Amgen 2009 Annual Report Download - page 58

• require additional healthcare reform costs to be borne by pharmaceutical and biotechnology companies.
We cannot predict whether these or any future proposed reform measures will be adopted into law. Health-
care cost-containment measures or other healthcare system reforms that are adopted could have a material
adverse effect on our industry generally and any changes to the current U.S. healthcare system that reduce the
coverage and reimbursement of our products, or restrict the way our products are used or prescribed, could have
a material adverse impact on our business. (See “— Our current products and products in development cannot be
sold if we do not gain or maintain regulatory approval.”)
Public and private insurers have pursued, and continue to pursue, aggressive cost containment initiatives,
which could result in lower reimbursement rates for our products. For example, most of our products furnished to
Medicare beneficiaries in both a physician office setting and hospital outpatient setting are reimbursed under the
ASP payment methodology. The ASP payment rate for most of our products furnished in the hospital outpatient
setting has been reduced twice since 2007. ASP-based reimbursements of products under Medicare may be be-
low or could fall below the cost that some medical providers pay for such products, which would adversely affect
sales of our products. We also face certain risks relating to the calculation of ASP. ASP is calculated by the
manufacturer based on a statutorily defined formula and submitted to CMS. However, the statute, regulations and
CMS guidance do not define specific methodologies for all aspects of the calculation of ASP. For example, in the
Medicare Physician Fee Schedule Final Rule for 2010, CMS did not address a proposed methodology for treat-
ment of bundled price concessions. Consequently, the current CMS guidance is that manufacturers may make
“reasonable assumptions” in their calculation of ASP consistent with the general requirements and the intent of
the Medicare statute, federal regulations and their customary business practices. As a result, we are required to
apply our judgment in certain aspects of calculating ASP which are disclosed to CMS and also are subject to fur-
ther CMS review. If our calculation of ASP is incorrect, we could be subject to substantial fines and penalties
which could have a material adverse impact on our results of operations.
Other initiatives reviewing the coverage or reimbursement of our products could result in less extensive cov-
erage or lower reimbursement rates. For example, in March 2007, CMS announced a review of all Medicare
coverage policies related to the administration of ESAs in non-renal disease applications which is a precursor to a
NCD. In July 2007, CMS issued a NCD where it determined that ESA treatment was not reasonable and neces-
sary for certain clinical conditions and established Medicare coverage parameters for FDA-approved ESA use in
oncology. We believe the restrictions in the NCD on the coverage and reimbursement of ESAs has had a material
adverse effect on the use, reimbursement and sales of Aranesp®, which has had a significant impact to our busi-
ness. We believe that the NCD may continue to impact us in the future.
In the dialysis setting, the reimbursement rates for our products may also be subject to downward pressure.
In the United States, dialysis providers are primarily reimbursed for EPOGEN®by the federal government
through the ESRD Program of Medicare. The ESRD Program reimburses approved dialysis providers for 80% of
allowed dialysis costs while the remainder is paid by other sources, including patients, state Medicaid programs,
private insurance, and to a lesser extent, state kidney patient programs. The ESRD Program reimbursement
methodology is established by federal law and is monitored and implemented by CMS. Since April 2006, the
Medicare reimbursement for ESAs administered to dialysis patients has been subject to an EMP, the Medicare
payment review mechanism used by CMS to monitor EPOGEN®and Aranesp®utilization and hematocrit out-
comes of dialysis patients. CMS revised the EMP, effective January 2008, further limiting reimbursement for
EPOGEN®and Aranesp®in certain cases. Further reduction in reimbursement in the dialysis setting could have a
material adverse effect on sales of EPOGEN®and Aranesp®, and our business.
In addition, on July 30, 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. Medi-
care currently does not have a NCD for the use of ESAs for anemia in patients who have CKD and CMS has not
announced whether it will proceed with a NCD for ESAs in ESRD or CKD. However, CMS announced it had
scheduled a MEDCAC meeting for March 24, 2010 to review the use of ESAs to manage anemia in patients who
have CKD, which may consider the results of the TREAT study. In February 2010, CMS released the voting
questions the MEDCAC will address, including whether the available evidence in both CKD not on dialysis and
46