A Medicare policy decision might hurt sales of this biotech giant’s Alzheimer’s drug.
Alzheimer’s is a cruel disease with no cure. As this brain condition progresses, patients experience greater memory loss and other cognitive difficulties.
In “Still Alice,” Julianne Moore’s portrayal of a professor of linguistics at Columbia University, who suffers from the early onset of this debilitating disease without the prospect of a treatment, is hard to watch.
More than 6 million Americans suffer from this destructive illness and “barring effective interventions,” this figure could more than double to 14 million by 2060, the Centers for Medicare and Medicaid Services estimates.
Last year when biotech giant Biogen (BIIB) – Get Biogen Inc. Report received clearance from the Food and Drug Administration for its Alzheimer’s drug, Aduhelm, the move reignited patient and investor interest in the causes of the disease and how to fight it.
Eli Lilly (LLY) – Get Eli Lilly and Company Report, which has an experimental Alzheimer’s drug in clinical trials, and partners Biogen and Japan’s Eisai, which jointly developed Aduhelm, all have been optimistic about their Alzheimer’s treatments’ prospects.
Introduction and Controversy
Biogen’s Aduhelm, a 100ml shot to be administered to patients that have mild cognitive impairment or mild dementia, was the first Alzheimer’s treatment in nearly two decades to be granted a nod by the FDA.
But the drug was mired in controversy as a group of medical experts had advised the FDA against its approval due to efficacy issues.
The treatment can cause serious side effects, including amyloid-related imaging abnormalities, Biogen said in its most recent earnings call. This side effect does not usually cause any symptoms but can be serious. Aduhelm can also cause serious allergic reactions. The most common additional side effects include headache and falls.
The drug was initially priced at $56,000 a year, but the Cambridge, Mass.. company cut the price by half to $28,200 at the beginning of this year.
“Too many patients are not being offered the choice of Aduhelm due to financial considerations and are thus progressing beyond the point of benefitting from the first treatment to address an underlying pathology of Alzheimer’s disease,” Biogen Chief Executive Michel Vounatsos said in a statement.
“We recognize that this challenge must be addressed in a way that is perceived to be sustainable for the U.S. healthcare system.”
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Narrow Medicare Coverage of Alzheimer’s Drug
Treatment for Alzheimer’s is bound to be expensive, and patients had hoped that government-funded health-care insurance coverage could bring down costs.
On April 7, the Centers for Medicare and Medicaid Services, the agency that controls spending by government-funded health plans, limited reimbursement for Biogen’s drug to patients who were enrolled in clinical trials rather than all Alzheimer’s patients in the U.S.
“There is the potential for promise with this treatment; however, there is not currently enough evidence of demonstrating improved health outcomes to say that it is reasonable and necessary for people with Medicare, which is a key consideration for CMS when making national coverage determinations,” Lee Fleisher, CMS chief medical officer and director of the center for clinical standards and quality, said in a statement.
“In arriving at this final decision, we looked at the very unique circumstances around this class of treatments and made a decision that weighed the potential for patient benefit against the significance of serious unknown factors that could lead to harm,” Fleisher added.
Medicare will not change or reconsider its decision until additional evidence is developed.
Biogen Sees Promise, Urges CMS to Reconsider
Biogen has said that the most helpful data for Aduhelm can be generated only from greater use of the drug in real-world practice.
Last month. Biogen published a peer-reviewed manuscript detailing data from its Phase 3 Aduhelm trials to help physicians better understand the appropriate use of the medicine.
Biogen for its part urged CMS to reconsider its decision for all FDA-approved amyloid-beta targeting therapies. The biotech major said it was carefully considering its options and will provide updates.
Some Wall Street analysts responded with cautionary commentary on Biogen following the CMS decision.
Wedbush analyst Laura Chico said in a note to investors, “We continue to see a daunting road ahead for Aduhelm and [Biogen] as we struggle to see a compelling, forward growth strategy.”
Chico added that a major question is how Biogen will manage its expenses and costs related to Aduhelm going forward.
She has a neutral rating and $185 price target on the stock, which recently was trading around $217.
Oppenheimer analysts cut their price target on Biogen to $240 a share from $285 following the CMS announcement but affirmed an outperform rating.
“We reduce our Aduhelm estimated probability of success to 50% (vs. 80% prior) and delay our commercial uptake until 2027,” Oppenheimer analysts Jay Olson, Matthew Hershenhorn and Cheng Li wrote in a note.
They added, though, that Biogen could compensate for the setback.
“We believe Biogen shares are undervalued based on our view that the company’s leadership position in neuroscience should deliver long-term growth,” the analysts said.
“BIIB has achieved a critical mass in neuroscience that enables pioneering research supported by sufficient cash flow to embark on high-risk programs.”
