The impact of Medicare's new oncology reimbursement policy will depend on how "average sales price" is defined, Amgen said.

"For ASP plus 6%, you may have some customers who are being reimbursed below cost, and I don't think it's the intent of Congress to deny access or actually to change the way patients have to receive their chemo or care agents," Exec VP-Global Commercial Operations George Morrow said during an Amgen analyst presentation Dec. 15.

That result would be "politically untenable in an election year, so there's going to be a lot of light shined on that," Morrow declared.

"The uncertainty there relates to how ASP is defined, how it's updated, and when they use widely available market price," Morrow stated.

Under the Medicare reform bill signed into law Dec. 8, drugs covered under Part B will see an immediate cut in reimbursement from AWP-5% to AWP-15% (see ¹ Also see "Medicare AWP Payment Cut Takes Effect Jan. 1; Exemption Requests Due" - Pink Sheet, 22 December, 2003.).

Beginning in 2005, Part B drugs will be reimbursed at ASP plus 6% (² [A#00650470005], p. 8).

Amgen believes that payment rate is "inadequate," Morrow declared. The cancer specialty company U.S. Oncology also plans to press the argument that ASP plus 6% is an inappropriate reimbursement rate (³ Also see "AWP Reform Debate Continues; U.S. Oncology Says Cut Will Hit Profits In ‘05" - Pink Sheet, 8 December, 2003., p. 20).

Amgen CEO Kevin Sharer met with leadership from the Centers for Medicare & Medicaid Services Dec. 15 to discuss "reimbursement questions" in the bill. "We're going to have, this year, full access and ability to comment, and we will," Sharer said.

Amgen's two primary concerns with the planned 2005 reimbursement level are the potential for payments below treatment cost and the possibility that ASP plus 6% will not cover indirect costs.

"Prices vary according to purchasing power, so in calculating ASP you have large hospitals and buying groups in the same mix with small unaffiliated physicians clinics," Morrow said.

Reimbursement rates also have to cover "copays, spillage, wastage, providing for the back office staff to run the operation," Morrow maintained. The Medicare bill includes enhanced administrative fees for oncologists and other Part B providers.

Amgen expects only a "minimal" impact from the changes in 2004, but a greater impact in 2005. Amgen's Neupogen , Neulasta , and Aranesp are all paid for under Part B.

In the long run, "the medical imperative is getting stronger to use growth factor" in the oncology setting, Morrow declared. "So, we're feeling very bullish, long-term, about the growth factor market."

Epogen is covered separately under the Medicare program and will not be affected by AWP changes.

However, other changes in the Medicare legislation will affect Epogen reimbursement, including a transition to use of "acquisition cost" as a basis.

Amgen indicated that it is confident that the reimbursement level will not impact Epogen use because "we don't think there is a lot of overuse of Epogen," Morrow said. "We only want appropriate use."

However, "the reason that we really can't give better guidance right now is we need to know how they will calculate acquisition cost, how often they will calculate it, when they will update it," Morrow said.

Amgen's rheumatoid arthritis agent Enbrel should receive a significant boost from the creation of the new Medicare Part D outpatient drug benefit.

In particular, the catastrophic coverage cap in the new benefit will significantly reduce out-of-pocket spending by seniors on Enbrel.

In addition, the market leader in the RA category - J&J's Remicade - is reimbursed under Medicare Part B, so the AWP changes that impact Amgen in the oncology market could help the company in the arthritis field.

Medicare AWP Reform Plan May Be “Politically Untenable,” Amgen Says

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