Medicare dialysis "bundling" will trim Amgen sales

LOS ANGELES Fri Jul 17, 2009 3:40pm EDT

LOS ANGELES (Reuters) - Tighter payments by U.S. government health plans for kidney dialysis treatment will trim sales at Amgen Inc (AMGN.O), and more clues about the full impact may come in a rule proposal as early as next week.

The Centers for Medicare and Medicaid Services, or CMS, is slated to release its planned ruling on "bundled" dialysis reimbursement soon, with implementation starting in January 2011.

Drugs used by dialysis patients, including Amgen's blockbuster anemia treatment Epogen, are billed separately. Medicare found this to be an incentive for dialysis centers to overprescribe them.

Concern about overuse of anemia drugs, mainly given intravenously, has grown over the past couple of years after studies emerged showing high doses could lead to heart complications or death.

Under the bundled system, dialysis providers will receive a fixed payment for all services and drugs. The dialysis center would effectively profit by spending less money on each patient.

"I suspect the impact will be modest to Amgen," said Cowen and Co analyst Eric Schmidt. "The guidelines have changed. There does seem to be less dosing, and probably less overdosing as well."

Other analysts are forecasting a deeper hit to sales.

Deutsche Bank analyst Mark Schoenebaum has predicted a drop of about 41 percent in Epogen sales over the four years of the program's phase-in -- from $2.37 billion in 2010 to $1.39 billion in 2014.

Amgen said in a statement that it is "supportive of policies that improve patient access and the quality of care for ESRD (end-stage renal disease) patients."

The biotech company also said critical elements of the system include "a well-defined scope for the new dialysis bundle, payment adjustments for higher cost cases, a phased transition to the new system, a robust quality incentive program, and annual update to the payment rate."

The federal health insurance program for the elderly and disabled spends about $2 billion annually on Epogen, for which dialysis providers are now reimbursed at the average sales price plus 6 percent.

A spokeswoman for CMS declined to comment on exactly when the proposed rule will be issued, but said it would likely include a public comment period of at least 60 days.

Patients with kidney failure need regular dialysis to help clear their blood of waste. Anemia, a shortage of red blood cells, is a common side effect of the disease and can cause fatigue and headaches.

Drugs like Epogen, as well as Amgen's longer-lasting Aranesp, are bioengineered proteins that work by boosting the number of red blood cells.

Analysts said it remains unclear whether oral drugs used to treat dialysis patients -- like Genzyme Corp's GENZ.O Renvela and Amgen's Sensipar -- will be included in the bundling program.

"Should the oral ESRD drugs ultimately be bundled, there would be a clear disincentive against use of branded orals," Cowen and Co analyst Phil Nadeau said in a research note on Thursday. "Generics and and drugs owned by the dialysis chains themselves would benefit."

(Reporting by Deena Beasley; Editing by Richard Chang)

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