New Alzheimer’s Drug Will Cost Medicare Billions

New Alzheimer’s Drug Will Cost Medicare Billions

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Plus, tax gap will total $7 trillion over next decade, Treasury says
Thursday, June 10, 2021

Bipartisan Senate Group Reaches Infrastructure Deal

Republican senators involved in bipartisan infrastructure talks said Thursday that they had reached agreement on a plan that would spend a fraction of the roughly $4 trillion proposed by President Joe Biden and pay for it without the tax increases Biden has proposed.

The deal comes just days after the president ended stalled talks with a separate group of GOP senators. The bipartisan group of 10 senators did not detail its proposal, but it had reportedly been considering a package totaling about $900 billion. Senators familiar with the deal say that it calls for a total investment of $1.2 trillion, including nearly $600 billion in new spending, according to The Hill. Both the total spending and new money appear to be higher than under plans proposed by Republicans negotiating with the White House — but lower than the funding Biden had sought.

The details of the plan — and proposals for how to pay for it — could also still face resistance from the White House or other lawmakers.

"Among the ten of us there is a tentative agreement on a framework but obviously there’s a long ways to go. I would not say that we have the leaders on board or we have started negotiating with the White House but I think having 10 senators come together and reach an agreement on a framework is significant," Sen. Susan Collins (R-ME), a member of the group, said, according to The Hill.

Another member, Sen. Mitt Romney (R-UT), said the group was still in the middle of the process: "We have a tentative agreement on the pay-fors, yes, but that’s among the five Democrats and the five Republicans. It has not been taken to our respective caucuses or the White House so we’re in the middle of the process. We’re not at the end of the process, not at the beginning but we’re in the middle."

A gas tax increase: Among the pay-fors reportedly included in the deal is the indexing of the gas tax to inflation. The tax, 18.4 cents a gallon, has not been raised since 1993, but the White House has objected to an increase, saying that it would hit lower-income Americans. A gas-tax hike could violate Biden’s pledge not to raise taxes on Americans making under $400,000 a year. Some Democratic lawmakers also oppose the idea.

Sen. Bill Cassidy (R-LA), another member of the bipartisan group, reportedly said that the emerging deal diverged from Republican proposals presented to Biden in a way that could help win the White House’s support — namely, that it includes energy provisions the president wants. "We have an energy section in ours that in my conversation with the president said he really wanted," he said.

The bottom line: It’s progress, but there’s still a long way to go.

New Alzheimer’s Drug Set to Cost Medicare Billions — Despite a Lack of Evidence It Works

The Food and Drug Administration’s decision this week to approve a new Alzheimer’s drug for the first time in nearly 20 years was highly anticipated — and highly questioned. It’s also likely to be highly costly for U.S. taxpayers, with a new analysis suggesting that Medicare could spend more on the new medication, Biogen’s Aduhelm (aducanumab), than on any other drug it covers.

The added costs are likely to result in broad-based increases in Medicare premiums, and patients prescribed the drug could also face copayments of $11,500 a year, the analysis by the Kaiser Family Foundation finds.

"Aduhelm may represent hope for Alzheimer’s patients and their families who have waited years for new treatments to come along, but that hope is likely to come at a high cost to Medicare, beneficiaries, and taxpayers," the Kaiser analysis concludes.

A controversial approval: The approval for the Aduhelm came despite the objections of the FDA’s outside scientific advisers, who joined other experts in citing uncertain trial data and questioning the drug’s benefits in slowing the pace of the disease.

The cost of the drug — set by Biogen at $56,000 a year — only heightens the concerns surrounding it. "For its manufacturer, Biogen, the new drug is poised to be a blockbuster. For just about everyone else, it is likely to further inflate high U.S. health care costs," The New York Times’s Rebecca Robbins and Pam Belluck wrote this week. "And that is despite the fact that there is not much evidence the drug actually works."

The Institute for Clinical and Economic Review, which assesses the value of medicines, estimated that Aduhelm would be cost-effective only below $8,300, Robbins and Belluck noted.

Facing 'a substantial increase in Medicare spending’: The new analysis by the Kaiser Family Foundation details the potential costs to Medicare. "Alzheimer’s disease is estimated to affect about 6 million Americans, the vast majority of whom are age 65 and older and therefore eligible for Medicare," the report explains. "It is hard to know exactly how many Medicare beneficiaries will take Aduhelm, but even a conservative estimate would lead to a substantial increase in Medicare spending."

In 2017, nearly 2 million Medicare beneficiaries used Alzheimer’s treatments covered by the program’s prescription drug benefit in 2017, Kaiser says. If just a quarter of that group is prescribed Aduhelm, Medicare and patient spending on the drug could total $29 billion — "an amount that far exceeds spending on any other drug covered under Medicare Part B or Part D, based on 2019 spending," Kaiser’s Juliette Cubanski and Tricia Neuman write. "To put this $29 billion amount in context, total Medicare spending for all Part B drugs was $37 billion in 2019."

If 1 million Medicare beneficiaries get the drug, spending would top $57 billion a year — "far surpassing spending on all other Part B-covered drugs combined."

Renewing the drug-pricing debate: Biogen has defended the drug’s pricing and said it won’t hike the price for four years. Chirfi Guindo, Biogen’s head of global product, said this week that the company priced Aduhelm at about a third the level of immunotherapy treatments for cancer. "So, we consider this to be a really responsible price and we consider this to be a price that is sustainable for the system," he said, according to the Associated Press.

Some lawmakers and others vehemently disagree, and the drug’s pricing has renewed calls to allow Medicare to negotiate drug prices.

Bloomberg’s editorial board, for example, on Thursday cited the cost issue as one major reason the FDA’s approval was "perplexing and wrong" — and it echoed other critics in suggesting that the drug highlights the need for structural reforms to the U.S. health care system:

"It would be absurd to spend so much on a drug that remains essentially unproven. Yet that is what Medicare is poised to do. It’s forbidden to negotiate prices, and it is expected to pay for medicines the FDA approves unless a special exception is made. Both of those strictures should be changed. … And if, in addition, Medicare was generally under no obligation to buy drugs before full clinical trials were done, drugmakers would have a powerful incentive to conduct those trials as quickly as possible. In effect, the current arrangement allows high prices to be charged and collected until a merely promising drug is proven to be of no use."

Biden Plan Would Extend Medicare Solvency by 14 Years: Analysis

President Biden’s 2022 budget request includes a number of proposed changes to the Medicare system, and a new analysis by the Committee for a Responsible Federal Budget finds that one set of policies contained in the request could extend the solvency of a key Medicare trust fund by 14 years.

Under current law, the Medicare hospital insurance trust fund which finances Medicare Part A and is funded mainly through payroll taxes and income taxes on Social Security benefits will be exhausted in five years. According to CRFB, Biden’s proposal to increase revenues going into the fund would push the date that the trust fund balance hits zero from 2026 to 2040.

However, CRFB cautions that much of the proposed improvement in the trust fund’s balances comes from redirecting general revenues. Under Biden’s proposal, about $430 billion from an expanded net investment income tax (NIIT) would be routed into the Medicare hospital trust fund. CRFB says that there may be a problem with double-counting those funds, though, since the Biden administration has indicated that at least some of those same tax revenues would be used to offset the cost of the president’s proposed American Families Plan.

If those revenues were to be applied to other spending programs, the extension of the Medicare trust fund under Biden’s plan would be much more modest, with the Medicare-specific revenues and savings extending the life of the trust fund to just 2029.

Read the full analysis here.

Tax Gap Will Total $7 Trillion Over Next Decade: Treasury

The gap between what Americans owe and what the IRS collects is only getting bigger, with lost revenues totaling trillions of dollars over the next 10 years, Deputy Assistant Secretary Mark Mazur told lawmakers Thursday.

"Over the coming decade, the gross tax gap is projected to total approximately $7 trillion, roughly 15 percent of all owed taxes," Mazur said in prepared remarks to the House Subcommittee on Oversight and Subcommittee on Select Revenue Measures. "Tax non-compliance has serious consequences for the majority of Americans who pay their taxes in full each year. A larger tax gap generates the following results: higher tax rates elsewhere in the system, lower revenues to fund the nation’s fiscal priorities, or higher budget deficits and larger amounts of federal debt. Extensive and persistent non-compliance also undermines confidence in the fairness of our tax system."

Mazur said years of underinvestment in the IRS has been a major contributing factor to the growing tax gap, as audits declined steeply in the wake of a 20% cut in funding over the last decade. The $80 billion in increased funding requested by the Biden administration for the agency over the next 10 years would reverse that decline, Mazur said, and help generate hundreds of billions of dollars in additional revenues. Over a longer time horizon stretching to 2040, the full package of compliance measures outlined by the White House could generate additional revenues of more than $2 trillion, he noted.

Former Treasury chiefs provide support: Mazur’s testimony comes on the heels of an op-ed in The New York Times by five former Treasury secretaries — Lawrence Summers, Robert Rubin, Henry Paulson, Jacob Lew and Timothy Geithner — urging Congress to back Biden’s plan to beef up the IRS.

"Reasonable people can disagree on the magnitude of particular tax rate increases," the former secretaries wrote. "But on this issue, all should agree, including members of Congress of both parties: Giving the I.R.S. the tools it needs to improve compliance will raise significant revenue and create a fairer, more efficient system of tax administration."

US Budget Deficit Hits Record $2.1 Trillion in First Eight Months of FY 2021

The federal budget deficit climbed to a record $2.1 trillion in the first eight months of fiscal year 2021, the Treasury Department reported Thursday in its monthly statement.

Federal revenues rose to a record high of $2.6 trillion from October 2020 to May 2021, an increase of 29% from the same period a year earlier, driven largely by a rise in individual and corporate income tax receipts as the economy recovered, Treasury said. Outlays also rose to a record of $4.7 trillion, up 20%, driven by big increases in spending related to the Covid-19 pandemic, including direct relief payments, unemployment benefits and support for small businesses.

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