Amgen 2009 Annual Report Download - page 30

government through Medicare, Medicaid and other government healthcare programs as well as through private
payers. Government healthcare programs are funded primarily through the payment of taxes from individuals and
businesses. The public and private components of this multi-payer system are described below.
Medicare and Other Forms of Public Health Insurance
Medicare is a federal program administered by the federal government that covers individuals age 65 and
over as well as those with certain disabilities and ESRD, regardless of their age. The primary Medicare programs
that affect reimbursement for our products are Medicare Part B, which covers physician services and outpatient
care, and Medicare Part D, which provides a voluntary outpatient prescription drug benefit. CMS is the federal
agency responsible for administering Medicare (as well as Medicaid, described below) and, among its re-
sponsibilities, has authority to issue Medicare national coverage decisions (“NCD”) as well as manual policy
issuances and updates and codes for drugs and other items. Local Medicare contractors have authority to issue
Local Coverage Determinations. Generally, a NCD issued by CMS is a national policy statement granting, limit-
ing or excluding Medicare coverage for a specific medical item or service.
Medicare Part B Coverage of Drugs and ESRD. Medicare Part B provides limited coverage of outpatient
drugs and biologicals that are furnished “incident to” a physician’s services. Generally, “incident to” drugs and
biologicals are covered only if they satisfy certain criteria, including that they are of the type that is not usually
self-administered by the patient and they are reasonable and necessary for a medically accepted diagnosis or
treatment. Medicare Part B also covers some drugs pursuant to a specific statutory directive, such as blood-
clotting factors and certain immunosuppressive drugs, erythropoietin and certain oral cancer drugs, if they fall
under a specific statutory benefit category and they are “safe and effective” as established by FDA approval.
Many of our principal products, including EPOGEN®, Aranesp®, Neulasta®and NEUPOGEN®, are currently
covered under Medicare Part B (as well as other government healthcare programs). In addition, most patients
with ESRD, regardless of age, are eligible for coverage of dialysis treatment through the ESRD Program under
Medicare Part B, the primary payer for dialysis treatment. Because Medicare Part B is the primary payer for
dialysis treatment, reimbursement for products, such as EPOGEN®, that are typically administered in dialysis
centers and other settings is particularly sensitive to changes in Medicare coverage and reimbursement policy.
Medicare Part D. Medicare Part D provides a voluntary prescription drug benefit for Medicare eligible
beneficiaries. This coverage is available through various private plans that provide insurance coverage for pre-
scription drugs for a monthly premium. The list of prescription drugs covered by Medicare Part D plans varies by
plan, but drug lists maintained by individual plans must cover certain classes of drugs and biologicals, specifi-
cally the statute stipulates that Part D plans have at least two drugs in each unique therapeutic category, subject to
certain exceptions. Medicare patients who obtain ENBREL and Sensipar®under retail coverage, where they are
primarily provided, are typically covered by Medicare Part D.
Medicaid. Medicaid is a joint federal and state program administered by individual states for low-income
and disabled eligible beneficiaries. CMS also has responsibility for federal administration of the Medicaid pro-
gram. Under federal law, states must cover low-income adults and children, pregnant women, disabled
individuals and seniors, and states have the option of expanding eligibility beyond these groups of beneficiaries.
Medicaid is financed jointly by the states and federal government through taxes. Medicaid offers a broad set of
benefits, including prescription drugs. Medicaid includes the Drug Rebate Program which requires manufacturers
to provide rebates to the states for our products covered and reimbursed by state Medicaid programs. (See—
“Government Regulation” and “Item 1A. Risk Factors — Our sales depend on coverage and reimbursement from
third-party payers.”)
Private Health Insurance
Employer-sponsored insurance. Employer-sponsored insurance represents the main pathway by which
Americans receive private health insurance. Many employers provide health insurance as part of the benefits
package for employees. Insurance plans are administered by private companies, both for-profit and not-for-profit,
and some companies are “self-insured” (i.e., they pay for all healthcare costs incurred by employees directly
through a plan administered by a third party). Generally, employer-sponsored insurance premiums are paid pri-
marily by employers and secondarily by employees.
18