensive, that calculating the estimated cost of this drug for the small percentage of Medicare beneficiaries who would use it accounted for at least 50% of the this year’s Part B premium increase. (According to Kaiser Family Foundation’s estimates, the drug’s initial price tag of $56,000 could boost annual Medicare spending by roughly $30 billion if used by 500,000 Medicare beneficiaries.)
The fact that one drug, to be used by a small portion of the Medicare population could have such a large effect on every Medicare beneficiary’s out of pocket costs, except for those with the lowest incomes on Medicaid, is scary. And this is just one drug. What if there were two or three or even five drugs like this? As shared in a recent Kaiser Family Foundation article, for many beneficiaries, the Part B premium is not a trivial share of income. “For example, a senior living on an income at 175% of the federal poverty level (~$23,000 for an individual) will spend nearly 9% of her income this year on the Part B premium alone, before factoring in other expenses, like Part D drug plan premiums or cost sharing for Medicare covered services. And for low-income Medicare beneficiaries who have coverage from both Medicare and Medicaid, the Part B premium increase will have implications for Medicaid spending because Medicaid pays their Medicare premiums.”
This situation yet again highlights the importance of granting Medicare the legal power to negotiate drug prices as a way to lower drug prices or limit drug price growth. Otherwise, Medicare’s drug spending is more at the whim of pharmaceutical companies’ rising prices and profits. Current prescription drug price proposals in the Build Back Better Act include allowing the federal government to negotiate the price of certain high-cost drugs, requiring drug companies to pay rebates if drug prices rise faster than the rate of inflation, and capping out-of-pocket costs under Medicare Part D. These are important cost-containing strategies for Medicare and for our country’s Medicare beneficiaries.
There is some good news around this year’s high premium hike, though. CMS is considering lowering the premium. Since setting the 2022 Part B premium last year, Biogen, the drug’s manufacturer, has announced that it will slash the price of Aduhelm by 50% from $56,000 to $28,200 in response to anemic demand for the new drug. This decrease has spurred Health and Human Services Director, Becerra to direct CMS to reassess. the Part B premium for 2022 and potentially lower the amount. This would be great news for all Medicare beneficiaries. We will keep you posted if the Part B premium is indeed lowered.
For more information, read: Medicare’s Coverage Decision for the New Alzheimer’s Drug and Why It Matters.