Dendreon, After Yearlong Inquiry, Sways Medicare to Pay for $93,000 Prostate Cancer Drug

6/30/11Follow @xconomy

Dendreon is no stranger to controversy, but the story today is about minimizing the debate about when taxpayers ought to pay for its high-priced prostate cancer drug.

The Centers for Medicare and Medicaid Services said today it has made a final decision to reimburse healthcare providers in the U.S. who prescribe sipuleucel-T (Provenge). The Medicare agency made its decision after a year-long inquiry. The reimbursement questions came after Dendreon had set the price at $93,000 for a course of therapy with this first-of-its-kind drug which stimulates the immune system to fight prostate cancer cells like an invading virus.

The decision by Medicare is no surprise, but it does conclude a period of uncertainty about insurance reimbursement for its lone marketed product. Dendreon was able to persuade a Medicare advisory panel last November that clinical trials show the drug extends the lives of men with prostate cancer. The agency followed that recommendation in March with a draft memo that stated “the evidence is adequate” and that the Dendreon drug “improves health outcomes for Medicare beneficiaries.” The FDA approved the drug in April 2010, following years of debate about the strength of its clinical trials. A study of more than 500 men showed the treatment helped them live a median time of four extra months, when compared to a placebo.

Medicare, the federal agency that covers health costs for people over 65, normally defers to the FDA’s scientific reviewers and pays for products that have been the agency approves. But this second review stirred uncertainty in the markets. Some speculated Medicare was trying to find a stealthy way to control drug prices by making Dendreon clear another regulatory hurdle after it set the price at $93,000. Winning over Medicare is obviously critical for a company like Dendreon, because its target patient population is mostly men over 65, but also because Medicare’s decisions are highly influential for private insurers as well.

The Medicare ruling hasn’t had a real effect on Dendreon’s business in its first 14 months on the U.S. market. The company was limited by manufacturing constraints, which it is working to eliminate by building out a network of three regional factories in New Jersey, Atlanta, and Los Angeles. While Medicare was mulling its national policy on reimbursement for the product, the agency’s15 regional bureaus all agreed to pay doctors who prescribe Provenge in the interim period.

Investors have expected Dendreon to pass this test for months now, but the Medicare decision should provide some extra comfort for physicians, says David Miller, the CEO of Seattle-based Biotech Stock Research, who follows Dendreon.

“If you look at most drugs, like Avastin, that costs $8,000 a month, and you find out in a month that your patient is not covered, the doctor is on the hook for $8,000,” Miller says. “But if you prescribe Provenge, and you find out you aren’t covered, you’re on the hook for $93,000. What doctors really want is to try it out, have no problems being reimbursed, try another one out, and get reimbursed. As they get more comfortable, they’ll come in.”

There is one more important technical detail to watch for from Medicare. The agency is expected to issue a temporary reimbursement code tomorrow, Miller says. That’s important, because doctors are currently filing for reimbursement under a miscellaneous code, which takes between 30 and 90 days to process for healthcare providers, he says. By getting a dedicated code, those claims should be processed in less than 30 days, providing doctors greater comfort, Miller says.

Dendreon previously projected it will sell about $350 million to $400 million worth of the new drug this year, as it works its way through its supply limitations, and reimbursement issues. The drug could generate billions in annual sales in the U.S. and Europe as time goes on, analysts say.

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