The FDA’s accelerated approval of Aduhelm in June 2021 ended a 20-year dry spell in new treatments for Alzheimer’s disease after decades of clinical research. Now just two years later, the FDA is soon to announce whether it will grant full approval to another anti-amyloid monoclonal antibody treatment, Leqembi (lecanemab), after granting accelerated approval this past January. Clinical trial results showed that Leqembi, made by Eisai and Biogen, slowed the rate of cognitive decline and reduced amyloid plaques, the protein that accumulates in the brains of people with Alzheimer’s disease – though not without the risk of adverse events. FDA approval of a similar drug showing similar clinical benefit (Lilly’s donanemab) may not be far behind.

If the FDA grants full approval to Leqembi, Medicare is expected to cover it for all indicated populations – patients with mild cognitive impairment or mild dementia with confirmed amyloid plaques – substantially broadening access to this medication beyond current limits under Medicare’s coverage with evidence development. The prospect of Medicare broadly covering a treatment that could slow the progression of cognitive decline in patients with Alzheimer’s disease offers long-awaited hope for these patients and their families, but also raises concerns about the potential impact on Medicare spending.

The exact number of Medicare beneficiaries who meet the prescribing requirements for Leqembi is unknown and the take-up rate among eligible individuals for a drug like this one is difficult to estimate. But for illustrative purposes, if 5% of the 6.7 million older adults in the US with Alzheimer’s disease take Leqembi, at the annual list price of $26,500, this would add $8.9 billion to Medicare Part B spending annually (assuming all are enrolled in Part B) (Figure 1). A 10% take-up rate would amount to $17.8 billion in higher spending.

To put these amounts in context, projected Medicare spending on Leqembi would be roughly equal to spending on the top 3 Part B drugs combined in 2021 based on the 5% take-up rate. At the 10% take-up rate, projected spending on this one drug alone would exceed spending on the top 10 Part B drugs in 2021 and would represent close to half of the $40 billion spent in total on the 600+ Part B covered drugs in 2021. And these estimates do not include additional costs to Medicare associated with PET scans or multiple MRIs that may be needed in conjunction with use of Leqembi nor potential offsets if treatment with Leqembi helps reduce spending on other services, such as hospitalizations due to falls or skilled nursing facility stays.

Higher Medicare Part B spending would likely lead to higher Medicare Part B premiums, which are set to cover roughly 25 percent of program costs. In the case of Aduhelm, the anticipation of substantially higher Medicare Part B spending due to coverage of that drug contributed to a 15% jump in the Part B premium between 2021 and 2022, an increase substantially above the norm. Medicare’s subsequent decision to limit coverage of Aduhelm contributed to a modest (3%) decline in the Part B premium for 2023.

At Leqembi’s current $26,500 list price, Medicare patients administered the drug would be responsible for more than $5,000 out of pocket each year, based on a 20% coinsurance requirement in traditional Medicare. Medicare Advantage enrollees are also typically responsible for the 20% coinsurance for Part B drugs up to their plan’s out-of-pocket maximum. (In 2022, the weighted average out-of-pocket maximum in Medicare Advantage plans was nearly $5,000 for in-network services and just over $9,200 for in-network and out-of-network combined). Beneficiaries may pay less if they have supplemental insurance, such as Medigap or Medicaid, that covers Medicare cost sharing. The Inflation Reduction Act includes a new cap on out-of-pocket drug spending under Medicare Part D beginning in 2024 that will provide significant financial relief to people who take high-priced Part D drugs, but there is no similar cap on out-of-pocket drug spending under Medicare Part B.

Even with Medicare coverage, therefore, Leqembi could be beyond the reach of many people with Medicare, whose median income is around $30,000 per person. And with higher rates of dementia and lower incomes among older Hispanic and Black adults than among older White adults in the US, the high cost of treatment could raise equity concerns if it means Black and Hispanic beneficiaries are less likely to gain access to this treatment because they can’t afford it.

To address concerns about the effect of high-priced drugs on Medicare program spending, the Inflation Reduction Act requires Medicare to negotiate the price of top spending drugs, but manufacturers of biologic drug products like Leqembi would be exempt from having CMS-negotiated prices take effect for 13 years from the drug’s licensure date. Assuming Leqembi receives full approval in July 2023 and Medicare coverage expands shortly thereafter, the drug’s manufacturers will have between now and 2036 to recoup investments in research and development and earn revenue from Medicare before possibly having negotiated pricing take effect. While broader access to Leqembi could provide modest clinical benefits to older adults with mild cognitive impairment and mild dementia stage of Alzheimer’s disease, a significant increase in Medicare spending and premiums is a distinct possibility, and one that Medicare, patients, and taxpayers are likely to confront in the not-too-distant future.