Amgen 2009 Annual Report Download - page 32

comment period ended on December 16, 2009. The bundled reimbursement rate will be phased in over a four
year period in equal increments starting in 2011. Providers have the option to move to a full Medicare bundled
payment system in 2011 or may elect to adopt certain components of the bundled payment system beginning in
2010. CMS will also be required to establish a quality incentive program that begins concurrently with bundling
in 2011. Beginning in 2012, facilities would be subject to up to a 2% annual reduction in Medicare reimburse-
ment for failure to meet or exceed CMS quality performance standards, including performance standards related
to anemia management and dialysis adequacy. Bundling initiatives that have been implemented in other health-
care settings have occasionally resulted in lower utilization of services that had not previously been a part of the
bundled payment.
ESA Reimbursement Developments. Since April 1, 2006, Medicare reimbursement for ESAs administered to
dialysis patients has been subject to a revised Erythropoietin Monitoring Policy (“EMP”), the Medicare payment
review mechanism used by CMS to monitor EPOGEN®and Aranesp®utilization and appropriate hematocrit
outcomes of dialysis patients. The EMP was revised, effective January 1, 2008, requiring a 50% reduction in
Medicare reimbursement if a patient’s Hb is above 13 g/dL for three or more consecutive months. In addition, the
revised EMP reduces the monthly dosing limits to 400,000 international units (“IUs”) of EPOGEN®, from
500,000 IUs, and to 1,200 micrograms (“mcgs”) of Aranesp®, from 1,500 mcgs. On March 14, 2007, CMS an-
nounced a review of all Medicare policies related to the administration of ESAs in non-renal disease applications
as part of a national coverage analysis (“NCA”), which is generally CMS’ first step toward developing a NCD.
Subsequently, on May 14, 2007, CMS issued a proposed NCD that was open for public comment through
June 13, 2007. On July 30, 2007, CMS issued a NCD which was substantially altered from the proposed NCD.
On January 14, 2008, CMS issued changes to its Medicare NCD Manual, adding the ESA NCD, effective for
claims with dates of service on and after July 30, 2007 with an implementation date of April 7, 2008. The NCD
determined that ESA treatment was not reasonable and necessary for certain clinical conditions, and established
Medicare coverage parameters for FDA-approved ESA use in oncology. We believe that the restrictions in the
NCD changed the way ESAs are used in clinical practice, for example, by decreasing the number of treated pa-
tients, the average ESA dose and the duration of ESA therapy. We believe this restriction on coverage of ESAs in
the NCD has had a material adverse effect on the coverage, reimbursement and sales of Aranesp®, and our busi-
ness and results of operations. In addition, many private payers have implemented portions of the NCD and we
believe many healthcare providers have reduced ESA utilization for all of their patients regardless of insurance
coverage.
On September 11, 2007, the FDA held a joint meeting of the Cardiovascular-Renal Drug Advisory Commit-
tee (“CRDAC”) and the Drug Safety and Risk Management Advisory Committee (“DSaRMAC”) to evaluate the
safety data on ESA use in renal disease. On July 31, 2008, CMS issued a listing of potential topics for future
NCDs as a step to increase transparency in the NCD process, which included as potential topics the use of ESAs
in ESRD and CKD. CMS has not announced whether it will proceed to a NCD for ESAs in ESRD or CKD and
we cannot predict whether ESAs in the renal setting will be the subject of a future NCD, however, any final NCD
for ESAs in the renal setting, which may include non-coverage and/or new dosing and treatment restrictions sim-
ilar to those in the NCD for treatment of anemia in oncology with ESAs, would negatively affect use, reduce
coverage and reimbursement, negatively affect product sales of our ESA products and may have a material ad-
verse effect on our business and results of operations. In addition, the CMS has scheduled a meeting on
March 24, 2010 of the MEDCAC to review the available evidence on the use of ESAs to manage anemia in pa-
tients who have CKD, which may consider the results of the TREAT study. In February 2010, the CMS released
the voting questions the MEDCAC will address, including whether the available evidence in both CKD not on
dialysis and ESRD clearly (i) demonstrates benefits and risks of ESA therapy, (ii) supports a baseline Hb range
or (iii) justifies a dose response or maximum dose. The CMS will decide whether more evidence is needed to de-
termine whether ESA treatment is reasonable and necessary to support continued Medicare coverage. The CMS
may consider initiating a NCA or a NCD following the MEDCAC. While the MEDCAC provides advice and
recommendations to CMS about the adequacy of scientific evidence and votes on certain questions proposed by
CMS, it functions as an independent advisory body and its advice and recommendations to CMS are advisory
only.
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