|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
Backlash mounts over FDA approval of a new Alzheimer’s drug
On Monday the Food and Drug Administration (FDA) approved Biogen’s Aduhelm (aducanumab) for the treatment of Alzheimer’s disease, despite little evidence that it delivers meaningful clinical benefits. The drug, the first new treatment for the disease in 18 years, has been shown to reduce the amount of beta-amyloid plaques in the brains of Alzheimer’s patients. But many scientists, including some who worked on Aduhelm’s clinical trials and members of the FDA’s own advisory panel, raised doubts about the approval, given that the evidence demonstrated little clinical improvement for patients taking the drug. Across the week, three members of the FDA’s Peripheral and Central Nervous System Drug advisory committee resigned in protest, citing approval of the drug despite weak evidence and the committee’s overwhelming rejection after reviewing trial data. The FDA was also criticized for broadly approving the drug for all Alzheimer’s patients, even though the trial had only evaluated efficacy in early-stage disease. The drug also carries non-trivial risks of significant side effects like brain swelling and bleeding.
The controversial approval demonstrates the disconnect between regulatory drug approvals, insurance coverage decisions, and the actual cost-benefit analysis of new treatments. Biogen has priced Aduhelm at a whopping $56K per patient annually. However, the total cost of treatment will surely be tens of thousands of dollars higher, to cover additional costs such as drug infusion and MRI scans to monitor for side effects. The FDA approval process is solely based on scientific evidence, and the agency has no authority to consider the cost and fiscal implications of treatment. Medicare and Medicaid plans nearly always follow the FDA’s approval when choosing to cover a drug, and also don’t take into account cost effectiveness. As a piece in the Atlantic points out, Aduhelm could easily become the most expensive medication ever, and if one-third of the country’s Alzheimer’s patients receive the drug, it would cost the healthcare system $112B annually—significantly more than the $90B spent on Medicare Part D each year to cover all prescriptions for 46M beneficiaries—with no guarantee of improved outcomes. The approval highlights the dysfunction and regulatory capture in our fractured drug development, approval, and payment systems, and will likely spark renewed momentum for policy reforms aimed at managing prescription drug costs. Meanwhile, we continue to wait for the Biden administration to nominate a permanent FDA commissioner to lead an agency increasingly under fire.
UnitedHealthcare temporarily delays a controversial policy
Facing intense criticism from hospital executives and emergency physicians, the nation’s largest health insurer, UnitedHealthcare (UHC), delayed the implementation of a controversial policy aimed at reducing what it considers to be unnecessary use of emergency services by its enrollees. The policy, which would have gone into effect next month, would have denied payment for visits to hospital emergency departments for reasons deemed to be “non-emergent” after retrospective review. Similar to a policy implemented by insurer Anthem several years ago, which led to litigation and Congressional scrutiny, the UHC measure would have exposed patients to potentially large financial obligations if they “incorrectly” visited a hospital ED. Critics pointed to longstanding statutory protections intended to shield patients from this kind of financial gatekeeping: the so-called “prudent layperson standard” came into effect in the 1980s following the rise of managed care, and requires insurance companies to provide coverage for emergency services based on symptoms, not final diagnosis. UHC now says it will hold off on implementing the change until after the COVID-19 national health emergency has ended, and will use the time to educate consumers and providers about the policy. Like many critics, we’re gobsmacked by the poor timing of United’s policy change—emergency visits are still down more than 20 percent from pre-pandemic levels, and concerns still abound that consumers are foregoing care for potentially life-threatening conditions because they’re worried about coronavirus exposure. Perhaps UHC is trying to “lock in” reduced ED utilization for the post-pandemic era, or perhaps they never intended to enforce the policy, hoping that the mere threat of financial liability might discourage consumers from visiting hospital emergency rooms. While we share the view that consumers need better education about how and when to seek care, combined with more robust options for appropriate care, this kind of draconian policy on the part of UnitedHealthcare just underscores why many simply don’t trust profit-driven insurance companies to safeguard their health.
One Medical acquires Iora Health
This week, concierge primary care provider One Medical announced it will acquire Iora Health, a chain of value-based primary care practices targeted to seniors, for $2.1B. The combined organization will have over 630K members (598K from One Medical, 38K from Iora) in 28 markets, bringing together two different patient populations and business models. Iora manages care for Medicare beneficiaries through risk arrangements, primarily under contract with Medicare Advantage plans, while One Medical manages a younger commercial population via a combination of fee-for-service reimbursement and employer and consumer subscription fees. As healthcare industry analyst Kevin O’Leary notes, the structure of the deal, which gives Iora 27 percent ownership of the combined company despite having just six percent of the patient base, signals One Medical’s strong desire to move into the booming Medicare Advantage space. Future growth will also be highly dependent on the company’s ability to expand membership in Medicare’s Direct Contracting program, judging from the investor presentation released by One Medical. While integrating cultures, business models, and care infrastructure could prove more difficult than anticipated, the combined company will field a nationwide physician network capable of managing patients across their life cycles, from cradle to grave, and will surely be a force to be reckoned with in primary care—and prime target for health plans and other investors looking to acquire a “soup to nuts” physician enterprise.