Biogen faces tough questions over $56K-a-year price of newly approved Alzheimer's drug

A person skateboards past Biogen Inc. headquarters in Cambridge, Massachusetts, on Monday, June 7, 2021.

Adam Glanzman | Bloomberg | Getty Images

Biogen on Tuesday faced tough questions from Wall Street analysts over the $56,000 annual cost of its newly approved Alzheimer's drug, Aduhelm – a price tag executives are calling "fair" and "responsible."

Shares of Biogen surged 38% on Monday after the FDA announced it approved the company's drug, scientifically known as aducanumab. It is the first medication cleared by U.S. regulators to slow cognitive decline in people living with Alzheimer's and the first new medicine for the disease in nearly two decades.

The biotech company said it is charging $56,000 for an annual course of the new treatment, higher than the $10,000 to $25,000 price some Wall Street analysts were expecting. That's the wholesale price, and the out-of-pocket cost patients will actually pay will depend on their health coverage.

Some analysts and advocacy groups immediately questioned how the company could justify the price — about five times higher than expected — especially as medical experts continue to debate whether there's enough evidence that the drug actually works and the industry faces criticism over drug prices.

The FDA departed from the advice of its independent panel of outside experts, who unexpectedly declined to endorse the drug last fall, citing unconvincing data. 

"Our one concern here comes around the Aducanumab annual cost, and whether at $56K/year (we were at $10k) the sticker shock could further invigorate scrutiny on drug pricing," Stifel analyst Jeff Preis told investors in a note Monday.

On a call with investors Tuesday morning, Evercore ISI analyst Umer Raffat congratulated the Massachusetts-based company on the drug's U.S. approval before asking executives to explain its price.

"I do think there's a disconnect between some of the words that you've shared in your press releases, like responsibility, access, health equity, versus the price point, especially given the primary care population," he told executives.

J.P. Morgan analyst Cory Kasimov later asked executives how much federal health insurance program Medicare will be expected to pay for the drug and how concerned executives are about the "backlash" the industry will face over its pricing.

Biogen executives said the total price figure for the new treatment is "substantiated" by the value it is expected to bring to patients, caregivers and society. They insisted the price is "responsible," noting the disease costs the U.S. billions each year.

More than 6 million Americans are living with the disease, according to estimates by the Alzheimer's Association. The company said it currently has the capacity to provide 1 million patients with the drug annually, with more than 900 sites in the U.S. ready to implement the new medicine.

"We want to make sure Aduhelm is affordable for patients and sustainable for health-care systems," one executive said.

The company has committed to not raising the price of the new drug over the next four years. That being said, executives said they are "open-minded" and suggested they could rethink the price as the company assesses demand over the next few years.

Biogen CEO Michel Vounatsos joined CNBC on Monday and said the drug's price will allow the company to further invest in its pipeline of medicines for other diseases. He added the company is working closely with Medicare as well as private insurers.

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