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Should You Blame Biogen for Medicare Part B Premium Hikes?

By Keith Speights and Brian Orelli, PhD – Dec 3, 2021 at 6:15AM

Key Points

  • Medicare Part B premiums will rise close to 15% in 2022.
  • The government said that the costs of Biogen's Aduhelm are a key reason behind this increase.
  • However, there are many factors that go into premium pricing.

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Yes -- at least partially.

If you're enrolled in Medicare Part B, your premiums will increase quite a bit next year. The Centers for Medicare and Medicaid Services (CMS) singled out one drug as a key reason behind the coming hike: Biogen's (BIIB 1.83%) Alzheimer's disease drug Aduhelm. In this Motley Fool Live video recorded on Nov. 16, Fool contributors Keith Speights and Brian Orelli discuss whether beneficiaries should really blame Biogen for their higher Medicare Part B premiums.

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Keith Speights: Brian, another story, another company we've talked about quite a bit in recent weeks. The Centers for Medicare and Medicare Services, CMS, said last week that standard Medicare Part B premiums will increase close to 15% next year, and I think they're going to up those premiums to a little over $170. They mentioned a certain drug from Biogen in their disclosure that these premiums are going to go up.

Brian, should Medicare beneficiaries blame Biogen for their higher premiums?

Brian Orelli: The agency certainly seems to be blaming Biogen for its Alzheimer's disease drug, Aduhelm, for the premium increase. Of course, the agency hasn't actually set up a national payment system for the drug yet. This maybe could indicate that that seems likely. That the agency thinks that it's likely to occur and so that should give Biogen's shareholders maybe some confidence that it's going to happen, although I think it's largely already priced into the stock price.

The bigger picture here is I think this could affect all companies that sell drugs for seniors. The increased premiums are going to cause seniors and agencies like the AARP, they lobby for the seniors to try to convince lawmakers to approve bills that give CMS the ability to negotiate with drugmakers. That could affect not just Biogen, but basically, all drug companies that are selling drugs, especially ones that are selling a lot of drugs to the Medicare and Medicaid patients.

If it passes, we have to wait and see how much power CMS actually has. If the companies refuse to negotiate is CMS going to not cover the drug? That's how PBMs, pharmacy benefit managers, are able to negotiate with drug companies is they're able to say, "Well, if you don't give us a price that we want, we'll not put you on our formulary and then none of our patients will actually take your drug, because they won't be covered enough to pay out of pocket and thus they won't do that, so they'll take a competing drug."

Is CMS willing to go that far and if they're not willing to go that far, and I could see a big outcry from seniors if they have a drug that isn't covered by CMS. I think that's going to be we'll have to wait and see, but it will be curious to see whether they can actually negotiate well with drugmakers if they don't have much leverage.

Speights: Brian, I think you made a good point that Biogen has really said that this national coverage determination, the NCD, that's hopefully (for Biogen anyway) coming on the way next year, Biogen has said this is really important for Aduhelm sales.

For CMS to come out in advance and say we're going to hike the premiums to be able to cover that, at least that gives Biogen some hope that it's likely that NCD will go in their favor. But not necessarily because CMS couldn't have come out later and hike the premiums, they can only do it before the year begins and it could just be that they're being cautious just in case. This is still a story we'll have to watch pretty closely.

Orelli: Yeah, that is true, you're right. They only do it once a year, so they couldn't wait till the end. They have to factor it in with the assumption that it's going to occur.

Speights: It also just underscores how expensive this drug will be to the healthcare system.

Orelli: I suspect it's probably more into it than just that one drug.

Speights: Sure, yeah, it's not just that one drug.

Orelli: It is interesting they highlighted that, but didn't highlight any of the other drugs.

Speights: Exactly.

Orelli: It probably, let's say, it's a factor of that drug plus general price increases across the board for all the other drugs.

Speights: Right. But there's no doubt Aduhelm will be quite expensive for CMS.

Orelli: Yes, assuming doctors actually prescribe it. We'll have to wait and see how many doctors will actually prescribe the drug.

Brian Orelli, PhD has no position in any of the stocks mentioned. Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Biogen. The Motley Fool has a disclosure policy.

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