Amgen 2007 Annual Report Download - page 55

creased frequency of cholecystitis, inflammation of the gall bladder, in patients treated with our late-stage prod-
uct candidate motesanib diphosphate, we delayed our phase 3 trial in first-line NSCLC, which was previously
expected to begin in the fourth quarter of 2006, until the second half of 2007. Clinical trials must be designed
based on the current standard of medical care. However in certain diseases, such as cancer, the standard of care is
evolving rapidly. In these diseases, the duration of time needed to complete certain clinical trials may result in
the design of such clinical trials being based on an out of date standard of medical care, limiting the utility and
application of such trials. Of course, even if we successfully manage our clinical trials, we may not obtain favor-
able clinical trial results and may not be able to obtain regulatory approval for new product candidates, product
label extensions or maintenance of our current labels on this basis. Further, clinical trials conducted by others,
including our licensees, partners or independent investigators, may result in unfavorable clinical trials results that
may call into question the safety of our products in off-label or on label uses that may result in label restrictions
and/or additional trials.
In connection with our efforts to improve our cost structure, we refocused our spending on critical R&D and
operational priorities and sought greater efficiencies in how we conduct our business, including optimizing on-
going clinical trials and trial initiation. These efforts will assist in allowing us to provide continued support of
key activities including (i) current and future postmarketing studies, including those with respect to our ESA
products, Aranesp®and EPOGEN®; (ii) regulatory affairs, safety and compliance functions; (iii) clinical studies
to advance our late-stage pipeline; (iv) the advancement of earlier stage compounds and (v) research efforts in
the core areas of oncology, inflammation, bone and metabolic disorders. To the extent future sales are negatively
affected as a result of additional regulatory and reimbursement developments or other challenges, we may be re-
quired to further adjust our R&D investment plans. Such actions could result in delays in obtaining approval or
reductions in the number of indications and market potential of our product candidates. We also partner certain
portions and/or geographic regions of our pipeline to preserve opportunities that may result in sharing the pos-
itive economic results with another party.
Our sales depend on payment and reimbursement from third-party payers, and, to the extent that reimburse-
ment for our products is reduced, this could negatively impact the utilization of our products.
Sales of all of our principal products are dependent, in part, on the availability and extent of reimbursement
from third-party payers, including governments and private insurance plans. Generally, in Europe and other
countries outside the United States, the government sponsored healthcare system is the primary payer of health-
care costs of patients. Governments may regulate access to, prices or reimbursement levels of our products to
control costs or to affect levels of use of our products. Worldwide use of our products may be affected by these
cost containment pressures and cost shifting from governments and private insurers to healthcare providers or pa-
tients in response to ongoing initiatives to reduce or reallocate healthcare expenditures. Further, adverse events or
results from clinical trials or studies performed by us or by others or from the marketed use of our drugs may ex-
pand safety labeling for our approved products and may negatively impact worldwide reimbursement for our
products. On July 30, 2007, the CMS issued its Decision Memorandum and on January 14, 2008, issued changes
to its Medicare National Coverage Determinations Manual, effective for claims with dates of service on or after
July 30, 2007, with an implementation date of April 7, 2008. A complete discussion of the Decision Memo-
randum follows below. (See also “— Our current products and products in development cannot be sold if we do
not gain or maintain regulatory approval of our products and we may be required to perform additional clinical
trials or change the labeling of our products or take other potentially limiting or costly actions if we or others
identify side effects after our products are on the market.” and “— Guidelines and recommendations published
by various organizations can reduce the use of our products.”)
Most patients receiving Aranesp®, Neulasta®and NEUPOGEN®for approved indications are covered by
government and/or private payer healthcare programs. Medicare and Medicaid government healthcare programs’
payment policies for drugs and biologicals are subject to various laws and regulations. Beginning in January 1,
2005 under the MMA, in the physician clinic setting and January 1, 2006, in the hospital outpatient and dialysis
settings, Aranesp®, Neulasta®and NEUPOGEN®have been reimbursed under a Medicare Part B payment meth-
odology that reimburses each product at 106% of its ASP (sometimes referred to as “ASP+6%”). Effective
January 1, 2008, Medicare payment in the hospital outpatient setting reimburses each product at 105% of its
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