Medicare rules threaten Epogen with 38% drop

New Medicare rules could have a devastating effect on Amgen's (NASDAQ: AMGN) anemia drug Epogen. The rules would combine payments for the services and drugs dialysis centers deliver to kidney-disease patients, in an effort to cut "overuse" of "profitable, separately billable drugs," the Centers for Medicare and Medicaid Services says in a statement quoted by Bloomberg

Under the previous regulations, dialysis centers could turn a tidy profit on anemia drugs such as Epogen. The drugs "were a profit center; now they'll be an expense," RBC Capital Markets analyst Michael Yee tells the news service. "Now there will be some incentive to use the minimal amount."

Yee calculates that Epogen sales could decline by 38 percent over the next three years as the rules are phased in. That would take sales down to $1.6 billion from $2.6 billion last year.

Amgen has been suffering from poor performance of its anemia drugs for some time now, ever since they got "black-box" warnings of links to heart disease and stroke. But those sales drops have come mostly at the expense of Aranesp, the anemia drug marketed to cancer patients. Epogen has held its own at around $2.5 billion for some six years now, Yee says. That's not growth, but it's not decline, either.

- read the Bloomberg piece 

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