Amgen 2012 Annual Report Download - page 23

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coverage and reimbursement methodologies. Worldwide use of our products may be affected by cost containment pressures and
cost shifting from governments and private insurers to healthcare providers or patients in response to ongoing initiatives to reduce
or reallocate healthcare expenditures. An increasing worldwide focus on patient access controls and cost containment by public
and private insurers has resulted, and may continue to result, in reduced reimbursement rates for our products. In addition, healthcare
reforms enacted in the United States have made substantial long-term changes to the reimbursement of our products, and those
changes have had, and are expected to continue to have, a material adverse impact on our business.
U.S. Reimbursement System
Our principal products are sold primarily in the United States, and healthcare providers, including doctors, hospitals and
other healthcare professionals and providers, are reimbursed by the government through Medicare, Medicaid and other government
healthcare programs as well as through private payers for covered services and products they use. Government healthcare programs
are funded primarily through the payment of taxes by 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 65 years or older as well as
those with certain disabilities or 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 responsibilities, has authority to promulgate regulations and policies, as well as issue
reimbursement codes for drugs, all of which can determine how medical items and services are covered and reimbursed by
Medicare. CMS can also issue Medicare NCDs, which are national policy determinations granting, limiting or excluding Medicare
coverage for specific medical items or services applicable throughout the United States. In the absence of a relevant NCD, Medicare
coverage determinations for a particular medical item or service are left to MACs, who issue LCDs, which are binding on providers
within their respective jurisdictions. CMS sometimes uses advisory committees of external experts in order to obtain independent
expert advice on scientific, technical and policy matters. For example, the Medicare Evidence Development & Coverage Advisory
Committee (MEDCAC) was established to provide independent guidance and expert advice for CMS on specific clinical topics.
The MEDCAC reviews and evaluates medical literature and technology assessments and examines data and information on the
effectiveness and appropriateness of medical items and services that are covered under Medicare or that may be eligible for
coverage under Medicare.
Medicare Part B Coverage of Drugs. Medicare Part B provides limited coverage of outpatient drugs and biologicals that
are reasonable and necessary for a medically accepted diagnosis or treatment of an illness or injury and that fall into a statutory
benefit category. One such category relevant to our products covers drugs and biologicals furnished incident to a physician’ s
services. Generally, incident-to drugs and biologicals are covered if they satisfy certain criteria, including that they are of the type
that are not usually self-administered by the patient. Medicare Part B also covers certain drugs pursuant to specific statutory benefit
categories, such as blood-clotting factors and certain immunosuppressive drugs, erythropoietin and certain oral cancer drugs.
Many of our principal products are currently covered under Medicare Part B (as well as other government healthcare programs).
Medicare Part D Coverage of Drugs. Medicare Part D provides a voluntary prescription drug benefit for Medicare eligible
beneficiaries. The coverage is available through private plans that provide insurance coverage for prescription drugs for a monthly
premium and with patient cost sharing. 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; specifically the statute stipulates that
Medicare Part D plans have at least two drugs in each unique therapeutic category or class, subject to certain exceptions.
Medicare ESRD Program. Most patients with ESRD, regardless of age, are eligible for coverage of dialysis treatment through
Medicare's ESRD Program. Because Medicare is the primary payer for dialysis treatment in the United States, 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. Since January 1, 2011, dialysis treatment under the ESRD Program has been
reimbursed under a bundled-payment system described in more detail below. See Dialysis Reimbursement.
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 program. 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 those groups of beneficiaries. Medicaid is financed jointly by the states and the federal government
through taxes. Medicaid offers a broad set of benefits, including prescription drugs, although coverage varies by state. Medicaid
includes the Drug Rebate Program, which requires that manufacturers provide rebates for the states for products covered and
reimbursed by state Medicaid programs.
See Item 1A. Risk Factors — Our sales depend on coverage and reimbursement from third-party payers.