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You are here: Home / Anderson On Health Insurance / Technological and regulatory shocks with risk adjustment

Technological and regulatory shocks with risk adjustment

by David Anderson|  June 14, 20218:32 am| 28 Comments

This post is in: Anderson On Health Insurance

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Last week, the FDA approved a new drug, aduhelm, for Alzheimer’s Disease.  The evidence that this drug does much, if anything, for patients is extremely thin.  It is also going to be priced at $56,000 per person per year, with several million people who are eligible to receive the drug.  In the Friedman-Weiner framework, this is a Type 2 drug (New, not very effective drugs that are expensive.) This drug, and the issues it raises, will be a massive health policy story for the next five years.

 

1/ OK, everyone, buckle up. @RESachs and I have a piece @TheAtlantic about Aduhelm.

It’s about how the law links FDA approval to payment policy, which means we’re likely to spend through the nose for a drug that may not work.https://t.co/rGfD67IQn6 pic.twitter.com/QB8dgVaPAB

— Nicholas Bagley (@nicholas_bagley) June 11, 2021

I am not qualified to speak on the linkage between the FDA approval  and CMS payment policy.  I will defer to others on that.

My first thought when I heard that this drug had been approved is that it is going to play merry hell with risk adjustment.  My second thought is that this is going to get prior-authorized to death.

Risk adjustment systems rely on previous years of experience to predict recurring, predictable average costs for a group of people with a condition or a cluster of conditions.  Claims are examined and then run through a big set of regressions and corrections to get an expected incremental cost of a disease.  Risk adjustment is always only going to be okay-ish when measured at the individual level.  Some people with a condition will cost a lot more to treat than statistically similar other people.  Conversely, some people are also comparatively cheap to treat.  Insurers care about the cost to cover individuals only net of risk adjustment.  There are plenty of ACA insurers that actively seek to enroll chronically ill individuals because risk adjustment makes covering a very sick person no more risky, and potentially more profitable than covering a healthy person.

Insurers want to find ways to cover folks who, individually, are overpaid in risk adjustment.  Insurers want to find ways to not cover folks who are underpaid after risk adjustment.

Aduhelm, if it is widely prescribed, is going to play merry hell with risk adjustment.  It has the potential to add a whole lot of costs to some people in an idiosyncratic manner.  It is likely that prescribers who are not under any risk based contracts will be more likely to prescribe Aduhelm than prescribers who are employed by organizations that take on the full cost of care.  In the next couple of years, individuals with Alzheimers will likely be estimated to be much more expensive and thus their risk adjustment transfers will increase even though the best evidence based protocols will not have changed.

I’m not sure what the games that will be played with risk adjustment, but given a huge technological/regulatory shock, it is likely that weird things will be happening in risk adjustment in a few years.

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28Comments

  1. 1.

    Raven Onthill

    June 14, 2021 at 8:45 am

    It may be used as a cudgel to push patients out of original Medicare; Medicare part D plans are fearsomely expensive to patients and this will only make them moreso.

  2. 2.

    Cheryl Rofer

    June 14, 2021 at 8:45 am

    I wonder how widely it will actually be prescribed. It’s supposed to have some bad side effects, too. But there are people who want to keep their loved ones on drastic life support measures, so there will be some who desperately want the smallest hope of bringing a loved one back from Alzheimer’s limbo.

  3. 3.

    WereBear

    June 14, 2021 at 8:55 am

    It’s about how the law links FDA approval to payment policy, which means we’re likely to spend through the nose for a drug that may not work.

    Desperate and suffering people getting money extracted by any means necessary? And getting nothing but ripped off?

    To me, this is simply a legal SCAM.

  4. 4.

    Wag

    June 14, 2021 at 8:56 am

    The thing that may prevent this from breaking the bank in terms of ACA plans is the age demographic.  Alzheimer’s disease is a disease of the Medicare age group, not the ACA plan group.  It is a drug that may wreck havoc on MC secondary insurers more than with ACA plans.

  5. 5.

    sab

    June 14, 2021 at 9:00 am

    @Wag: Except for early onset alzheimers. Those families are likely to be most desperate.

  6. 6.

    Soprano2

    June 14, 2021 at 9:09 am

    It’s so sad. I understand the desperation; my grandfather had dementia, and it’s awful for everyone. That said, I also hate the idea of false hope. That’s what it sounds like this is.

  7. 7.

    Bill K

    June 14, 2021 at 9:15 am

    The expert advisory panel was almost unanimous (11/12) in refusing to approve this drug, but someone at the FDA overruled them.  I would like to know who and why.  I suspect there is a tale of corruption and at least one Trump appointee in there somewhere.

  8. 8.

    WereBear

    June 14, 2021 at 9:17 am

    @Soprano2:

    That said, I also hate the idea of false hope. That’s what it sounds like this is.

    That is the cruelest part, aside from the money. Plus, the side effects:

     

    Side effects of Aduhelm include:

    amyloid related imaging abnormalities (ARIA) fluid retention (edema),
    headache,
    amyloid related imaging abnormalities due to haemosiderin deposition (ARIA-H) microhemorrhage,
    ARIA-H superficial siderosis,
    falls,
    diarrhea, and
    confusion/delirium/altered mental status/disorientation.

     

    My italics.

    Call me weird (you won’t be the first) but a side effect that is exactly the same as the symptoms the drug is supposed to treat sounds very dicey.

  9. 9.

    RSA

    June 14, 2021 at 9:26 am

    @Cheryl Rofer:

    there will be some who desperately want the smallest hope of bringing a loved one back from Alzheimer’s limbo.

    Yes.  In an Alzheimer’s spouse online group I belong to, reactions are all across the board: hope and prayers that aducanumab works; skepticism about the clinical results; shock at the price; …  These folks are probably better than most, though, at recognizing that the drug doesn’t promise reversal, only a slowing down of the decline.

  10. 10.

    Ken

    June 14, 2021 at 9:35 am

    Derek Lowe’s take.  Near the end he has links to other science and medicine writers, none of whom are happy with the decision (which admittedly may be selection bias).

  11. 11.

    Odie Hugh Manatee

    June 14, 2021 at 9:44 am

    Yet another *mab drug. I’m not taking the RA version of *mab drugs because cancer runs in our family, but even then the side effects are damned scary.

    I’ll stick with RA, at least I know what I have and what to expect.

  12. 12.

    boatboy_srq

    June 14, 2021 at 10:00 am

    @Cheryl Rofer: Speaking as the child of a dementia/Alzheimer’s patient, for which parent the entire Namenda-based drug family was not merely ineffective but contraindicative, there are likely a lot of patients with only one alternative – Aricept – and having ANY other remedy to address the condition will be worth any manageable copay. That is the most frightening aspect of this situation: there is Aricept, there is Namenda and its siblings, and – until now – nothing else, and there are patients desperate for something not the one or the other who will be beggared getting only incremental benefit from a very expensive drug – even though that incremental benefit is better than either the nothing from no other drug or the impairment offered by taking both the existing remedies together.

  13. 13.

    boatboy_srq

    June 14, 2021 at 10:06 am

    @WereBear: Consider that the entire Namenda family has a measureable potential to do exactly the same or worse, and it’s been on the market for decades.

    I agree with you wholeheartedly, but the fight against Alzheimer’s has been littered with pyrrhic victories already.

  14. 14.

    TomatoQueen

    June 14, 2021 at 10:14 am

    My father (vascular dementia/COPD/CHF) has been on aricept and drugs for the other two major conditions for many years.  It took a hospitalization for a fall  to confirm not-Alzheimers but vascular (what  many suspect TFG has) dementia, but he stays on aricept because it helps him.  No change contemplated at 90 years old.

  15. 15.

    Cheryl from Maryland

    June 14, 2021 at 10:22 am

    Prior authorization can be harsh.  My spouse is on a drug which requires prior authorization (it’s a gray label use, so that affects the approval).  The insurance company cut the dosage in half without telling us.  It took two months to resolve; two months where his symptoms worsened with no medication.  The only way we got approval was my spouse’s job experience at the FDA.

  16. 16.

    RSA

    June 14, 2021 at 10:40 am

    @TomatoQueen: My father (vascular dementia/COPD/CHF) has been on aricept and drugs for the other two major conditions for many years.

    I’m sorry to hear that. My wife was on aricept and namenda for a number of years.  There’s an interesting connection to the discussion of effectiveness here—there’s little if any clinical evidence that these drugs are effective after a couple of years (that’s a liberal estimate).  But they’re still prescribed; I agreed with my wife’s doctor to keep it going because there seemed to be no harm… and there’s always the fear of things getting suddenly worse.

  17. 17.

    David Anderson

    June 14, 2021 at 10:42 am

    @Raven Onthill: The drug is an infusion drug, so it will be under Medicare Part B.

    Traditional Medicare will be paying for the drug for people currently on Medicare Advantage plans (this is long-standing policy when there is an expensive new therapy introduced between rate setting cycles)

    If a lot of people are prescribed it, expect Medicare supplemental plans to get a lot more expensive for people on TM.

  18. 18.

    Fair Economist

    June 14, 2021 at 11:03 am

    Aduhelm is probably WORSE than category 2. It’s probably actively harmful. There was no indication of clinical benefit, and lots of harm. It was approved on a nonclinical endpoint, reducing amyloid in the brain. But, that is probably detrimental. Amyloid damages brain cells, true, but it is actively produced by brain cells in response to chronic infection. The benefit is that it also damages infective agents, both bacterial and viral, and presumably the net result is a benefit for the brain, at least on average. To back this up, multiple amyloid-reducing medications have failed trials because brain function actually got worse in spite of demonstrable reductions in amyloid.

    This approval is both a travesty and a disaster. It won’t just waste huge amounts of money, it will actively harm many thousands of patients.

    The manufacturer likely knows all this because if they really wanted wide use of a med with such nasty side effects they’d want to do the trials to demonstrate clinical benefit. But they know it won’t work so they are trying to squeeze some money out before doctors realize how bad this is.

  19. 19.

    WereBear

    June 14, 2021 at 11:39 am

    Ketogenic Diet Improves Symptoms of Alzheimer’s Disease in Randomized Controlled Trial (February 2021)

  20. 20.

    Wag

    June 14, 2021 at 12:19 pm

    @sab:   Absolutely.  I do not mean to minimize these families trauma with the diagnosis, but those patients are a decided minority of AD patients.

  21. 21.

    Wag

    June 14, 2021 at 12:20 pm

    @Bill K:   Not only that, but the 1/12 who didn’t vote to not approve the medication voted “uncertain”, not “yes”.

  22. 22.

    StringOnAStick

    June 14, 2021 at 12:47 pm

    I’ve read that 3 of the 12 panels members resigned when the FDA overruled their recommendation to not approve this drug.

  23. 23.

    StringOnAStick

    June 14, 2021 at 12:49 pm

    @WereBear: Ketogenic helps a lot of things, like being husband’s WBC down from his very early stage CLL.  It also took my triglycerides from 150 to 42.

  24. 24.

    StringOnAStick

    June 14, 2021 at 12:50 pm

    Deleted duplicate

  25. 25.

    WereBear

    June 14, 2021 at 12:57 pm

    @StringOnAStick: Excellent! I find low carb is anti-flammatory for my autoimmune condition, too. I rely on the work of Dr. Terry Wahls.

  26. 26.

    sab

    June 14, 2021 at 2:08 pm

    @Wag: Agreed

  27. 27.

    Raven Onthill

    June 14, 2021 at 6:18 pm

    @David Anderson: I see. Thanks.

  28. 28.

    Raven Onthill

    June 14, 2021 at 6:45 pm

    In this, BTW, I also worry about damage to the credibility of the FDA.

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