This week, drugmaker Biogen made a stunning announcement: It is going to cut in half the price of its controversial Alzheimer’s drug Aduhelm. Instead of selling the infusion drug for $56,000 annually to a typical user it will charge $28,000-a-year.

It is, to say the least, unusual, for the maker of a potential blockbuster drug to cuts its price just months after first coming to market. For the moment, at least, Biogen has no competition. And the potential demand for a drug to slow the onset of Alzheimer’s disease is enormous, with more 6 million Americans already living with the disease. So what is going on?

Four problems

Four things: There is scant evidence the drug provides real benefit to those with Alzheimer’s, the costs are prohibitive, neither Medicare nor most private insurers have decided whether to pay for it, and competing drugs may soon come to market.

To start, FDA’s decision to approve Aduhelm was  highly controversial. Even as FDA OK’d the drug it acknowledged that Biogen had not shown clinical benefit to Alzheimer’s patients. Rather, the regulator found only that Aduhelm was effective in reducing levels of a protein in the brain called amyloid beta that is associated with Alzheimer’s.

Instead of being seen as a major new step in the treatment of Alzheimer’s, the approval set off a firestorm of controversy. Members of an FDA expert panel that recommended against approval resigned in protest. Many physicians were reluctant to prescribe Aduhelm.

In part, the reluctance of physicians was due to price. But it also was because of the uncertainty of the drug’s clinical benefits, the risk of some dangerous side effects, and the likelihood that even if Aduhelm is beneficial, it would help only those with early-stage disease. There is no evidence it would benefit people with more advanced Alzheimer’s or those with other dementias.

One reason for all the controversy: Biogen’s clinical trial results were uncertain at best. As part of its FDA approval, Biogen agreed to begin a Phase 4 trial next May, but those results are not expected until 2026.

The cost

Then there was the cost. Not only the $56,000-a-year for the drug but additional expenses for testing that generally is not covered by private insurance or Medicare. As a part B drug (not a more common Part D medication), Medicare enrollees still would pay 20 percent of its cost, or $11,000 at the current price or about $5,600 annually even at the $28,000 reduced price.

Most important, there is the open question about whether Medicare or private insurers will pay for the drug at all.

Medicare is in the midst of a national coverage determination process to decide whether, and under what circumstances, it will pay for Aduhelm. That decision is expected in the Spring. The coverage review is not supposed to consider price. But reducing costs surely won’t hurt Biogen’s chances for getting Medicare coverage.

Similarly, private insurers must decide whether they will pay for the drug. They are expected to take their cues from Medicare. But the price certainly will matter to them.

Looming competition

This price reduction is not the company’s first attempt to build a constituency for Aduhelm. In September, it offered to provide the drug for free to patients of some Florida medical practices.

Given uncertain benefits and high costs, the market for Aduhelm is evolving very slowly. The company says it sold only about $300,000 worth of the drug in the third quarter of 2021. And along with the price cut, Biogen announced a $500 million restructuring that is likely to result in significant layoffs.

And there may be one other key reason Biogen is cutting prices. Competitors may be about to enter the market with similar drugs. The news site Fierce Pharma reports that Eli Lilly plans to request FDA approval for its own, similar Alzheimer’s drug donanemab by March 2022. Interestingly, the two drugs will be pitted against one another in a head-to-head trial. And we’ll see those results at the end of 2022.

The price cut likely will generate some more customers for Aduhelm but the cost still is much more than what independent analysts believe is reasonable, and far beyond what the vast majority of Alzheimer’s patients can afford.

Better evidence

The lower price also could relieve the financial burden on Medicare, which announced a 15 percent increase in its 2022 Part B premiums largely because of the expected costs of this one drug. Trouble is: beneficiaries will begin paying those higher premiums next month no matter what happens with Aduhelm.

But there is a bigger reason Aduhelm has so far flopped: Biogen has been unable to convince either physicians or consumers that it benefits Alzheimer’s patients. Until it does that, neither it nor its competitors will develop much of a market. Nor should they.