National

After years of trying to squash the expansion of government-funded health care and preserve business from private payers, the health care industry is suddenly facing new threats to the revenue it receives from the Medicare.

Why it matters: Behind all of the political posturing around sustaining the program is a cold, hard fact — the program's trust fund is expected to go bankrupt as soon as 2028. To prevent that from happening, lawmakers have three options: raise taxes, cut benefits, or cut payments to the health care industry.

State of play: House Republicans' statements on Medicare have been carefully worded, and notably don't say that the program shouldn't be touched. 

After warning that Medicare is "on the pathway to insolvency," House Energy and Commerce Committee Chair Cathy McMorris Rodgers said in a statement last week that "Republicans stand ready to strengthen and preserve these programs, without cutting benefits to seniors."

The big picture: Republicans are shining a spotlight on the program's long-term finances as they call for federal spending reductions. But the GOP has ruled out tax increases as a solution and is acutely aware that it will be hammered by Democrats if it proposes benefit reductions for seniors. 

That leaves payment reductions as the most politically tolerable solution, if they put forward any policy solutions at all. 

But any significant cuts to insurers, drug companies or hospitals would be strenuously opposed — a dynamic already playing out over Medicare Advantage proposals made by President Biden.

Driving the news: Amid all of the debt ceiling and spending drama, the Biden administration has proposed two Medicare Advantage payment rules that threaten insurers' profits. 

The first claws back billions of dollars in overpayments made to insurers for administering private Medicare plans over the last few years. The second, which was proposed earlier this month and has not been finalized, would decrease payments to Medicare Advantage plans by more than 2% next year, insurers say.

The payment update could translate into a a $540 decrease in benefits per member per year, according to an Avalere analysis funded by the Better Medicare Alliance and released yesterday.

Democrats have already reduced what Medicare will pay pharmaceutical companies in the future through the Inflation Reduction Act, which allows the program to negotiate the cost of certain drugs and imposes financial penalties to companies whose price increases outpace inflation.

What they're saying: Some Republicans are leaning into the opportunity to accuse Biden of hypocrisy.

"Joe Biden is trying to gut Medicare benefits. Seniors can't trust Democrats to protect Medicare," said National Republican Senatorial Committee spokesman Philip Letsou in a statement highlighting the analysis. 

But decreasing federal payments to Medicare Advantage plans ranks as one of the most effective ways to cut program spending.

The intrigue: The Medicare solvency discussion is particularly tricky for providers, who absent further action would see drastic payment cuts if the trust fund runs out. 

But popular spending reduction proposals target them too, and hospitals argue that now is not the time to talk about cutting their pay. 

"I hope that there will be action beforehand. We wont get to that cliff," said Chip Kahn, president and CEO of the Federation of American Hospitals. "But I don't think right now — coming off of COVID, and all the changes and effects of it ... I don't think this year is a good year to do it."

"We've got to be very careful," he added. "It probably means at some point in time there will be a solution that includes many of the items and effects many of the players." 

The bottom line: Picking a fight with the health care industry may be a more attractive option than cutting seniors' benefits, but that's a very low bar. And yet when it comes to addressing Medicare's financial future, neither party has very many options.

Health industry could be playing defense on Medicare

Medicare

Health care costs

The U.S. faces a range of health care flashpoints — unaffordable drugs, opioids, vaping — as we debate whether to adopt universal care. For now, the Affordable Care Act is the law of the land, but Republicans want to issue it a final death blow.

Health

Only a quarter of hospitals studied were fully compliant with a federal price transparency rule, according to a new report by Patient Rights Advocate — but compliance is a spectrum.

Why it matters: The findings come as Congress has expressed bipartisan concern over compliance with the Trump administration rule and potential interest in legislating on the topic.

By the numbers: Only 24.5% of the 2,000 hospitals studied were in full compliance with the rule, per the report. But there were instances of outright noncompliance and partial compliance.

5.8% of hospitals were in total noncompliance. 

Just over half of the hospitals posted negotiated prices clearly associated with payers and plans, while the other half failed to meet the study's definition of compliance because the majority of pricing data was missing or incomplete.

Zoom in: None of the hospitals owned by HCA Healthcare, Tenet Healthcare, Christus Health, Providence, Bon Secours Mercy Health, UPMC, Mercy Health, UnityPoint Health, and Avera Health were deemed compliant by the report.

Our thought bubble: The fact that there's a spectrum of compliance with the rule — and most hospitals are in at least partial compliance with it — may help explain why different studies can find such different rates.

For example, Turquoise Health has found that 65% of hospitals have published "robust" negotiated rates.

The other side: The American Hospital Association has also argued that compliance is much higher than some reports have suggested, including an earlier version by Patient Rights Advocate.

What they're saying: The group has outlined ways that Congress can improve the rule in a letter sent to leadership today. A separate letter to President Biden asks for stronger enforcement.

"We encourage you to consider legislation that boosts enforcement, increases penalties for noncompliance, establishes clear price disclosure standards, requires actual prices, not estimates, and demands hospital attestations to the quality and completeness of their data," writes founder and chairman Cynthia Fisher.

A quarter of hospitals in full compliance with transparency rule

5.8% of the hospitals studied were in total noncompliance.

Illustration of a health plus-shaped price tag with dollar signs printed on it.

Hospitals

Health Care Policy

Medicare Advantage plans are in line for a 2.09% rate increase in 2024, the Centers for Medicare & Medicaid Services said in a notice on Wednesday.

Why it matters: The adjustment is driven by growth in Medicare fee-for-service costs. But analysts said the bump is offset by other policy changes that would translate into a net reduction of 2.27%.

The notice comes as private Medicare plans continue to draw enrollees away from traditional Medicare with promises of capped out-of-pocket costs, vision and dental benefits, and perks like fitness classes.

The average change in revenue for Medicare Advantage plans will be 1.03% next year, CMS said. 

Yes, but: Plans are concerned about the notice, and the final rates that will be published no later than April 3

"CMS should not finalize payment policies that increase costs and/or reduce benefits for MA enrollees, especially when health care cost and inflationary pressures remain high," Matt Eyles, president and CEO of AHIP, the insurer trade group, said in a statement.

"There is no real way to sugar coat this as anything other than a bad rate update for MA plans," Raymond James & Associates' note on the policy says. 

Cowen analysts predicted plans will reduce benefits to protect their margins.

Go deeper: Beyond the rate adjustment, CMS will implement changes brought by the Inflation Reduction Act, including a cap on out-of-pocket spending on insulin and the elimination cost-sharing for recommended preventive vaccines.

It also reflects changes the IRA brought to Medicare's Part D drug program, such as the elimination of cost-sharing for Part D prescription drugs in the catastrophic phase expanded eligibility for premium subsidies.

Between the lines: CMS in the notice proposed a series of technical updates to the Medicare Advantage risk adjustment model, to improve payment accuracy.

The moves comes the same week the agency finalized a plan to increase audits of Medicare Advantage insurers and claw back about $4.7 billion in overpayments. 

Of note: CMS again proposed to use the minimum required rate for adjusting diagnostic coding in the Medicare Advantage program.  

Experts, including the Medicare Payment Advisory Commission, say increasing the adjustment factor would ease coding abuse problems in  Medicare Advantage that have cost the federal government billions of dollars. 

Medicare Advantage plans could see net rate cut in 2024

Medicare Advantage plans could see a 2% rate hike in 2024

Illustration of a hundred dollar bill puzzle with pieces missing out of the center in the shape of a red cross

Medicare Advantage

The Biden administration on Monday finalized an oft-delayed plan to step up audits of Medicare Advantage insurers in order to identify and recover overpayments.

Why it matters: Studies and audits have identified billions of dollars of excess payments to health plans that weren't supported by patients' medical records, but federal officials in the past backed off many repayment demands. 

The final rule seeks to claw back $4.7 billion from 2023 through 2032. 

It comes as more seniors are choosing private Medicare Advantage plans over traditional Medicare and insurers are facing scrutiny for aggressive sales tactics and not delivering on pledges to lower health spending. 

How it works: The Centers for Medicare and Medicaid Services does audits called risk adjustment data validation, or RADV, to identify improper payments.

The inability to catch the biggest overpayments stirred a push for enhanced audits that would extrapolate results over a Medicare Advantage plan's entire patient population.

The pandemic and insurance industry pushback delayed the final rule multiple times.

Top Medicare Advantage insurers affected by the rule include UnitedHealthCare, Humana and CVS Health/Aetna.

The details: Under the plan finalized Monday, CMS will collect extrapolated audit findings starting with the 2018 plan year, and non-extrapolated overpayments from 2011 through 2017. 

CMS originally proposed collecting extrapolated overpayments from as far back as 2011. 

CMS will also not adjust Medicare Advantage payments to account for the difference in documentation standards between Medicare Advantage diagnosis data and traditional Medicare diagnosis data, which is not audited. The agency cites a 2021 court decision as the rationale. 

What they're saying: "For years, federal watchdogs and outside experts have identified the Medicare Advantage program as one of the top management and performance challenges facing HHS, and today we are taking long overdue steps to conduct audits and recoup funds," said Health and Human Services Secretary Xavier Becerra. 

"This rule is unlawful and fatally flawed, and it should have been withdrawn instead of finalized," Matt Eyles, president and CEO of the insurers' lobby AHIP,  said in a statement on the policy. "The rule will hurt seniors, reduce health equity and discriminate against those who need care the most." 

“This rule comes with enormous costs and fails to target the most egregious diagnosis coding violations,” Alliance of Community Health Plans President and CEO Ceci Connolly said in a statement. 

What we're watching: Insurers have questioned whether parts of Medicare's methodology are legal and could challenge the rule in court.

The higher costs to plans could lead some insurers to pull out of markets — and beneficiaries could face higher costs, fewer plan choices or reduced supplemental benefits under the Medicare Advantage program, per an Avalere analysis.

CMS will also release an advanced notice of Medicare Advantage rates for 2024 soon. The payment notice could offset some market concerns raised for health plans by the RADV proposal, said Raymond James analyst Chris Meekins. 

Reality check: The real impact on plans will likely be quite small. CMS's annual payments to Medicare Advantage plans are expected to increase to $943 billion by 2031, the Kaiser Family Foundation estimated.

Biden administration seeks to recoup $4.7 billion from Medicare Advantage plans

Illustration of stacks of one hundred dollar bills laid in a medical cross shape

Efforts to overhaul the prior authorization process are hitting a crescendo in state legislatures, with at least 40 states expected to consider measures that would streamline the way doctors must obtain health plan sign-offs before they can order procedures, tests or treatments. 

Why it matters: As the nation emerges from the pandemic, officials like Surgeon General Vivek Murthy are blaming administrative burdens like prior authorizations for physician and health worker burnout.

The Biden administration in December proposed rules to create an electronic process and shorten wait times for prior authorization in Medicare Advantage, Medicaid managed care and Affordable Care Act exchange plans.

Driving the news: Doctors and insurers have waged a long-running battle over prior authorizations, but clinicians say the situation has worsened in recent years, causing delays for patients, including those with chronic conditions that haven't changed in years.

A third of providers surveyed in 2021 by the American Medical Association said delays caused by prior authorization have led to a serious adverse event for one of their patients. The physicians' group is pushing model legislation that would apply to individual and small-market plans in state health insurance markets.

A November analysis by the consultancy Crowe found prior-authorization denials for hospital inpatients contributed to a 67% jump in the dollar value of insurer coverage denials between January 2021 and August 2022. 

The other side: Health insurers say prior authorizations eliminate waste, save money and are necessary to ensure patients get the care they actually need. 

Health plans say they've worked toward the goals in a shared consensus statement they signed with the AMA and hospital and pharmacist groups in 2018. 

But they're on the defensive, with 26 bills introduced in 16 states as of mid-January (with an expectation that 42 states might see bills this year) that would limit or change prior authorization, Miranda Motter, vice president of state affairs at AHIP, told Axios.

"We believe it's critical to reduce that low-value and inappropriate care," Motter said. "We recognize that it can be burdensome."

Zoom in: Texas passed a law in 2021 allowing clinicians who have 90% of prior authorization requests for a service or drug approved over six months to earn a "gold card" which exempts them from prior authorization for that service. Providers there are pushing for revisions to the law this year.

Last year, Louisiana and Michigan also passed gold-carding legislation, and this year states like Mississippi are looking to follow suit. Others like New Jersey are weighing changes to existing laws to reduce prior authorizations to one day from the current 15 that insurers can take to approve or deny a claim. Additionally, the New Jersey legislation would exempt chronic condition treatments from prior authorization rules for the length of treatment.

Josh Bengal, director of government relations at the Medical Society of New Jersey, told Axios his group also is seeking a ban on prior authorization for generic drugs.

Be smart: States can only regulate individual and small-group employer plans, as well as the health plans they offer to state employees.

The bottom line: They'll face a tricky path balancing what's in the best interest of payers, providers and patients. But the pendulum is swinging in the providers' favor, as concerns about more red tape are pushing an already exhausted medical workforce over the edge.

"It's not just a nuisance and cost issue it's an efficacy of health care issue," said Joel Ario, national adviser at Manatt Health.

States jump into fight over prior authorization requirements

States wade into doctor-insurer feud over prior authorizations

Illustration of a medical cross with clock hands 

Health insurance

The Biden administration is offering struggling rural hospitals a new financial lifeline starting this month, but with an unusual twist: Facilities that opt in have to agree to close their non-emergency inpatient services. 

The big picture: Becoming a "rural emergency hospital" brings enhanced Medicare payments and upward of $3 million in subsidies each year. But patients typically have to leave within 24 hours, meaning those who can't go home have to be discharged to a full-service hospital, possibly in another state.

The thinking is many small hospitals have so few patients that inpatient services invariably run in the red. 

Critical access hospitals or rural facilities with less than 50 beds are the primary candidates for conversion under the program, which Congress authorized in 2020. 

Go deeper: Critics say the designation is built around the mistaken belief that inpatient services for small patient populations are draining rural facilities, and that eliminating that will solve most problems.

It's a myth, said Harold Miller, CEO of the Center for Healthcare Quality and Payment Reform, especially for facilities with swing beds for either acute or skilled nursing care, or long-term care beds.

Miller studied cost-drivers in Washington state and Alaska, concluding facilities would lose more money by eliminating inpatient care. "Costs would go down but revenue would go down even more from inpatient services and ancillary services," he said.

He added the new emergency hospital designation is "bizarre," noting that the $3.2 million subsidy figure is arbitrary and not based on the size of the hospital or its current operating revenues.

Yes, but: For some rural facilities on the brink, converting will bring an infusion of cash and the ability to triage patients as well as continue outpatient services.

The new designation amounts to "an alternative to those areas that want to maintain access in their community," Carrie Cochran-McClain, chief policy officer at the National Rural Health Association, told Axios.

Hospitals that have clinics or outpatient settings but few patients in the actual facility could benefit from conversion to the model, as a way to focus on providing emergency care while maintaining access to primary care.

How it works: Starting Jan. 1, hospitals that elected to convert to rural emergency hospitals could begin receiving monthly subsidies of more than $272,000 and a 5% increase for Medicare outpatient and emergency services.

There are 1,569 eligible hospitals, per a JAMA Health Forum research letter published in December. The University of North Carolina Sheps Center estimates more than 1,700 hospitals might be eligible however, and that more than 120 might convert.

Kansas, Texas, Nebraska and Oklahoma have the most hospitals that could convert, based on low profit margins, revenue and patient census counts, the Sheps Center found.

The intrigue:  Some facilities are hesitant to convert because they would be locked out of the federal 340B drug pricing program, which provides low-cost medicines to ensure access to low-income patients.

State licensing regulations will also need to be changed so the newly minted emergency hospitals can be credentialed care facilities.

"It could be adjusting the bill or language to allow hospitals to take this exception, which has happened in the past; they could make it a pilot program," Monica Hon, vice president at the consultancy Advis, told Axios. "There are ways states could do it, but they still have to do it."

Kansas, Nebraska and South Dakota lawmakers have already passed legislation to authorize the new model of rural hospitals, per the National Conference of State Legislatures.

State regulations may deter some facilities from jumping to switch funding models early in the new year, particularly in states that require a certificate of need, Hon said. 

Zoom in: Rural hospitals, particularly those in states that have not expanded Medicaid, are in the similar financial peril as they were pre-pandemic and shuttering services to make ends meet.

In Texas, a few rural facilities with very low patient censuses are considering the new model, John Henderson, who leads the Texas Organization of Rural and Community Hospitals, told Axios.

The new model "allows them to do what you'd prioritize which is to provide emergency services but not provide inpatient services when you have significant operational costs associated with that," Henderson said.

While the model might not work in some places, it could be a solution for small facilities that operate some of the only health services in their counties. 

"If your inpatient census is two or less and your traditional Medicare payments were less than $3 million last year, you need to understand this," Henderson said.

New rural hospital model a lifeline for some, a gamble for others

A new rural hospital payment model launched in 2023 has few takers so far.

Illustration of a stack of money wrapped up in a terms and conditions document. 

Hospital finance

Share who say someone in their family recently had issues paying medical bills

Data: National Center for Health Statistics; Note: "Recent" applies to any time in the last 12 months; Chart: Madison Dong/Axios Visuals

Medical debt may still plague millions of American families, but the pandemic years brought a marked decline in the number of people struggling to cover their health costs, the Centers for Disease Control and Prevention reported today.

By the numbers: 10.5 million fewer people were in families having problems paying medical bills in 2021 than in 2019 — amounting to a 3.2 percentage point decline, according to National Health Interview Surveys.

Women were likelier to have problems paying medical bills, and the percentage of people in families struggling with bills was higher among those with children aged 0–17 years (11.5%) and adults aged 18–64 (11.3%) than in adults 65 and over (7.7%).

The uninsured were more likely than those with Medicaid or private coverage to be in families that had problems in the previous 12 months.

The percentage of people in families having problems paying bills was higher among non-Hispanic Black people (15.8%) compared with Hispanic (12.8%), non-Hispanic white (9.4%), and non-Hispanic Asian (6.1%) people.

Between the lines: Researchers said the CARES Act, American Rescue Plan Act, and other pandemic relief legislation may have indirectly softened the blow of medical debt by providing direct monetary payments, increasing the percentage of people covered by insurance using COBRA premium subsidies and expanding eligibility for subsidies in Affordable Care Act markets, among other things. 

People in all age groups living in Medicaid expansion states also were less likely than those living in non-expansion states to have problems paying medical bills.

The dropoff in doctors visits, elective procedures and outpatient care early in the pandemic also may have reduced the odds of incurring debt through fewer copays, deductibles, and coinsurance, the researchers said.

Yes, but: Medical debt still is a major factor in overall debt in the U.S., and can increase the risk for eviction, food insecurity and bad health outcomes.

Pandemic years saw a reduction in medical debt

Medical debt may still plague millions, but the pandemic saw a drop in the number of people struggling to cover costs, the CDC said today.

COVID-19

Leqembi, a new Alzheimer's drug developed by Eisai and Biogen, may have passed muster with the FDA last week, but experts say it's still an open question how much it will improve the quality of patients' lives.  

Why it matters: Patients, doctors and insurers still have to decide whether using the drug to slow the disease's progression is worth the associated hassle, cost and safety risks. These decisions will ultimately decide the overall uptake and commercial success.

Between the lines: Leqembi's accelerated approval was based on data showing patients taking the drug saw a statistically significant reduction in brain amyloid plaque that's thought to contribute to the disease. But data published in November — which was not used for the accelerated approval — found that the drug provides a clinical benefit as well. 

The data, published in the NEJM, found that Lequembi slowed cognitive decline in patients in the early stages of the disease by 27% over 18 months. That will be used to determine whether the drug warrants a full FDA approval.

But clinicians caution that such a modest benefit may not be very noticeable to patients and comes with significant tradeoffs.

“We’re still far from an intervention that can really slow down or stop the progression of the disease, but it is very exciting to have something that can be offered probably as part of a series of interventions," said Alvaro Pascual-Leone, a professor of neurology at Harvard Medical School and chief medical officer of Linus Health.

The big picture: Alzheimer's disease is both devastating and common, teeing up a potentially huge market for cures for the more than 6 million Americans who suffer from the condition.

But the FDA says the treatment should only be initiated in patients with "mild cognitive impairment or mild dementia stage of disease," narrowing the eligible patient population. That translates to about 1.5 million Americans, per the NYT.

It also requires patients to overcome significant hurdles before starting treatment, including testing to confirm they have a buildup of amyloid and an MRI within the last year. The treatment itself consists of one-hour infusions every two weeks, and patients must receive MRIs throughout the process.

Leqembi's list price of $26,500 per year doesn't include the cost of these related tests and procedures. For now, Medicare covers the drug and other amyloid-focused cures in limited circumstances, but the agency says barriers will be lowered if the FDA issues a traditional approval of the drug. It's unclear how private payers will approach coverage.

Finally, the drug poses significant safety risks, like other drugs for serious diseases, and three patients who received Leqembi in a clinical trial died.

What they're saying: Given all the downsides, some providers say they want more information — particularly from the FDA — before they feel comfortable prescribing it to patients. 

"At this moment, based on the available data, I'm not clear and skeptical," said Yale professor Reshma Ramachandran. "I would have a lot of reservation about prescribing this."

“I do think one of the things that has given us a lot of pause…is the risk and the death issue. Nobody wants to be the clinician that prescribes a drug that could potentially harm our patients," she added. 

The other side: "This treatment can change the course of Alzheimer's in a meaningful way for people in the early stages of the disease, allowing more time to participate in daily life and live independently," said Maria Carrillo, chief science officer of the Alzheimer's Association, in a statement on Friday.

"The decision to use this treatment should lie in the hands of the individual living with the disease and their family, in consultation with their doctor."

What we're watching: The upfront requirements for patients who do want to receive the drug will likely present broad challenges to the health system.

“There is a lot of changes to the health care system and how we practice that will need to be put in place to really offer this treatment at scale to many patients," Pascual-Leone said.

New Alzheimer's drug may have limited real-world impact

The drug's modest benefits come with significant tradeoffs.

Illustration of a question mark hanging off of an IV stand.  

Alzheimer's disease

A group of pricey breakthrough prescription drugs are poised to shake up the market this year — including an Alzheimer's treatment that could be approved today by the FDA. 

Why it matters: Though the drugs offer hope to patients with hard-to-treat conditions like Alzheimer's or sickle cell disease, or who struggle with obesity, their potentially eye-popping prices are sure to create dilemmas for insurers, government programs and patients themselves.

The big picture: The approvals could fuel already-contentious debates around affordability and equity, giving ammunition both to those who say innovation doesn't come cheap and others who contend medical advances are meaningless if patients can't access them.

Although some of the drugs could be transformative, "they will create choices that need to be made and they will also create potential burdens, particularly on the most vulnerable, on people who are the least well-insured and people who live in states or happen to have insurance coverage that is the least generous," said Rena Conti, a professor at Boston University's Questrom School of Business.

None of the drugs would be subject to the price controls that congressional Democrats included in the Inflation Reduction Act. 

Driving the news: The FDA is expected to today decide whether to approve Eisai and Biogen's lecanemab, a treatment for Alzheimer's disease, setting into motion another round of debate over how much the drug should cost and whether Medicare should cover it. 

It would become the second FDA-approved Alzheimer's treatment targeting amyloid plaques that are believed to contribute to the development of the disease. But it isn't likely to cause as much controversy as Biogen's Aduhelm did when it was approved in 2021. 

Biogen initially priced that drug at $56,000 a year, drawing outrage from critics and presenting big questions about how Medicare could absorb the large spending spike if millions of beneficiaries tried to get it. 

If lecanemab is approved, experts will be closely watching both its list price and whether the FDA limits its use to subgroups of Alzheimer's patients. Both factors will be crucial in determining potential spending on the drug. 

A cost-effective price would be between $8,500 and $20,600 a year, the Institute for Clinical and Economic Review said last month.

State of play: The drug pipeline is brimming with other experimental cures that could make headlines this year.

Data for another promising Alzheimer's treatment by Eli Lilly that is similar to lecanemab is expected midyear, per a recent Cowen research note, and Medicare will almost certainly have to revisit its coverage policy for the entire class of drugs.

Several multi-million dollar gene therapies have already been approved. But this year the pipeline includes two treatments for sickle cell disease, which has a much larger patient population. 

Clinical trial results for Eli Lilly's obesity drug candidate are also expected in April, potentially ushering a new entrant to what could become a booming market. Disputes over coverage of obesity drugs already on the market will almost certainty continue.

Between the lines: Some novel drugs present an inherent dilemma: They're worth a lot of money because of the way they can dramatically improve patients' lives. Even so, manufacturers can still price these drugs well above what experts say they're worth. 

Gene therapies may cost millions per patient. Other drugs could cost much less per course, but cater to enormous patient populations or may require long-term use. 

In any scenario, the expense could present complex problems to federal and state health programs, private insurers and patients who wind up on the hook for out-of-pocket costs.

"We're fortunate there are so many treatments in the pipeline that promise to transform the quality of care for people with devastating diseases. While we recognize there are concerns about cost, the facts point to a health care system that can sustain this incredible innovation over the long haul," said Priscilla VanderVeer, vice president of public affairs at PhRMA.

Yes, but: The final cost burden hinges on several factors, starting with where manufacturers set the launch price.  

But there's also the question of how many patients can access them, either because of FDA-imposed limitations on eligibility or payer restrictions on coverage. 

Zoom in: Medicare opted to heavily restrict coverage of Aduhelm due to questions about whether it worked, effectively dooming the treatment's commercial prospects. The program will have to revisit its coverage policy for this class of drugs if the FDA approves lecanemab. 

Commercial insurers already limit coverage of obesity drugs, as NBC News recently reported, and the price tag of the treatments without insurance makes them unaffordable to most patients. 

But insurers say the therapies have limitations and don't always warrant blank-check treatment. The obesity drugs, which are also approved to treat diabetes, "have not yet been proven to work well for long-term weight management and can have complications and adverse impacts on patients," said Kristine Grow, a spokesperson for America's Health Insurance Plans. 

The gene therapies, particularly for sickle cell disease, could force difficult budgetary tradeoffs for state Medicaid programs, which could lead to coverage restrictions.

The intrigue: The arrival of the new cures and higher pharmaceutical spending will likely coincide with the implementation of the drug pricing components of the Inflation Reduction Act, which will allow Medicare to negotiate the prices of some older drugs on the market that don't face competition. 

But the law doesn't apply to new drugs' launch prices, which some critics say weakens its impact.

"You don't have a system in the U.S. for negotiating in any meaningful way the launch prices of those kinds of treatments to ensure that people can access them," said Aaron Kesselheim, a professor at Harvard Medical School.

What we're watching: The drug approvals could drive a new round of conversations about changing the way the U.S. pays for some drugs.  

"These kinds of drugs, like cell and gene therapies or very expensive drugs that might cure sickle cell or very expensive drugs that could help with Alzheimer's may force us as a country to rethink whether we pay for all drugs in the same way," said Mark Miller, executive vice president of health care at Arnold Ventures.

A banner year for prescription drugs brings cost concerns

There's a large pipeline of promising yet expensive drugs that could get approved.

Prescription drugs

Congressional probe faults FDA on Biogen Alzheimer's drug approval

The drugmaker said it stands by the integrity of the actions it took.

Health care costs

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All Health care costs stories

Health industry could be playing defense on Medicare

A quarter of hospitals in full compliance with transparency rule

Medicare Advantage plans could see net rate cut in 2024

Biden administration seeks to recoup $4.7 billion from Medicare Advantage plans

States jump into fight over prior authorization requirements

New rural hospital model a lifeline for some, a gamble for others

Pandemic years saw a reduction in medical debt

New Alzheimer's drug may have limited real-world impact

A banner year for prescription drugs brings cost concerns