Is it Worth It?

The term that keeps coming up when you talk to Republican staffers in the House of Representatives about their 2011 agenda is: oversight.

“I think one of the lessons Republicans learned when they lost power in 2006 is they should have done more oversight of their own people,” says one Democrat on Capitol Hill who doesn’t think oversight of the Obama Administration would be such a bad idea.

If Republicans didn’t learn the lesson of conducting more oversight of their own, they sure are planning to teach a lesson to their colleagues on the other side of the aisle.

Unless you were living under a rock, you know that repealing health care reform was one of the top issues Republican candidates across the country ran on as they took over the majority in House and made major gains in the Senate.

The start of that process, according to many Republicans, is to haul up heads of key agencies in HHS—including the HHS Secretary Kathleen Sebelius—to start asking some hard questions about healthcare reform and its implementation going forward.
“Once he gets vaccinated, we look forward to seeing him” for oversight hearings, quips one Hill staffer of Acting CMS Administrator Don Berwick, who has yet to go before a House congressional committee but will testify before the Senate Finance Committee on November 17.

CMS is already a focal point of the soon-to-be incoming Congress with pending national coverage decisions for Dendreon’s prostate cancer cell-based immunotherapy Provenge, Amgen’s Aranesp and erythropoiesis-stimulating agents (ESAs), and the possibility of doing the same with Roche/Genentech’s Avastin for first-line treatment of breast cancer.

The House Oversight & Government Reform Committee, which will be chaired by Rep. Darrell Issa (R-Calif.) come January, has already sent a letter to FDA Commissioner Margaret Hamburg probing the agency’s oversight of pharmaceutical manufacturing plants in Puerto Rico. The letter promises more questions in the future, and we expect an in-person appearance before the committee will not be far off.
The question is: are Obama Administration officials ready and willing to face a hostile Congress for the two years?

There are already rumors in Washington that HHS Secretary Sebelius could be the next high-level official out the door. And FDA Commissioner Hamburg has a built-in successor in Deputy Joshua Sharfstein, who has previous Hill experience. And remember, Berwick is still only “acting” (he was a recess appointment) and has yet to be confirmed by the Senate.

Whether they stay or go may depend on their appetite for a good, long public fight. Do they think it’s worth it? We’ll know in the next 12 months.

PhRMA Throws Bus Under the Bus

Remember the flap over candidates throwing allies, staff and pastors “under the bus?” It may seem like an eon; but it is only a little over a year ago that jettisoning a former supporter brought the phrase “throwing someone under the bus” into the common political parlance.

Now the phrase has true relevance to pharma politics. It creates the perfect metaphor to describe a change in tactics by the Pharmaceutical Research & Manufacturers of America (PhRMA), the trade association.

PhRMA is abandoning one of its high-visibility projects of the last four years, the patient assistance bus campaign in favor of a the larger goal of pushing through health care reform.

Ed Silverman writes about the trade association’s decision to put the bus back in the garage until the end of the health care reform effort in an article in “The Pink Sheet” Daily.

The association explains to Ed that it is too busy with health reform to take on budgeting issues like the cost of the bus campaign until the end of this legislative season.

That is clearly one reason. There is no question that PhRMA is busy with health reform and multiple mark-ups on Capitol Hill. And the association needs all of its resources to keep spending as heavily as it can (through partners like Families USA and the American Medical Association) to create the image of a strong consensus in support of overall health care reform.

From a strategic point of view, giving up the bus now makes perfect sense. The bus was just a vehicle (a big 18-wheel vehicle) for PhRMA to draw attention to its longer overriding objective: to get access for drug coverage to a good chunk of the 40-some million people who are insured and often can’t pay for drugs themselves. Offering assistance programs through the traveling bus was a good way for PhRMA to take charge of the issue of expanding drug coverage to the needy.

Health care reform moves that from a slow city-by-city or region-by-region effort to sign up people to the chance to legislate coverage to a large new market in one fell swoop. With that opportunity, it makes sense to change tactics.

It is worth noting as the bus goes back to the shop that it was also an effective way to counteract one of the most telling anti-industry metaphors of the last decade: the bus trips by seniors to Canada to buy cheaper drugs. PhRMA usurped the metaphor by sending a bus to the disadvantaged to sign them up for private assistance.

But now is the time for PhRMA to focus on opening the public pocketbook to drug coverage. The association and industry have been doing well at this effort: offering to pay $80 billion to pay for the cost of reform and stand with the White House has been a big plus.

PhRMA faces some big hurdles to the market expansion: take, for example, a recent change in the Senate Finance Committee mark (proposed legislation) that would remove the requirement for states to add drug benefits to all new Medicaid recipients. At first glance, this change would knock out a large proportion of the newly covered Medicaid beneficiaries in 2717 states from being assured of getting access to drugs.

That wouldn’t be good for PhRMA. The industry in this deal to get access to those Americans who cannot afford drugs now and to make sure that they get drugs without high out-of-pocket costs.

But getting coverage without a mandate on Medicaid to include drug programs for all beneficiaries won’t be the end of the road. PhRMA can always bring out the bus again to the states with coverage gaps and work at the state legislatures. The association should keep the tires inflated and the engine in tune while the bus is taking its break in the garage.

CMS Administrator Search: Glenn Steele Out?

With all of the movement in Washington on the confirmations of HHS Secretary and Deputy Secretary Kathleen Sebelius and Bill Corr, respectively, as well as the confirmation hearing of FDA Commissioner nominee Margaret Hamburg, lost in the shuffle is that the CMS Administrator has yet to be named. 

It looked like that position was close to being filled by Geisinger Health Systems President Glenn Steele. Apparently not.

Steele has dropped out of the running, according to an individual on Capitol Hill familiar with the search. 

On paper, Steele is a perfect candidate. He heads up one of the most innovative health systems in the country and has been called upon many times to advise Congress, publicly and privately. Basically, Geisinger promises better quality for a flat fee and they take on the extra costs if they don't perform a given medical intervention properly the first time around. To read a great summary of Geisinger, click here. 

Before joining Geisinger in 2001, he was VP of Medical Affairs at University of Chicago (anybody with clout in Washington from Chicago?) and Dean of Biological Sciences at the Pritzker School of Medicine. 

Anyone care to guess where he was prior to Chicago? You guessed it, Harvard. 

During a recent Senate Finance Committee health care roundtable at which he testified, Steele told the Committee a few times that he would prefer to answer certain questions in private, tipping off that he could be under consideration for an administration job. 

Steele is at least the third candidate to drop out of the CMS running; Billings Clinic's Nicholas Wolter and Institute for Health Care Improvement CEO Don Berwick were the other two.  To read our coverage on the search, click here, and here. 

Because of the nature of previous administration nominations and searches, Steele could still emerge as the choice; however, based on what we've heard, that's not presently the case. 

CMS Administrator: The Pick Is Made, But Who Is It?

We've heard from a few people that the next CMS Administrator has been chosen by the Obama transition team. We're sure the one name we left off the list will get the job, but here are a few names to consider anyway:

Mayo Clinic CEO Denis Cortese: Cortese would be an intriguing pick to lead the agency and seemingly has every qualification to lead the growing Medicare programs: He's an outsider, he holds a medical degree, he manages a large health institution and he's helped to implement a number of the most talked about health reforms at Mayo and made them work. Cortese also chairs the Institute of Medicine Roundtable on Evidence-based Medicine.

The Mayo Clinic Health Policy Center for the last two and a half years, according to Cortese, has developed four principles for reform: 1) getting value out of the provider network, 2) getting integrated and coordinated care, 3) payment reform to pay for value, and 4) insurance for all.

At a November 17 event on health care put together by the Engelberg Center for Health Care Reform, Cortese discussed his views on how to pay for high-value medicine. Here's a window into how Cortese thinks about health reform from comments at the Engelberg event:

"Medicare will have to change the way it does business….One, they need to pay for value. Of all the organizations that can identify where value is, they know where it is. They just need to begin to find—maybe with pilots—some ways to do it."

"They have to get rid of price controls and reduce price controls. Price controls have done nothing to control the rate of spending—absolutely nothing to control the rate of spending throughout the last 30 years or so. And in place of that, put transparency of pricing and value, and the transparency that reports where everybody’s performing."

"There ought to be a mechanism to let people pay more if they choose to do so. Maybe that’s the only way you will get pay for value. Let individuals decide what is of value to them, and let them choose some."

"Allow comparative effectiveness studies to be done. Comparative effectiveness studies are absolutely crucial in helping to decide what to design for coverage and what to actually cover. That currently today is explicitly not allowed for reasons that are vague to me. It’s totally…mindless. It’s another example of a mindless attempt to try to regulate something through Congress, and the unintended consequences are we don’t use evidence to decide anything basically. So you get what you pay for."

Cortese is also on the Mayo Board of Directors along with Tom Daschle.

Institute for Health Care Improvement CEO Donald Berwick:

Berwick is considered a leading authority on health quality and improvement and co-chaired the National Priorities Partnership which put together a report focused on core principles aimed at transforming the health care system.

Berwick has served as vice chair of the U.S. Preventive Services Task Force, the first "Independent Member" of the Board of Trustees of the American Hospital Association, and as chair on the National Advisory Council of the Agency for Healthcare Research and Quality.

He’s also on IoM’s governing council and previously served on President Clinton's Advisory Commission on Consumer Protection and Quality in the Healthcare Industry. Co-chaired by the secretaries of health and human services and labor, the Commission was charged with developing a broader understanding of issues facing the rapidly evolving health care delivery system and building consensus on ways to assure and improve the quality of health care.

He is also clinical professor of pediatrics and health care policy at the Harvard Medical School. Berwick was also at the Engelberg briefing and here's what he had to say about reforming the system and his view of the three major issues standing in the way:

"I think the problem is cost: it's total cost. It is manifestly possible for a Western democracy to give all the care its population needs for about 10 percent of GDP. It is possible. You can't say it's not possible because it's being done. We're at 16 percent or 17 percent. We're wasting probably 40 percent or 30 percent of the dollars we're putting into health care."

"We simply have a toxic dynamic in health care, that if you make something it will be used. No other market works that way. We have to target supply driven care as a matter of public policy. It’s very, very, difficult."

"The second is integrated care for chronic illness and the gaps there in. Seventy percent of costs go into chronic illness care. Probably half of it is pure waste. And a lot of it happens because we don’t have the integrated flows that we need for a restructured care system."

"The third really might be American exceptionalism. It’s our inability to learn from successful models outside of this country. Countries that function with better care than we have; we are 19th out of 19. We’ve got to learn from these other models and not throw them away because we assume that stuff like that doesn’t work here. It will."

The Urban Institute's Robert Berenson: Berenson is a Medicare veteran and is considered a favorite to end up running the agency; he served on the Obama Transition’s agency review group. From 1998-2000, he oversaw payment policy and managed care contracting at the agency. His current research focuses on modernization of the Medicare program to improve efficiency and the quality of care provided to beneficiaries. We think his medical degree is a plus in the coming era of comparative effectiveness research.

Former Avalere exec Jon Blum: The former VP at the health care consultancy Avalere Health where he directed its Medicaid & Long-Term Care practice, Blum is understood to have already left Avalere and is already working at CMS. We’re just not sure in what capacity.

Blum was on the Obama health policy working group working on the transition. Prior to joining Avalere, Blum served on the professional staff of the Senate Finance

Committee and was a lead advisor on the Medicare prescription drug program and played a key role in drafting the Medicare Modernization Act of 2003. He also was an analyst at the Office of Management & Budget.

Harvard's Jeffrey Liebman: We think Liebman is a dark horse candidate to run CMS. He has two key characteristics one would look for in a Medicare Administrator: he was one of three key health advisors to Obama during the campaign and he's an economist.

Along with Harvard's David Cutler and David Blumenthal, Liebman is credited with developing Obama’s health care strategy and projecting cost savings associated with the overall proposal.

His areas of expertise include social insurance, tax and budget policy, poverty, and income inequality. Liebman coordinated the Social Security reform working group and was special assistant to the President under the Clinton Administration.

Harvard's David Cutler: We assumed Cutler would get a top job right out of the gate. After all, Cutler was considered the top health advisor to Obama and serves/ed on the transition's health policy working group. But we heard Cutler was going to coordinate the outside advisors to the campaign as part of the transition and may serve the campaign from his office at Harvard.

If Cutler joins the administration, a spot in the White House is most likely. Still, we don't want to remove someone who is so obviously qualified for the job at CMS from consideration, even if Medicare isn't especially the most attractive job in the administration. It still has a huge impact on the overall health system. Cutler has co-authored health economics papers with Mark McClellan and shares some of McClellan’s views on finding significant cost savings by correcting and reforming the inefficiencies in the system.

Harvard's David Blumenthal: Another David. Another Harvard professor. Another top Obama advisor. Blumenthal is director of Massachusetts General Hospital’s Institute for Health Policy and was a major contributor to the Obama health plan during the campaign. Blumenthal got his start in politics as a professional staff member on Senator Ted Kennedy’s Subcommittee on Health and Scientific Research during the 1970s, which is always a good thing if you're a Democrat. Like Cutler, we expected Blumenthal to be given a post almost immediately after Nov. 5. So far, no word. We've heard that Blumenthal may also serve the administration in a consulting capacity from the outside but until we hear that for sure from a primary source, we're keeping Blumenthal on the list.

Margaret Hamburg: This is a name you may not have heard of until now, but she's an intriguing choice. Hamburg is on the HHS agency review team as part of the Obama transition. She could end up at any number of agencies or remain outside the administration altogether. But here are the three things we think make her an interesting candidate for CMS: she's an MD, she ran a large health care system and she has served in a past administration.

Hamburg was named assistant secretary for policy and evaluation at HHS in 1997 under President Clinton. She was health commissioner from 1991-1997 for New York City...not a small town.

Former Clinton health advisor Judy Feder: The Virginia 10th District Democratic Candidate in 2008 is likely to land somewhere in the administration given her background. The question is, where? The answer may be CMS.

Feder previously served as HHS chief health policy adviser in the role of HHS principal assistant secretary for planning and evaluation under the Clinton Administration. She was the point person with Ira Magaziner during the administration's attempt at universal coverage.

Feder was also staff director on the bipartisan Congressional Pepper Commission on comprehensive coverage. She served as Dean of Georgetown University’s Public Policy Institute between 1999-2007.

Deal of the Year Nominee: Over-Protecting Therapeutic Classes in Medicare

Ah, awards season. Why should film critics have all the fun? And voting! It's not just for presidential elections. This year your IN VIVO Blog team is nominating a handful of alliances, acquisitions, financings, regulatory negotiations and legislative compromises in our First Annual DOTY competition. And then you, dear readers, will vote (early and often, we hope) for the winner. Imaginary federal and international biopharmaceutical statutes prohibit us from awarding a monetary prize. But our winners, when they die, on their deathbeds, they will receive total consciousness. So they've got that going for them, which is nice.

When the Medicare outpatient prescription drug benefit began just three years ago (seems longer, doesn’t it?), the story was all about the glitches encountered by beneficiaries, pharmacists, governments (state and federal), and insurers as they all tried to learn together, in real time, how to make stand-alone prescription drug insurance work.

For Forest Labs, though, there was a much bigger glitch. It happened when the Centers for Medicare & Medicaid Services told plans in 2005 that they must cover essentially all drugs in a handful of big therapeutic categories: the now famous six protected classes—antidepressants, antipsychotics, anti-epileptics, anti-neoplastics, immunosuppressants and HIV therapies. The Medicare agency concluded (after hearing loud and clear from patient organizations relying on those medicines) that the need to protect access among vulnerable benficiaries trumped the plans’ need to be able to exclude medicines in an effort to extract deeper discounts for manufacturers.

That was good news, of course, for companies with products in those classes. Except for Forest. Because the Medicare agency made one prominent exception: there was no need for plans to cover Forest’s antidepressant brand Lexapro (escitalopram), the agency said, so long as they covered Forest’s closely related (and off patent) Celexa (citalopram).

In essence, the federal government told plans that Lexapro is equivalent to Celexa, and so plans could meet the agency’s goal—ensuring patients have access to all options in the six critical classes—without having to cover Forest’s biggest product.

That decision took Forest by surprise, to put it mildly. Forest was ultimately able to get the language addressing Lexapro removed from CMS’ policy, and it also managed to get Lexapro on most plan formularies—but at the cost of deeper discounts than it anticipated.

That history explains why a seemingly insignificant clause slipped into a hard-fought compromise on Medicare funding in 2008 may turn out to be the biggest deal of the year.

When Congress “codified” the CMS policy over the summer, it sounded like no big deal. It sounded like a simple matter of elevating the six protected classes from an ad-hoc principle established by administrative fiat to a formal, statutory requirement. No change from the status quo, right?

Well, then people actually read the provision of the law “codifying” the policy. It did no such thing.

Instead of adopting CMS’ language stipulating the classes, Congress instead gave CMS the authority to define any classes as protected. And it also made it much more onerous for CMS to create exceptions to those protections within classes. Call it the Forest clause.

That is a very big deal indeed.

There is nothing to stop the next CMS Administrator from expanding the list to include, say, Alzheimer’s therapies as protected classes. Plenty of people wonder why—if the goal is to protect vulnerable patient populations—AD therapies weren’t on the list in the first place. And then, why not antidiabetics? Surely we shouldn’t disrupt treatment in that class, when the consequences of uncontrolled illness can be so severe and costly. Or rheumatoid arthritis, where decisions by Part D plans have a direct affect on Part D spending. You see where this is headed, right?

Sure, there is no reason to think that the people who created the six protected classes in the first place would expand the list just because Congress says they can. After all, they invented the list and easily could have decided to add more at any time.

But those people won’t be calling the shots anymore, not after January 20. The next CMS Administrator could, with the stroke of a pen, add to the list of protected classes--and be cheered for it by the Democratic leadership of Congress.

No wonder managed care plans are concerned. They weren’t happy about CMS’ policy in the first place, since it basically takes away their leverage to negotiate better prices on some pretty big line items. But they really aren’t happy about the potential for that list to expand, potentially ad infinitum.

And, while manufacturers may feel differently, they better not gloat.

That's because Medicare Part D is itself the product of one of the more unlikely deals of all time. It came about in large part because pharmaceutical manufacturers and their long-time political adversaries, the managed care sector, were able to join forces in support of a never-before-tried concept: stand-alone prescription drug insurance.

That deal helped generate enough support in Congress—just barely—to push the Part D program through in 2003.

And, as the managed care industry is busily reminding Big Pharma, that program will only work if plans are able to do what politicians historically cannot: deny access to medicines if they need to in order to contain costs. The alternative? A program that allows broader access to medicines—but with more direct government intervention in prices.

So when the new Congress turns to price intervention proposals in 2009, remember the deal struck in 2008—a seemingly noncontroversial item slipped into a hard fought compromise bill. If that small deal helps break up the coalition that made Part D possible, that would be a very big deal indeed.

Was Tom Scully Right About Nexium?

You probably remember when Tom Scully was the head of the Centers for Medicare and Medicaid Services.

If you do, you may also remember his rants about successor products companies create to offset generic competition for one of their brands. He was particularly concerned about the amount of taxpayer money being spent to cover AstraZeneca’s Nexium. The company’s original proton pump inhibitor omeprazole (Prilosec) works just as well, he maintained – and extremely cheap omeprazole generics are available, as are over-the-counter versions.

Here’s a sample of what Scully said about Nexium back in 2003 and 2004:

• "The fact is, Nexium is Prilosec. It is the same drug. It is a mirror compound. It is exactly the same."
• "You should be embarrassed if you prescribe Nexium because you're screwing the patients and you're screwing taxpayers.”
• “Nexium is a game that is being played on the people who are paying for drugs, and it's not right."

Get the picture? Mr. Scully isn’t a fan of Nexium, at least when it comes to the government paying for it.

Well, now CMS has released some of its findings from an examination of Part D drug claims data from 2006 and 2007, and guess what? It looks like Tom had a good reason to be concerned. Nexium is the fourth largest drug in the program by cost. Only Lipitor, Plavix and Zyprexa have a larger claim to Part D dollars.

CMS says gastrointestinal drugs accounted for 8.7% of overall drug costs, and presumably Nexium is a big chunk of that, given its fourth-place ranking. TAP’s PPI Prevacid also contributed significantly to spending in the category, coming in seventh overall.

Interestingly, proton pump inhibitors seem to be the drugs Part D beneficiaries think they can do without when they reach the donut hole and have to cover the full cost of the drugs themselves.

A recent study by the Kaiser Family Foundation found that, on average across eight drug categories, 15 percent of Part D enrollees stopped taking their medicines when they fell into the donut hole, but the highest rate of discontinuation was for PPIs, at 20 percent.The study said, “Because there is some concern that PPIs are overused for more routine gastrointestinal conditions, terminating medication use might not pose serious health risks in some cases.”

There’s been a lot of pushing by the plans to use low-cost drugs by having lower copays for generics than brands. One problem with differential copays in Part D is that many of those enrolled in the program are eligible for a low-income subsidy from the government, and they are protected from the higher copays for brands. As a result, they don’t respond to the financial incentives provided by differential copays to take the cheaper drug.

Plans are starting to respond to that by putting stricter drug utilization management rules, like prior authorization and step therapy, in place for those beneficiaries. The biggest Part D plan sponsor, UnitedHealth, is taking that route, as detailed in a recent article in “The Pink Sheet.”

So what would Tom say about this data? I asked him, and he was nice enough to provide a few thoughts by e-mail. First, he wished to say that he has no grudge with Nexium per se, and if someone wants to pay for it in a private plan, that’s just fine with him, but “no government insurer should pay for Nexium as an added cost to Prilosec. … My last year at CMS I think Medicaid spent $350 M on Nexium – absolutely insane.”

And, not to rub it in or anything, but he did have this final reaction to all the money being spent on Nexium in Part D: “I told you so.”--Scott Steinke

image by flickr user shoothead used under a creative commons license

The New Administration: More Names to Consider

We didn't wait for the election to start the speculation about who might play an important role in an Obama Administration. But now that the voters have spoken, we've heard a few more names bandied about for key posts in the new Administration.

So, without further ado, here are some additions to our prior post:

HHS Secretary:

Rosa DeLauro (US Congress): We thought Tom Daschle was sure to end up as HHS Secretary, but now we hear he may instead be leading the health care reform effort from within the White House. (You know, kind of like Hillary did in the Clinton Administration. Not exactly like that, we hope.) And we've heard that maybe Connecticut Congresswoman Rosa DeLauro (pictured) will get the job. DeLauro currently chairs the agriculture appropriations subcommittee in the House, which among other things oversees FDA's budget. She's no fan of DTC ads, sloppy overseas manufacturing, or anything that looks like overly cosy relationships between industry and regulatory. In other words, she would make a verrrrry interesting secretary for the pharmaceutical industry. The suspense on this position won't last long, so stay tuned...

FDA Commissioner:

Ezekiel Emanuel (NIH): The National Insitutes of Health's chief bioethicist has a cv that is longer than a typical issue of IN VIVO, packed with publications, books, awards and honors. The one thing not on it: his brother, Rahm, was just named chief of staff to President-elect Obama. Those family connections ensure Emanuel will be an influential figure in the new Administration; whether FDA is the right fit is a different question. Still, his involvement in addressing conflict-of-interest issues--both within NIH and in other professional societies--is likely to set the tone for how clinical research and medical education evolve in the years ahead. (FYI, the third Emanuel brother is an agent in Hollywood. That's right: Mr. and Mrs. Emanuel have one son who is a hard driving political operative, one who is a hard driving Hollywood agent, and one who is...a bioethicist.)

Jerry Avorn (Harvard): One of the pioneers in the field of pharmacoepidemiology, Avorn's post at Harvard gives him an in with the Obama health team and the Massachusetts Senate delegation. FDA is prey to internal disagreements between its clinicians and its epidemiologists, and historically the leadership has come from the clinical world. But the emphasis on drug safety and post-marketing surveillance could make someone like Avorn an attractive candidate.

Joshua Sharfstein (Baltimore Commissioner of Health): Kennedy is the traditional power broker for FDA, but it is an open question whether his health will allow him to continue to play that role in 2009. So someone like Sharfstein, who once served on Rep. Henry Waxman's staff, could be a more likely candidate since House members have a strong interest in FDA as well. And he has Steve Nissen-like drug safety credentials, having helped led the charge to withdraw pediatric indications for OTC cough/cold medicines. A pediatrician by training, Sharfstein graduated from Harvard Medical School in 1996.

David Kessler (UCSF): Yes, that David Kessler. Plenty of folks are suggesting that he wants back into government and that he could end up back at FDA. We've been telling people for more than a year the next FDA commissioner will be from the Kessler mold, so we certainly can't resist passing on the notion that it will just be Kessler himself. He recently lost his post as Dean of the UCSF Medical School--under unpleasant circumstances--so we're betting a move back East would not be unwelcome.

CMS Administrator

Judy Feder (Ex-Georgetown): Feder is also certain to play a prominent role in the Obama health team after her unsuccessful bid for Congress in Virginia. Feder's campaign was closely aligned with the top of the ticket, and though she fell far short of unseating incumbent Frank Wolf in Virginia's 10 District, she is likely to be rewarded for helping increase Democratic support for Obama in what proved to be a pivotal state for the campaign. A veteran of the Clinton Administration (she was HHS principal deputy assistant secretary), she surrendered her position as Dean of Georgetown's Public Policy Institute before launching her unsuccessful bid.

Elizabeth Fowler (Senate Finance Committee): Fowler, one of the key Democratic staffers who worked on the Medicare Part D benefit, certainly has the resume for the job: in addition to her time on the Democratic committee staff, she worked as VP-public policy at Wellpoint, as an attorney at Hogan & Hartson, and as a health services researcher with HealthSystem Minnesota. Ironically, one drawback could be the key role she played as one of the few Democratic staffers who helped draft the Medicare Modernization Act. Changes to MMA are atop the agenda of many in the Democratic Congress, and having a CMS administrator so closely tied to the 2003 law could be a problem.

Cybele Bjorklund (House Ways & Means Committee): Bjorklund, on the other hand, would be the staffer who represents the Democratic opponents to MMA still bitter about being shut out of the end of the debate that created Medicare Part D. In the House, Bjorklund has worked on legislation to undo the "non-interference" clause in Part D - including proposals to have Medicare launch its own prescription drug plan.

Kevin Concannon (Iowa Department of Human Services): Concannon is only one of many state Medicaid program directors who could be considered for positions in the federal agency. However, he bubbles to the top of the pack because: (1) He has led two state Medicaid programs, first in Maine and now in Iowa; (2) In Maine, Concannon implemented a state-wide drug discount program that withstood a court challenge from the brand name pharmaceutical industry; (3) His boss, Gov. Tom Vilsack, helped deliver Iowa for Obama (after Vilsack ended his own presidential campaign, and then supported Clinton in the rest of the primaries), and may join the administration in the Department of Agriculture; and (4) Iowa is the home state of Finance Committee ranking Republican Chuck Grassley, which would presumably help Concannon get through the Senate.

The Next Administration: McCain's Top Health Positions

With the actual election almost here, we figure we’d provide you with a few shortlists of possible candidates for three key positions under either a McCain or Obama Administration. First the McCain people. The lists are by no means scientific. These are names that have been circulated, brought up in discussions with sources, or individuals we think could end up being candidates based on their experience. Remember, this is just for fun. Without further ado:

McCain Administration

HHS Secretary:

Former Arkansas Governor Mike Huckabee: The former governor’s name has been floating around as a possible HHS Secretary from the time he bowed out of Republican Primary because of his reputation as a health reformer in his home state. Will his cool relationship with McCain preclude him from a role in the Cabinet?

Former Massachusetts Governor Mitt Romney: Romney makes the most sense as HHS Secretary for the leadership role he took in ushering in the universal coverage system (with the help of Ted Kennedy and state congressional leaders) in Massachusetts. The program initially ran into serious early problems but now it seems to be gaining in popularity. Why not Romney? As they say in boxing: these two guys just plain old don’t like each other.

Former FDA/CMS head Mark McClellan: There’s only one significant health care post McClellan hasn’t held: HHS Secretary. The reasons for choosing him are obvious: former FDA commissioner, former CMS administrator (implemented the Part D program), leading the way on active surveillance through the Engelberg Center for Health Care Reform, and chairs the public-private Reagan-Udall Foundation. And he’s respected by Republicans and Democrats alike. The problem? We think McClellan’s best shot at HHS Secretary was during the Bush Administration and he was passed over for Utah Governor Michael Leavitt.

Iowa Senator Chuck Grassley: The ranking minority member on the Senate Finance Committee is a reform-minded Republican, particularly when it comes to FDA and Medicare. He hasn’t been talked about much but we think he should be considered.

FDA Commissioner:

Bill Schultz (Zuckerman Spaeder): Although Schultz is considered to be a Democrat, his name has surfaced as a possible commissioner candidate under a Republican administration. Why’s that? We’re not sure, and this one has us scratching our collective heads. However, Schultz played a key role representing generic drug makers in Congressional negotiations over a follow-on biologics bill that barely missed getting attached to the FDA Amendments Act.

Ray Woosley (C-Path Institute in Arizona): The cardiologist is highly regarded by both sides of the aisle and has made a name for himself in the area of drug safety. With his C-Path Institute, Woosley has also taken the lead on one of FDA’s most high profile public/private efforts, the Critical Path Initiative.

Edward Diethrich (Arizona Heart Institute): The cardiovascular surgeon is a prominent physician with a specialty in endovascular procedures and founder of the Arizona Heart Institute. His strong Arizona ties make him an obvious candidate for the commissioner’s job.

Frank Torti (FDA): The FDA’s chief scientific officer and former Wake Forest researcher is only one of two viable internal candidates for the job. Many think he will take over FDA in the interim between Andrew von Eschenbach’s departure and the choosing of the next commissioner. If he plays his cards right, with the administration and Congress, it could be him. But the permanent job almost certainly won’t go to someone from the inside.

Janet Woodcock (FDA): We believe that Woodcock is a registered Democrat (Plan B testimony) but she has a very good working relationship with the drug industry and proven herself to be a good manager of a number of large initiatives within FDA ranging from the Sentinel active surveillance system and Critical Path to Safety First. She could also lead FDA in the interim post-Von E, however, we believe her chances of landing the top spot permanently are incredibly slim.

CMS Administrator:

Former CMS Administrator Gail Wilensky: Currently a senior fellow at the non-profit Project HOPE, Wilensky is an official adviser to the campaign and is on any short list for administration positions. She served a two-year stint as administrator of the Health Care Financing Administration (now CMS) from 1990-1992 under Bush I. We could see her going back to oversee the next complicated phase of Part D.

McCain Advisor Jay Khosla: Khosla serves as a health policy advisor on the McCain team. He served in the Senate as health counsel for the Senate Budget Committee and health policy counsel to former Senate Majority Leader Bill Frist (R-Tenn.). Medicare cost-cutting has been a focus of his public comments.

McCain Advisor Dan Crippen: Former domestic policy advisor to President Reagan from 1988-1989, Crippen could take on any number of advisory roles in a McCain Administration. The former CBO director would seem most suited to the top spot at CMS given his stance on addressing Medicare cost savings above and beyond anything else.

This list is just a start and we’ll surely be adding to it and subtracting from it after the election. We’ll give you the Barack Obama short lists on Tuesday. Then we'll give you our picks, but we want to know: What do you think? Any names you’d like to add? We’d love to see you’re picks. We may even post them.

Lucentis Congressional Oversight Hearing Put On Hold

Genentech will get a reprieve from lawmakers investigating the company’s pricing practices for its age-related macular degeneration drug ranibizumab (Lucentis).

The Senate Special Committee on Aging, which has been conducting the investigation, has decided not to initiate an oversight hearing on the issue.

“I don’t think that we’re going to schedule a hearing at this time,” says a Senate investigator. “However, we may have some staff findings on this matter which we may make public in the near future.”

While the committee aims to win the battle of public opinion, it’s a welcome development for Genentech knowing that one of their executives won’t be called in front of a Congressional panel—along with the television cameras—for intense questioning.

Last October, Senate Special Committee on Aging Chairman Herb Kohl (D-Wisc.) sent a letter to the Centers for Medicare and Medicaid Services asking why Medicare was paying a steep premium for Lucentis when the “chemically similar” cancer drug bevacizumab (Avastin) can be used off-label for AMD at a fraction of the cost.

The committee then launched a formal investigation in November with letters to FDA and Genentech. To read the specifics, click here.

CMS responded to the October 2007 committee letter at the end of February, according to the Senate investigator. Staffers intend to put together a staff memo containing findings from the investigation.

The staff identified “interesting details” in the FDA inspectional papers, e-mails and interviews, as well as noteworthy findings on the issue of whether Genentech promised to provide free Lucentis for the NIH/National Eye Institute-sponsored, head-to-head CATT study evaluating microdoses of Avastin compared to Lucentis (more on this later).

The findings of the investigation could be made public in a few weeks.

FDA-CMS Parallel Reviews: A Mixed Bag

Parallel reviews by the Food & Drug Administration and the Centers for Medicare & Medicaid Services may be just around the corner.

According to a research note put out by Stanford Group’s David Blaszczak, Greg Frykman and Jan Wald earlier this week, the agencies are close to issuing a Federal Register notice that will solicit comments on a voluntary program that would allow a manufacturer to receive an approval from FDA and a national coverage decision from CMS at approximately the same time.

The idea for a parallel review process was first proposed after Mark McClellan left his post as commissioner of FDA to become administrator of CMS in 2004. Given his experience at the heads of both agencies, it seemed natural that McClellan would be interested in a closer relationship between FDA and CMS, but plans for a demonstration project were eventually scrapped.

Questions about whether the agencies were starting to work more closely together resurfaced during the erythropoietin safety debate. Rather than wait for FDA to conclude its safety review of EPO, CMS conducted a simultaneous assessment and issued a national coverage decision before FDA had reached a final conclusion on restricted labeling. We have covered that story extensively in The RPM Report; subscribers can click here and here to read all about it.

So what would parallel reviews mean for industry? The majority of manufacturers certainly won’t be pleased about the potential for FDA and CMS to work more closely together: the Stanford team notes that drug and biologic sponsors are likely to complain about a more extensive FDA review process, which could slow down drug approvals. Confidentiality is also likely to be a top complaint.

But industry’s queasiness also stems from a fear that parallel reviews could blur the line between two agencies with two very different missions: FDA’s review of safety and efficacy, and CMS’ determination of whether coverage is “reasonable and necessary.” Inevitably, the conversation turns to whether cost would start to become a factor in either decision—the same reason that most of industry remains uneasy about a national center on comparative effectiveness.

Since the proposed process would be voluntary, it’s likely most manufacturers won’t take advantage of it. But Stanford believes that “forward-thinking” companies should consider it, under the following circumstances:

• they have a potentially successful product anticipated for, or in registrational development,
• that is likely to cause a paradigm shift in the management of one or more serious and life-threatening diseases and;
• for which premium pricing is under internal consideration.

If nothing else, the proposal should serve as a reminder that sponsors should avoid waiting until after FDA approval to open coverage discussions with CMS. On the contrary, that exchange needs to take place early and often.

While You Were Hanging Your Stockings By the Chimney with Care

"It's a major award!"

Not many creatures stirring this pre-holiday weekend, but we couldn't resist keeping up our weekly roundups of what you might have missed anyway. Basically, not much. We guess it isn't a surprise that you won't find us keeping up the not-quite-rigorous blogging pace this week and the beginning of next, though surely we'll pop up from time to time to amuse those of you hard at work. For the rest of you, bundled up on the couch watching "A Christmas Story," be careful not to shoot your eyes out this week.

• Winner: IMS Health: Maine's state law that restricts access by medical-data companies to doctors' prescription information is unconstitutional, says a Federal Judge, according to an AP report in today's WSJ. You could have seen this one coming if you a) thought a previous ruling in New Hampshire pointed toward a similar result in Maine or b) you read about this on Friday (hey we told you it was a slow weekend).
• The Boston Globe ran a Q&A with CMS boss Kerry Weems on Sunday. Weems is on the road encouraging consumers to shop around for the best medicare plans.
• The Times profiles Renovo CEO Mark Ferguson, whose career has taken him from "dentist to alligator biologist to pharmaceutical chief executive eyeing an estimated £6 billion virgin blockbuster market."
• Ben Goldacre's Bad Science reminds us that particularly around the holidays, some health studies are too good to be true.

The Lucentis/Avastin Investigation: “The Story is Far From Over”

If you thought the battle over Lucentis and Avastin was confined to FDA, CMS and NIH, you’re wrong. Now Congress is jumping into the fray in significant fashion as is typically the case when the government feels they are overpaying for something.

On October 18, Senate Special Committee on Aging Chairman Herb Kohl (D-Wisc.) sent a letter to Acting CMS Administrator Kerry Weems asking why Medicare was paying a steep premium for Lucentis when the “chemically similar” cancer drug Avastin can be used off-label for age-related macular degeneration at a fraction of the cost.

The letter was in response to Genentech’s decision to cut off distribution of Avastin to compounding pharmacies, which are responsible for creating micro-doses of the drug that are tolerable in the eye. For more on Genentech's strategy, see this feature in the December RPM Report.

Kohl asked two questions of CMS: 1) How much has Medicare spent on the two drugs since 2005?; and 2) What measures has CMS taken to reduce expenditures on Lucentis, such as using Avastin?

Now things are starting to heat up. On November 7, 14 and 16, Kohl launched a formal investigation by sending two letters to FDA Commissioner Andrew von Eschenbach asking for all documents related to FDA field inspections and one letter to Genentech president of product development Susan Desmond-Hellmann, respectively. Kohl asked Genentech for essentially any document related to the Lucentis/Avastin dispute, from the company’s decision-making to meetings with FDA, NIH and CMS.

“We’re trying to figure out what really happened,” says one Senate staffer involved in the investigation. The committee is receiving “conflicting stories” from FDA, CMS, NIH, Genentech and the compounding pharmacies, the staffer says.

The Aging Committee has interviewed officials from Genentech and received documents from the government agencies. However, investigative staffers are still waiting for more evidence to come in.

The investigation is focused on several questions, according to the Senate staffer. First, “what happened during the FDA inspection” of Genentech’s San Francisco facility and the reason for the destruction of several lots of Avastin at the site.

Second, the staffer says, Genentech had agreed to take part in the National Eye Institute-sponsored head-to-head CATT study of Lucentis and Avastin if the design were changed to focus more specifically on safety and the trial was extended to allow for longer follow-up. “This summer, Genentech had a change of heart,” and the committee wants to know why the company changed its mind and chose not to participate in the trial and charge the government retail price for Lucentis.

Third, there was “initial concern” that Health & Human Services General Council Daniel Meron may have been unduly influenced to reject designating the CATT study a demonstration project in order for CMS to fund the trial. Then-Acting CMS Administrator Leslie Norwalk had approved the demonstration project.

The Office of the General Counsel justified its decision by saying it was obvious the demo project would improve the quality of the clinical trial and would benefit from having Medicare beneficiaries participate in it, therefore a demonstration project was not needed to prove it.

As a result of the CATT study delay, Kohl is developing legislation that gives CMS authority to waive co-pays for patients participating in government-funded clinical trials and comparative-effectiveness studies. Co-pays present a study design challenge because beneficiaries can be unblinded to what drug they are receiving because it represents a percentage of the total drug cost. In other words, the higher the co-pay, the more expensive the drug.

The Senate staffer says this type of situation occurs routinely with head-to-head studies but the CATT study is the “most egregious” example.

The Senate Special Committee on Aging will wait to receive more documents over the next several weeks, and after review, decide whether to hold an oversight hearing. “We have enough to hold a Q&A hearing right now, but we want to wait until we have all the documents,” the staffer says. “The story is far from over.”

Venturing to Washington II: Fleecing the Drug Industry

The primary concern of Day 1 of the FDA/CMS Summit was just how bad for the industry are the unofficial tollgates of a more safety-conscious FDA and the official post-approval burdens imposed by the FDA Amendments Act.

Day 2 focused on a perhaps more inchoate fear – the chance that payors of all stripes will take the savings they need out of the hide of the drug industry.

And they will need them. Amgen VP of Global Coverage and Reimbursement Josh Ofman noted the variety of ways drugs cut overall health costs – but ultimately acknowledged, as did a variety of other speakers, that cost-containment was going to hit drugs hard – either, says Ofman, through controlling market access, restricting coverage (e.g., through formulary controls), or by imposing conditional coverage.

Most speakers did not expect the industry nightmare of a single-payor to soon take flesh. And the popularity of unfettered drug choice makes dispensing restrictions political and economic non-starters. But without them, the easiest (and most politically popular) target for cutting costs, separately noted Eli Lilly’s top politico Alex Azar and Rob Seidman, the influential former pharmacy chief at Wellpoint, is the biopharma industry—through price reductions and rebates (which fatten PBM profits as much as they cut drug expenses). Drugs covered by Part D—where consumer choice is most obvious (“what do you mean I can’t have Lipitor?” the consumer bellows at the pharmacist)—will likely face the brunt of the pricing assault.

Unfair? Absolutely. As much BS as drug companies hand out about their R&D spend, the fact is they can’t invest in new medicines if they can’t charge enough for the ones they get to market. Investors, for one, won’t allow it. Rob Seidman somewhat cynically commented that if the drug companies can’t create new products for less than $1 billion, they “need to build a better mousetrap.”

So—some mousetrap suggestions. First, there are ways of cutting that cost. Lilly’s Chorus division has shown it can get products to proof-of-concept much quicker than traditional development programs, giving their late-stage clinical colleagues a much broader choice of likely programs to push forward (and their business development colleagues a slew of out-licensing candidates that would otherwise have been dust-collectors on lab shelves).

Second, former Pfizer exec Stephen Williams, now with a new firm he founded called Decisionability, offered an interesting solution to the rising reimbursement risks – securitizing them in much the same way private equity firms and royalty buyers have learned to securitize drug-development programs. Instead of packaging development-stage products into tradeable securities (e.g., Morgan Stanley’s Pharmaceutical Royalty Monetization Assets—click here for more on just how clever the financial community can be), theoretically one could bundle approved products into packages that could cut a sponsor’s risk of reimbursement problems and permit investors to share in the upside of a positive outcome.

But drug companies also need to figure out ways of cutting reimbursement risk without turning to Wall Street. And one very practical solution is to start exploring how to create at least two formulations, one Part D and one Part B, for a molecule entering development (it’s a point we’ve mentioned before—here for example). That means exploring how a small-molecule headed for Part D might be useful in an IV infusion…and doing so at the earliest stages of planning for proof-of-concept. Take those biotechs, for example, developing small-molecule therapies for cancer or as replacements for niche drugs in orphan diseases, like lysosomal storage disorders: oral is convenient, sure. But IV can have both therapeutic and reimbursement advantages, too.

It’s reimbursement-oriented portfolio management – and it’s why R&D executives need to be au courant on the challenges their commercial colleagues face with payors (and why the marketing guys should focus on more than just market size when they kibbitz on drug development issues).

Final suggestion: there were roughly 200 attendees at the FDA/CMS Summit. More than half were the drug companies’ policy mavens. It’s clear, at least to this blogger, that what was once inside-the-beltway wonk material is now central to financial and drug-development strategy. If senior marketing, finance and R&D execs are leaving this stuff to their Washington groups, they’re leaving themselves wide open to the competitors who aren’t.

Drug Safety Alarm: "Something Big" Coming?

If you attended our FDA/CMS Summit last week, it was great seeing you. If you missed it, shame on you. The keynote address by Cleveland Clinic cardiologist Steve Nissen on the state of the FDA stirred up a lot of controversy, not surprisingly.

However, one thing we didn't hear in his remarks could be more worrisome to the biopharmaceutical industry than what he actually said. A little birdie told us at the meeting to prepare "for something big" to be released this week.

We have no idea what the "something" could be. Do you? I will say that the last time a little birdie told us at The RPM Report that Steve Nissen was up to "something big," the "something" turned out to be Avandia.

EPO Relabeling: Its Not the Black Box, Its What FDA Says About the Black Box

Whoever said actions speak louder than words hasn’t been paying attention to the regulatory response to drug safety issues involving the anemia therapies darbepoetin (Aranesp) and epoetin (Procrit, Epogen).

FDA unveiled strong new warnings on the EPO brands marketed by Amgen and Johnson & Johnson on November 8. The new warnings stress the dangers of using the agents too aggressively to elevate hemoglobin levels, and emphasize that there is no evidence that the drugs improve symptoms of anemia—they should only be used to reduce the risk of transfusion.

It is safe to assume that the new labeling will have absolutely no impact on how the drugs are actually used.

On the other hand, what FDA said about the new labeling will have an impact.

That’s because FDA used the relabeling to repeat its position that restrictive coverage rules implemented by the Centers for Medicare & Medicaid Services are “generally consistent” with the revised labeling.

FDA first made its position on the EPO drugs clear almost a month ago, in a letter to two powerful members of Congress. And in so doing, the agency ensured that the labeling change itself would be anti-climactic at best. That’s because it is CMS’ coverage policy—not FDA’s regulatory actions—that will drive use of the products going forward. (Although FDA still isn't done with EPO; what the agency does next probably won't make much of a difference to Amgen and J&J commercially, but will nevertheless be a key milestone in the implementation of the new drug safety law. You can read all about that in The RPM Report's November issue.)

The question of how the label matches the CMS coverage policy came up repeatedly during a media conference call hosted by FDA November 8. Office of Oncology Drug Products Director Richard Pazdur observed that the labeling says care should be taken that hemoglobin levels not exceed 12 g/dL. “This is not a target,” Pazdur stressed. “This is an upper boundary for safety.”

Office of New Drugs Director John Jenkins highlighted several elements of the labling, including the addition of a new chart summarizing results of six clinical trials showing an adverse impact on survival or tumor progression. The chart includes a column highlighting actual average hemoglobin levels achieved in the trial (data available for three of the six studies). Although the trials targeted hemoglobin levels above 12, actual measures achieved were below 12 in two of the three cases, including only 10.6 in one study that found an adverse survival outcome.

So, Jenkins observed, FDA has added to labeling a warning statement emphasizing that the available data cannot exclude a risk in patients whose hemoglobin levels are maintained below 12. In other words: FDA is saying the drugs are dangerous when used in patients with hemoglobin above 12, but the agency is not saying they are safe when used at levels below that.

Instead, Jenkins said, FDA's goal is to encourage conversations between doctors and patients about whether to use EPO “at all” and then to use “the lowest dose to prevent transfusion.”

Amgen and J&J, of course, see things a bit differently. In fact, they both formally asked CMS to reconsider the policy on November 8, the same day the new labeling was adopted.

Sharer responded to FDA's position that the CMS policy is consistent with the labeling. “I think the issue of consistency here is a bit of red herring," Amgen CEO Kevin Sharer said on an investor conference call to explain the new labeling. " I think the real issue is physician discretion. Clearly, the labeling gives physicians discretion here and the NCD does not. We see that as the point of policy that really needs to be focused on.”

Sharer, though, is not promising anything in terms of changes. "Our financial plan is to manage the company on the assumption that the NCD will stand.”

The reconsideration request certainly looks like a long shot. Sharer acknowledged that the submission does not have a lot of new data in the “literal use of the word data.” It does include a new study conducted in Germany showing now adverse outcomes in patients with Hodgkin’s lymphoma, and it includes some early data about signals of increased transfusions in the US resulting from the policy.

But what it mostly does is reargue the points addressed by CMS in the policy. “Over the course of this year, many different individuals, capable individuals and entities have looked at this data and come out in favor of giving the providers discretion,” Sharer said. “We think the weight of opinion of others looking at this data is very very important information.”

What Does the FDA Drug Safety Law Mean for Drug Development?

If you have been reading the IN VIVO Blog you know what we think.

But why trust us?

That's why we've lined up a bunch of top R&D executives--like Pfizer's new R&D head Martin Mackay, Bristol's head of development Brian Daniels, and Glenn Gormley from Novartis--to talk about that at this year's FDA/CMS Summit for Biopharma Executives. It is just a month away: December 6-7 in Washington DC.

Our own Roger Longman will moderate a panel discussion among that group, tackling the big question: Did FDA kill the blockbuster?

And that is just one of more than 20 different sessions featuring top industry and government officials who will discuss all aspects of the new FDA law, as well as the new realities of reimbursement, Medicare Part D and the broader political landscape. All with an eye to helping you understand what it means for your business.

Why are we telling you this? Because we want you to come. Click here for more information.

Amgen Feels the Effects of CMS’ Long Shadow

To no one’s surprise, sales of Amgen’s flagship anemia product darbepoetin (Aranesp) dropped sharply in the third quarter, 23% worldwide, and 36% in the US. Given the tough new restrictions put on coverage of Aranesp and J&J’s epoetin brand Procrit in the key Medicare market, a big hit was inevitable.

Still, it is worth looking at the full impact of the Centers for Medicare & Medicaid Services coverage decision on Amgen’s third quarter results. (If you haven’t been following this, you can catch up by clicking here.)


Given the tight coverage policy, it is no surprise that EPO use is way down in the Medicare market directly controlled by CMS.

But the coverage policy is casting a much bigger shadow than that.

First, there is a spillover effect into the private insurance market for chemotherapy patients. Amgen EVP-commercial operations George Morrow reported that use of EPO in chemotherapy induced anemia patients is down 30%-40%--even though no private payors have adopted payment policies that are as restrictive as CMS’.

“Clinics and hospitals are struggling with 2-tier medical practice,” Morrow explained. “They do not want to treat all of their patients to the lowest common denominator—and here I am talking about the NCD with a hemoglobin of 10. On the other hand, they find it ethically discomforting and administratively burdensome, to implement one treatment protocol for Medicare patients in another widely diverging protocol for all other patients.”

Morrow is optimistic that the picture will brighten over time. “We are also seeing a steady increase in the adoption of differential treatment protocols, by largely more sophisticated clinics and hospitals, as oncologists reluctantly adapt themselves to the new reimbursement environment.”

There is another possibility: that private payors will begin to move more in line with CMS’ restrictions. That is the usual pattern: CMS leads and private payors follow.

The spillover from the coverage policy doesn’t stop there. Amgen is also seeing an impact on use of EPO in myelodysplastic syndrome, even though the company successfully persuaded CMS not to put new restrictions on that indication. “Even though reimbursement remains in place, physicians have reduced utilization,” Morrow reported.

It doesn’t stop there. “We are seeing some modest spillover of the ESA reimbursement concerns for colony stimulating factors or CSF. In other words, there is a generalized fear of not getting reimbursed leading to more cautious utilization.” That was a factor in holding back growth of pegfilgrastim (Neulasta), Morrow said. Sales were up 8% for the quarter, but underlying demand was flat.

“We are actively investigating and addressing any clinical or reimbursement issues that are inappropriately impacting Neulasta utilization,” Morrow said.

That impact comes on top of the effect Amgen already acknowledged from a loss of promotional support for the brand while the sales force addressed the concerns about EPO.

Amgen is still hoping it can find a way to force CMS to reconsider its position on EPO, but it acknowledges that to be a long shot. “As physician groups continue their dialogue with CMS, we hope a compromise can be reached that gives doctors sufficient latitude to make the best decisions, consistent with their understanding of the available science and their own clinical experience, while also meeting important CMS objectives,” Amgen CEO Kevin Sharer said.

Asked what kind of “compromise” he envisions, Sharer replied. “Its hard to say. Our financial plan is to manage the company on the assumption that the NCD will stand.”

That seems like a safe assumption. A Reuters interview with CMS Chief Medical Officer Barry Straube suggests that the agency isn’t going to budge any time soon.

J&J sure seems to be moving on. Amgen acknowledged during the call that reimbursement wasn’t the only issue affecting Aranesp this quarter: the product also lost market share against Procrit—a development that would have dominated the discussion of Amgen’s prospects a year ago when Aranesp was relentlessly taking over the market Procrit used to own.

Amgen CFO Bob Bradway explained that the share loss came in Public Health Service hospitals, “where our competitor offers some very steep discounts, discounts that we felt that we weren't going to match.”

Amgen isn’t happy that J&J is recapturing share in the EPO market, but there may be some comfort to the company in being able to talk about those issues. After a year dominated by regulatory and reimbursement issues for its flagship franchise, a year where the company was forced to consider what else it might turn to besides EPO, Amgen surely longs for the days when it only had to worry about the competition.

FDA Sides With CMS in EPO Battle; Labeling Change Next

Rep. Stark is smiling; Amgen isn't

Amgen Inc.’s uphill climb to reverse restrictive coverage policies for darbepoetin (Aranesp) just got a little steeper.

The Centers for Medicare & Medicaid Services’ position that it will not pay for use of Aranesp or Johnson & Johnson’s competing EPO brand epoetin (Procrit) in patients with hemoglobin levels above 10 g/dL “is generally consistent with the available data and the published scientific literature.” So says the Food & Drug Administration in a letter sent to two prominent House Democrats: Oversight and Government Reform Committee Chairman Henry Waxman (D-Calif.) and Ways & Means/Health Subcommittee Chairman Pete Stark (D-Calif.).

The letter, signed by acting Assistant Commissioner for Legislation Stephen Mason, gives CMS a vote of support the agency desperately wanted. It looks like CMS is making its position stick—and that is a development that should matter to companies across the industry, not just Amgen and J&J. (Why? We have written extensively about that in The RPM Report—including this article just going to press. Not a subscriber? Click here to register for a free trial and check out our coverage.)

FDA’s letter ends any lingering hopes for a quick reversal of the coverage policy, despite an all-out campaign by Amgen and J&J to enlist support in Congress. Amgen seemed to have gained a lot of traction on Capitol Hill, especially in the Senate, where a non-binding resolution urging CMS to reconsider the policy passed at the start of September, and where many Hill watchers expected a binding resolution to be included in a Medicare bill this year.

But one of the critical arguments underpinning the Senate legislation has been the contention that CMS’ policy is consistent with the FDA approved directions for use for EPO. As currently written, FDA’s label says EPO should be used to maintain hemoglobin levels at the lowest level sufficient to avoid the need for transfusions, and not be used once hemoglobin rises above 12 g/dL. Amgen, J&J, and a whole bunch of oncologists think that means CMS’ policy—refusing to pay for use above 10—is inconsistent with the labeling.

CMS has stuck by its position despite the political pressure. But no one knew for sure what FDA thought or what it would say when it finalizes new labeling for the drugs to reflect advice from two advisory committees convened in May and September. (Here is our recap of the situation, including a nifty picture of Commissioner von Eschenbach holding the PDR.)

So Waxman and Stark asked. FDA still hasn’t finalized the labeling, but it did answer the critical question. “The current labeling advises that the hemoglobin not exceed 12 g/dL,” Mason wrote. “FDA considers this to be an upper safety limit for ESA dosing, not a target for therapy. FDA is aware that there has been some confusion about the dosing recommendations in the current approved labeling and will work to clarify that confusion as we complete labeling changes that we are currently discussing with Amgen.” (Amgen is the license holder for both Aranesp and Procrit, so J&J is not directly involved in the labeling discussions.)

“Transfusions are not normally given to patients whose hemoglobin is 10 g/dL or higher,” FDA said. So I guess we know what the new labeling will say--not that it matters anymore, since FDA's letter of support is far more important to the future of the anemia therapies than anything the labeling ultimately says.

Oh, and FDA didn’t stop there. “There is no evidence that ESAs result in improved survival, tumor control, health-related quality of life at any hemoglobin level in cancer patients undergoing chemotherapy,” the agency wrote. “ESAs were approved based on their effectiveness in reducing the need for red blood cell transfusions.”

Don’t expect Amgen to take that answer lying down. But the company has an even tougher road ahead if it hopes to change CMS' mind.

EPO’s Future Back in FDA’s Hands

FDA Commissioner von Eschenbach: Whose Side is He On?

That sigh of relief you heard on Tuesday came from Amgen and Johnson & Johnson, when an FDA advisory committee declined to recommend significant changes in the labeling for EPO products in renal failure patients. As a commenter put it in response to our preview of the meeting, “history didn’t repeat itself.”

Probably just as important for the companies was the tone of the meeting. It was a tough meeting—any advisory committee focusing on safety concerns with your biggest products is going to be tough—but in general FDA officials avoided making inflammatory comments or otherwise suggesting that they are going to somehow make life even tougher for the anemia therapy sponsors.

After the meeting, a bunch of Wall Street analysts did something they haven’t done in a long time: they raised their forecasts for 2008 revenues from Aranesp, Epogen and Procrit, and Amgen’s stock responded accordingly.

So is the worst over?

Well, that depends. After the meeting, FDA officials said they plan to finalize the new labeling for the EPO therapies in a matter of weeks. The new labeling will address use of the drugs both in the renal failure/dialysis setting and in oncology.

And right now at least, the oncology setting is where the action is. Amgen, J&J and the oncology profession are waging an all fronts campaign to reverse the restrictive coverage policy put in place by the Centers for Medicare & Medicaid Services in that setting.

A key point of contention is whether CMS’ policy contradicts the FDA-approved labeling for the drugs. (The RPM Report has just published its latest coverage of that issue online. Not a subscriber? You can read the story for free by registering for a 10-day trial here.)

The argument that CMS is restricting access to FDA-approved uses of EPO clearly resonates politically. ASCO’s point about the conflict between CMS’ policy and the EPO label was cited in a “sense of the Senate” resolution urging reconsideration of the coverage decision.

So when FDA issues final labeling plenty of people will be paying close attention. The sponsors hope that FDA will reinforce their view that CMS’ treatment model is ridiculous—in particular, by repudiating the ceiling that CMS has set on hemoglobin levels for chemo patients. If that is how the final labeling reads, the pressure on CMS to reconsider its policy is sure to intensify.
Of course, there is another possibility: FDA could back up CMS instead.

FDA is not likely to insist on labeling that requires treatment exactly along the lines proposed by CMS, but FDA could try to tweak the labeling so that it more clearly states that treatment should maintain hemoglobin levels at the lowest level to prevent transfusions.

Or the agency could support CMS less formally, simply by stating publicly that the coverage policy is consistent with FDA approved labeling. FDA Commissioner Andrew von Eschenbach is an oncologist by training, the former head of the National Cancer Institute, and a prostate cancer survivor. With the political pressure on CMS ratcheting up, the Medicare agency is surely rooting for some show support from the commissioner of FDA.

But will they get it?

So far, there has been nothing. An FDA spokesperson says she is unaware of any plans for the agency or the commissioner to weigh in on the coverage policy, saying that falls outside the agency’s “central mandate to review drugs for safety and efficacy.”

The head of FDA’s Office of Oncology, Richard Pazdur, participated in the September 11 advisory committee review of EPO use in renal failure, but he did not use that forum to make any comments about the CMS coverage policy.

But stay tuned. The September 11 advisory committee review is definitely not the last word on EPO.

EPO Fatigue: Amgen Hopes History Doesn’t Repeat Itself

Did you ever have a recurring nightmare? That is what Amgen Inc. and Johnson & Johnson want to avoid next week when another panel of expert advisors to the Food & Drug Administration weighs in on the safety profile of EPO therapy to treat anemia in chronic renal failure patients.

The Cardiovascular & Renal Drugs Advisory Committee will discuss the safety profile of Amgen’s Epogen and Aranesp, as well as J&J’s Procrit, on September 11.

Amgen has been making the rounds on Wall Street, assuring investors that it is ready for anything at the Cardio-Renal Committee.

Why? Because the last time an FDA advisory committee met to discuss those same products—the Oncologic Drugs Advisory Committee in May—it did not go well. The committee recommended much stronger restrictions on use of the drugs than anyone anticipated. And things got even worse a few days later, when the Centers for Medicare & Medicaid Services issued a proposed coverage policy that sharply limited the drugs.

CMS compromised a bit when it issued a final coverage policy in July, but not enough to spare Amgen. The new payment rules prompted a major restructuring by the company in anticipation of a big drop in Aranesp revenues.

Now Wall Street is wondering what to expect from the nephrologists when it is their turn to review EPO.

In recent weeks, Amgen has been making the rounds to large investors and analysts with to assure them that it has a solid game plan in place for the meeting. The company says it has seen FDA’s briefing materials and they don’t look surprising or onerous. (The public will be able to see those materials on Friday or Monday, on FDA’s website.)

What will Amgen do? Here is how SVP-North American operations Jim Daly described the company’s approach back in June. Asked during a Goldman Sachs conference what the company would do differently to prepare for the Cardio-Renal Panel, Daly replied: “I think we’ve learned a lot from ODAC, which is go in prepared for a scientific discussion but also be prepared for wherever it goes.”

“I think that community also needs to play a more proactive role, and the good news here is that the nephrology community already has been very active with the FDA. Their primary concern is that they are taking an oncology dosing paradigm and imposing it on nephrology patients, and it’s a very different disease state.”

Still, Daly said, “we need to be prepared in case the agenda goes into other areas, whether it be the cost of ESAs, whether it be the utilization patterns as a result of reimbursement, I think we need to be prepared to address those.” Daly recalled a “pointed moment” in the ODAC review when “one of the physicians said does anybody here know what community oncologists do and why they do it? And the response was no, but I do know they make $1,200 a dose, therefore we can’t leave the prescribing decision in their hands.”

If the Cardio-Renal meeting “goes to that level I think that would be very disappointing, but I think we have to be prepared to deal with that. The best response will come from someone in the audience that says that is preposterous.”

In other words, expect plenty of patient and provider representation ready to speak up on Amgen’s behalf.

But will that be enough to ensure no unpleasant replay of the May ODAC meeting? Citigroup Yaron Werber doesn’t think so. The headline to Citigroup’s Aug. 30 note says it all: “Beware of CRDAC—the Bite May be Worse than Expected.”

Why is Werber concerned? Because “we have learned that Rich Pazdur, head of FDA’s oncology division, will be present in an oversight role. Given his aggressive stance, his presence in CRDAC is a clear concern.”

That seems like a lot to read into one FDA official’s participation in the meeting, but it does underscore a larger point about the regulatory response to the EPO safety issues. As Werber puts it, there is a “theme that FDA/CMS view EPO to have modest benefit w/growing evidence of harm. Thus, panel might be more contentious than expected even on dialysis.”

Werber isn’t alone in worrying. After all, several analysts note, Amgen assured them it was on top of the situation before the May ODAC meeting.

One other thing: Citigroup expects CMS to follow close on the heels of the advisory committee with a national coverage decision about use of EPO in nephrology. And, Werber warns, it is possible that the combined impact could be to make Citigroup’s forecast of a 10%-15% decline in the nephrology market in 2008 overly optimistic.

If Werber is right, Amgen investors have another tough three months to look forward to. Should make for an interesting week next week.