Biogen (NASDAQ:BIIB) stock is trending lower today on news that Medicare will limit coverage of its Aduhelm drug for Alzheimer’s.
In an announcement, Medicare said that it will restrict coverage of Aduhelm, a controversial and expensive Alzheimer’s drug, to patients who are enrolled in clinical trials. The decision effectively ends an intense lobbying campaign on the part of prescription drug makers who wanted Medicare to cover the cost of the Alzheimer’s medication for U.S. patients.
Biogen’s stock has declined 26% in the last six months, including a 12% pullback this year. It now trades at $211 a share.
What Happened With BIIB Stock
In its decision, Medicare said it will also limit access to Aduhelm to people who have mild dementia, and who have amyloid plaques, the proteins Aduhelm is designed to target in the human brain. Since the U.S. Food and Drug Administration (FDA) approved Aduhelm in 2021, physicians and scientists have raised questions about whether it actually works.
Government watchdogs and policy groups are now investigating the Alzheimer’s medication’s approval by the FDA to determine if proper procedures to approve it were followed, and also if the medication’s cost is justified. Biogen initially set the cost of Aduhelm at $56,000 per year, before cutting it to $28,000.
Why It Matters
Medicare’s final decision has implications that go beyond Aduhelm manufacturer Biogen. Specifically, its coverage decision is not specific to Aduhelm, and applies to all drugs in the class, including a similar medication that is now being developed by Eli Lilly (NYSE:LLY). Medicare’s decision also sets a precedent as it almost always covers drugs if the FDA approves them.
In essence, the Aduhelm coverage decision highlights a power struggle between Medicare and the FDA over access to prescription drug coverage for Americans. For Biogen, the coverage decision is a major blow to its plans for Aduhelm, which the company spent heavily on to develop. Additionally, Biogen is now being investigated over reports that it had a “back channel” into the FDA, which may have influenced the approval of Aduhelm.
What’s Next for Biogen
BIIB stock takes a hit today on news that Medicare will not cover the cost of its pricey Alzheimer medication for many Americans. For Biogen and other pharmaceutical companies, the decision by Medicare sets a worrying precedent that just because the FDA approves a drug, it doesn’t mean that Medicare will cover the cost. Going forward, this decision could have far-reaching implications for the pharmaceutical industry and the broader healthcare sector.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.