UPDATE 2-US Medicare proposes no changes for anemia drugs

Wed Mar 16, 2011 5:49pm EDT

* Drugs include Amgen's Epogen, Aranesp; J&J's Procrit

* CMS final ruling due in mid-June

* Amgen shares rise 1 percent (Adds analyst comment, background, share price, byline)

By Deena Beasley

LOS ANGELES, March 16 (Reuters) - U.S. Medicare officials do not plan at this time to change coverage terms for anemia drugs used to treat kidney patients.

The agency, which is slated to issue a final decision on the matter in June, also said it has found no clear proof that the drugs provide clinical benefits other than increasing hemoglobin.

Endorsement of current reimbursement guidelines would benefit shares of Amgen Inc (AMGN.O), which takes in billions from sales of its flagship anemia drugs for treatment of kidney patients. The company's shares were up 1 percent at $53.15 in after hours trading on Wednesday.

"This still leaves the door open for a future and final ruling but at the end of the day, we think that a worse case scenario was clearly avoided," JP Morgan analyst Geoff Meacham said in a research note.

Under a draft decision announced on Wednesday, the U.S. Centers for Medicare and Medicaid Services said it would not issue a national coverage determination at this time.

The agency said it would seek comments on the announcement, and would respond in a final decision memorandum in June.

Some Wall Street analysts are concerned that the government healthcare plan might lower the threshold for target hemoglobin rates, thereby reducing usage of Amgen's Epogen, which is approved for usage in kidney patients undergoing dialysis.

A second-generation Amgen drug, Aranesp, as well as Procrit, which is sold by Johnson & Johnson (JNJ.N), are used to treat anemia in kidney patients who are not yet sick enough to need dialysis and for cancer patients undergoing chemotherapy.

Known as erythropoiesis stimulating agents, or ESAs, the anemia medicines are used by patients with chronic kidney disease at various stages to help reduce fatigue caused by the disease or blood transfusions.

Sales of the drugs have declined steeply in recent years amid safety concerns, but Amgen's Aranesp and Epogen along with J&J's Procrit are still expected to generate $7 billion in 2011 revenue, according to data from Thomson Reuters.

Although CMS currently pays for the drugs on a region-by-region basis, it has no comprehensive, nationwide policy on the issue. While CMS can't make any recommendations on the drugs themselves -- that's the job of the Food and Drug Administration -- any Medicare payment changes could affect their use.

Private health insurers also tend to eye Medicare decisions when setting their own coverage policies.

While Medicare traditionally covers just elderly and disabled Americans, kidney disease patients are an exception.

The program also covers all those with end stage renal disease under a decades-old law. As of 2009, Medicare covered 572,569 kidney patients, according to CMS.

FDA is also weighing whether to change approved use of ESAs for kidney patients, but its own outside advisers have urged no action. Both CMS and FDA have already taken steps to address use of ESAs in cancer patients. (Additional reporting by Susan Heavey; Editing by Steve Orlofsky, Bernard Orr)

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