Venture Capital, Drugs and Insurers: Oil and Water

Biogen is the latest company to learn that it could suffer dramatic losses on an expensive new drug.

Investors like expensive new drugs as they see massive profits on the table.

Insurers don’t like expensive new drugs unless they can be persuaded that the drug is truly essential for patient treatment. Current premiums don’t factor in new drugs and their price tags.

Biogen’s new baby is Adulhelm, a medication designed to treat Alzheimer’s. The estimated cost of this treatment per year is $56,000.

Biogen hails this as a “breakthrough” treatment for the disease.

The top 25 insurers have decided that the value is unproven despite FDA approval, and classify this drug as “not medically necessary,” meaning that they won’t pay for it. That basically stops sales of the drug.

Consumers who believe in the drug will have to dig deep to pay for it, or go to court. There is an appeal process through the insurers, but that is probably unlikely to be successful given the position they have taken.

Biogen investors are in trouble.

Just another day in insurance.



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