July 27 (Bloomberg) -- Amgen Inc., the world’s largest biotechnology company, and Genzyme Corp. will be able to separately bill Medicare for oral drugs used in dialysis until 2014, longer than first proposed. The shares rose.
Medicare, the U.S. health program for the elderly and disabled, yesterday imposed rules that bundle, or combine into one fee, payments for multiple services and drugs that dialysis centers provide to patients with severe kidney disease. Oral medications that have no intravenous equivalent won’t be included until Jan. 1, 2014.
The oral drugs were part of the bundled fee when the rules were proposed last September. The oral medicines used by dialysis patients include Amgen’s Sensipar and two products from Cambridge, Massachusetts-based Genzyme, Renagel and Renvela, which cut phosphate levels.
“There do seem to be favorable elements for industry within the rule,” said Arthur Henderson, an analyst for Jefferies & Co., in a telephone interview yesterday from his office in Nashville. That’s because the fee paid to dialysis centers led by Fresenius Medical Care AG of Bad Homburg, Germany, and DaVita Inc. of El Segundo, California, will decline only 2 percent to $250 to $260 per treatment and because of the delay in including the oral drugs, he said.
The new rules may cut sales of Faraheme, an intravenous iron-boosting drug from AMAG Pharmaceuticals Inc., as the centers opt instead for cheaper products, said Yaron Werber, an analyst for Citi Investment Research in New York.
“Why would centers use an expensive intravenous iron product instead of a fairly comparable and much cheaper IV iron formulations?” Werber said in a telephone interview today.
Amgen, based in Thousand Oaks, California, rose 84 cents, or 1.6 percent, to $54.51 at 4 p.m. in Nasdaq Stock Market composite trading. The shares have declined 3.6 percent this year. Genzyme gained 13 cents to $67.51, and has increased 38 percent this year.
Fresenius Medical Care rose 4.9 percent in Frankfurt trading to 43.15 euros. DaVita fell 34 cents, less than 1 percent, to $60.52 in New York Stock Exchange composite trading.
The rules released yesterday follow three years of debate over the cost and risks of drugs used in dialysis treatment. The old reimbursement formula used by the U.S. Centers for Medicare and Medicaid Services created an incentive for dialysis centers to “overuse profitable, separately billable drugs,” the agency said yesterday in a document announcing the rules.
Sales of Amgen’s intravenous Epogen, the world’s top-selling anemia drug, is likely to fall under the new rules. Epogen sales may decline 38 percent from last year’s $2.6 billion as the regulations are phased in over the next three years, said Michael Yee, an analyst with RBC Capital Markets in San Francisco, in a telephone interview.
Anemia drugs “were a profit center, now they’ll be an expense,” Yee said in a July 23 telephone interview. “Now there will be some incentive to use the minimal amount.”
Kidney disease depletes patients’ red-blood cell levels and can worsen their fatigue and increase their need for transfusions. Epogen is used to boost those blood cells, though the ideal level is still debated. Pushing them too high with greater doses of Epogen can add to the risk of heart disease and stroke, studies found.
Concern for Undertreatment
Amgen had submitted comments to the Centers for Medicare and Medicaid Services opposing Sensipar’s inclusion in the bundle. The company argued that making Sensipar and other oral medications part of a single-fee package would cause dialysis patients to be undertreated for hyperparathyroidism and would be detrimental for patients who need these drugs, Amgen spokeswoman Emma Hurley said in a July 23 telephone interview.
The delay in making the oral medications part of the bundle gives Amgen and Genzyme a transitional period and allows them to maintain current revenue from their drugs, said Geoffrey Porges, an analyst for Sanford C. Bernstein & Co. in New York.
The delay “acknowledged the concerns expressed in the dialysis community,” Hurley said in an e-mail today. “This will help maintain access to important therapies for dialysis patients.”
Sensipar is used to treat hyperparathyroidism, a complication of kidney disease that leads to excess levels of a hormone and too much calcium in the blood. It had sales of $651 million last year and analysts projected that to rise.
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