VA health system won’t cover Biogen’s Alzheimer’s drug

The Department of Veterans Affairs won’t cover Biogen Inc.’s new Alzheimer’s drug, the latest rebuke of the controversial treatment since it was approved earlier this summer.

The VA decided not add the drug, called Aduhelm, to its formulary list of available medicines because of the drug’s risk of causing serious side effects and a lack of evidence that it improves cognitive function, an agency spokeswoman said.

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The VA provides medical benefits to more than nine million veterans, and is the largest integrated healthcare system in the U.S. The agency is known for being a shrewd customer of prescription drugs, using its large purchasing power to haggle steep discounts from manufacturers. By law, the VA has greater leeway than other government health programs such as Medicare and Medicaid to deny coverage of medicines it deems to be of poor value.

Last month, a research paper by a group of VA doctors and scientists identified more than 150,000 veteran beneficiaries diagnosed with Alzheimer’s and estimated that the drug could cost the VA more than $4 billion annually, plus additional spending on associated care such as screening tests and imaging scans. The paper hasn’t yet been published in a peer-reviewed journal.

The VA’s rejection comes as Biogen seeks to persuade health insurers to cover the medicine and push back against critics who have cast doubt over its effectiveness and value.

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For the average patient, Aduhelm costs about $56,000 annually, according to Biogen, which could add up to billions of dollars in new taxpayer spending on Medicare, the federal health program for the elderly that is expected to pay for the majority of Aduhelm prescriptions.

The Centers for Medicare and Medicaid Services is conducting a nine-month review of whether to cover the drug for Medicare patients and under what circumstances. Meanwhile, a few hospitals have said that they won’t administer the drug to their patients, citing concerns over the drug’s effectiveness and the Food and Drug Administration’s process for approving it.

On Thursday, the VA posted on its website a document detailing its review of Aduhelm and its decision. The document provides guidance to doctors not to offer the drug to VA patients, but allows for doctors to seek exceptions for certain patients.

"Any requests must meet prescribing guidance and will be adjudicated on a case-by-case basis," the spokeswoman said.

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A Biogen spokeswoman said the VA’s no-coverage policy isn’t absolute and includes a pathway for veterans to access the drug. "Biogen remains committed to ensuring veterans have access to the latest therapies for Alzheimer’s and we will continue to engage closely with the VA as they evaluate potential updates to their guidance," she said.

Biogen’s drug, co-developed with Eisai Co. Ltd., has been mired in controversy since being approved by the FDA in June, the first new treatment for the memory-robbing disease in nearly two decades. The FDA cleared the treatment despite what it said were lingering uncertainties about its effectiveness and the unanimous objections of an outside panel of expert advisers, three of whom later resigned in protest of the approval.

Ultimately, the FDA said approval was justified based on the reasonable likelihood that the drug’s proven ability to remove a protein called amyloid from the brain will slow the mental deterioration caused by a disease with virtually no other treatment options.

The approval was criticized by some doctors and scientists, who said that further clinical studies were needed to prove the drug would benefit patients and thus justify its hefty cost and potential for serious side effects including brain bleeding.

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Biogen has said it stands by its clinical data used to support FDA approval in people with early Alzheimer’s symptoms. The company has said that it expects sales of the drug to build gradually because of logistical hurdles in getting patients treated, but that Aduhelm should eventually reach billions of dollars in annual sales.

Disagreements over the drug’s approval and concerns about its financial impact on the healthcare system have led health insurers to take a cautious approach to deciding whether to cover the drug. Most eligible patients are covered by Medicare, according to Biogen.

Write to Joseph Walker at joseph.walker@wsj.com