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Amgen may make cuts over anaemia drug reimbursement losses

Amgen says it may have to cut costs over losses incurred by reduced Medicare reimbursement earnings from its mainstay anaemia drug franchise

US biotechnology company Amgen has suggested it may have to cut costs over losses incurred by reduced Medicare reimbursement earnings from its mainstay anaemia drug franchise.

Epogen and Aranesp were the top-selling biotech-derived drugs in the US in FY06. Epogen racked up sales of USD 2.5bn and Aranesp took USD 4.1bn, bolstered by government health programmes in the US and overseas.

However, since safety fears over the use of anaemia drugs were highlighted at the FDA regarding their use in the treatment of certain cancers, Medicare, the government sponsored health insurance programme for the elderly, disabled and low-income groups, will no longer offer reimbursement for Amgen's drugs used in dialysis for specific cancer tumour types.

The US Centers for Medicare & Medicaid services, which spent approximately USD 1.7bn on Aranesp and Procrit in 2005, have scaled back coverage for cancer patients and added that it planned to cut payments for dialysis patients in H1 2008.

As a result, Amgen's sales have dipped 10 per cent in H1 FY07 and its shares have lost almost 27 per cent of their value. Also, Amgen is involved in a patent dispute with Swiss-based Roche to keep a rival anaemia drug off of the US market. The hearing is set to begin in September 2007.

US sales of Aranesp declined 19 per cent to rest at USD 578m in Q2 FY07, while J&J's US Procrit sales dropped 14 per cent to USD 449m. J&J licensed rights to market Epogen to cancer patients under the name Procrit, while Amgen cornered the dialysis market.

J&J has already announced its plans to cut its global work force by three to four per cent.

Amgen said in a recent regulatory filing: "As a result of these challenges, we have commenced a global review of the company's business plans to identify opportunities to improve our cost structure in response to any resulting declines in revenues."

Amgen revealed that it would refocus spending on critical R&D and operational priorities, but would not confirm any job cuts.

A further blow to Amgen's anaemia franchise could come in September 2007, when US regulators will meet up to discuss the use of anaemia in patients with chronic kidney disease. Also, EU health officials may also issue label changes for anaemia drugs, including those made by UK-based Shire and Swiss-headquartered Roche in Q4 2007.

30th September 2008

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