Our latest edition is out in print and online this month. Subscribe today and start reading.

Medicare Premiums Are About to Skyrocket Because the Government Is in the Pocket of Big Pharma

Medicare is set to push through a historic premium hike — just in time for the midterms. And it’s all because of the corrupt FDA approval of an exorbitantly priced drug that might not even work.

Much of a giant planned hike in Medicare premiums is due to the FDA’s controversial approval of a new treatment for Alzheimer’s disease. (Sam Moqadam / Unsplash)

Back in the aftermath of the 2016 election, as Democrats scrambled to blame Russia, James Comey, the media, and anyone else they could think of for Hillary Clinton’s loss, another factor went largely unremarked. Two weeks before voting, officials announced that premiums for health insurance plans bought on the federal exchange were going to soar 25 percent in 2017 — or, if you counted the thirteen states at the time that ran their own exchanges, 22 percent.

Would Clinton have won without it? It’s impossible to say. But it’s hard to believe that more bad news from the dysfunctional, insurer-friendly reform put in place by the sitting Democratic president, on whose legacy she was running, didn’t have some kind of effect. (“Obamacare is just blowing up. . . . It has to be replaced with something much less expensive,” Donald Trump said when the news broke.) And it’s even harder to believe the government’s assurances that, as long as people just switched to a cheaper, less effective plan that wasn’t even an option in many places — and they figured out how to take advantage of the subsidies and tax credits they probably didn’t know about and might not even qualify for — it wouldn’t make a difference.

Well, if Mark Twain was right that history rhymes instead of repeats, then we might just be coming to the end of a stanza right now. Again, we have a major upcoming election, in this case the 2022 midterms, and again, we have a spike in health care premium costs born of Democratic failure.

Last week, the Centers for Medicare and Medicaid Services (CMS) announced that the monthly premiums for Medicare Part B in 2022 are set to increase by $21.60. It’ll be the largest dollar hike in Medicare’s history according to the AARP, and at 14.5 percent, the third-largest percentage increase since 2007. This is on top of a jump in the cost of several Medicare deductibles.

Similar to 2016, government officials have pointed to this year’s 5.9 percent cost-of-living adjustment (COLA) for Social Security beneficiaries, the highest in forty years, saying it’ll more than cover the jump in premiums. And that’s correct. But that increase was announced back in October against the backdrop of a sharp, pandemic-driven rise in the cost of various consumer goods — meaning this premium increase will end up eating into seniors’ ability to deal with that sudden rise in prices everywhere else.

According to The Senior Citizens League analyst Mary Johnson, the proposed premium hike “will consume the entire annual [COLA] of Social Security recipients with the very lowest benefits,” while those with higher benefits “may not wind up with as much left over as they were counting on.” The fact that the Joe Biden administration dumped the news about the premium late on a Friday afternoon suggests that, for all their assurances, they’re well aware of how bad this is politically.

So, what happened? After all, back in August, the Medicare trustees’ report had projected the monthly premium would only go up by $10 next year, to $158.50.

The long answer is a host of factors converging at once. As CMS explained, part of the rise is thanks to COVID-19-related cost rises, and the need to make up for the fact that Congress had deliberately held down the premium increase this year because of the disruptions of the pandemic. The shorter answer is, it’s the power of Big Pharma and the corporate capture of federal regulators.

As CMS detailed, the other half of this premium hike is thanks to the need to set aside reserves in case Medicare decides to cover Aduhelm, a brand-spanking-new Alzheimer’s drug produced by pharma giant Biogen and approved by the Food and Drug Administration (FDA) back in June. The Kaiser Family Foundation had predicted this upon the drug’s approval, determining that if just half of the two million Medicare enrollees who used a covered Alzheimer’s treatment as of 2017 end up being prescribed the drug, it would cost the government $57 billion in one year — more than 50 percent higher than the $37 billion Medicare spent on all Part B drugs in 2019 combined.

It’s arguably a small price to pay for a wonder drug that combats one of the world’s more dreadful and debilitating diseases. At least it would be. But it’s far from clear that’s what Aduhelm is.

Last November, the FDA’s advisory panel voted ten-to-one against endorsing the drug, charging that Biogen’s study didn’t provide “strong evidence” that it worked to treat Alzheimer’s. Yet despite the panel’s opposition, the FDA approved the drug this June anyway, leading three of the panelists to swiftly resign in protest, one calling it “probably the worst drug approval decision in recent U.S. history.” Now, just this past week, the Biogen scientist most closely associated with Aduhelm, Alfred Sandrock, has suddenly retired, sending the company’s stock price tumbling.

This was all after Biogen had already abruptly canceled clinical trials for the drug back in March 2019, owing to an independent review that disputed its efficacy, before reversing itself just as suddenly later that year. The company hadn’t stumbled upon new evidence that changed its mind. Instead, it had launched what it called “Project Onyx,” a secret campaign uncovered by Stat to win over the FDA and get the drug approved in spite of these issues.

According to Stat, in 2019, Sandrock arranged an “off-the-books” meeting with Billy Dunn, head of the FDA’s office of neuroscience whom he’d long known professionally, at a conference they both attended. (Under FDA protocols, all meetings between FDA and industry officials are meant to be documented). There, he reportedly managed to sway Dunn on the case for the drug.

Before long, the company had an ally on the inside, and agency officials working under Dunn were urging “accelerated approval” of the drug. One of the panelists who resigned later described to CNN the November 2020 public meeting on its approval, with Dunn and Biogen executives virtually in sync as they talked up its supposed benefits. The whole matter is now the subject of two different government probes.

So, to summarize: A corrupted process that saw an extravagantly expensive and likely ineffective anti-Alzheimer’s drug get approved by the FDA means that Medicare premiums are shooting up next year by a historic amount, just in time for a major election in which concerns about inflation are taking center stage.

The premium hike could still be held down to a more reasonable level if Medicare decides not to cover Aduhelm, which, given the ever more swirling controversy around its efficacy and approval, is entirely possible. But that’s no guarantee. Perhaps most tragically, this would be far less of an issue if Congress simply did the commonsense thing and allowed Medicare, the single largest purchaser of prescription drugs in the United States, to use its buying power to negotiate down the extortionate prices pharma companies have free rein to charge for all drugs, let alone the absurd $56,000 a year Biogen is demanding for this one. But as we know, the White House and Democrats in Congress cut that provision from their big spending bill under major pressure from Big Pharma, along with almost every other part of their agenda.

You couldn’t get a better illustration of the way that Democratic reluctance to so much as enact reforms to make life tolerable for people ends up building up and cascading down, inflicting further pain on working Americans while ultimately shooting the party itself in the foot. It’s also a sadly perfect illustration of the irrelevance of so much of the inflation discussion, which obsesses over the price of milk and burritos while drugmakers continue to rob ordinary people blind.