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.

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.

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.