WASHINGTON (AP) - Biotech drugmaker Amgen Inc. is among the companies that
could see profits trimmed by a Congressional spending bill aimed at streamlining
the Medicare program.
On Friday Senate Finance Committee Chairman Max Baucus released a $20
billion bill that outlines Medicare spending through 2010. Roughly 44 million
seniors U.S. receive health coverage through the program.
To avoid cutting payments to physicians who treat seniors, Baucus would
shave government payments for dialysis drugs, home oxygen equipment and other
health services. Wall Street analysts debated Monday which proposals would
eventually become law, with Lehman Brothers analyst Tony Clapsis advising
investors that "provisions that are 'non-controversial' or raise a lot of money
are the most likely."
One of the most significant proposals for investors would lower government
spending on Amgen's anemia drug Epogen, a $2.5 billion product used exclusively
in kidney dialysis centers.
Lawmakers have warned that Medicare's current payment policy encourages
doctors to overprescribe the drug to receive more government reimbursement. The
Baucus bill would change that by lumping the costs of the drug into payments for
all other dialysis-related services.
Dialysis center operators like Fresenius Medical Care AG and El Segundo,
Calif.-based Davita Inc. would cut down on their use of Epogen to increase
profits, Citigroup analyst Paul Heldman wrote in a note Monday. While the new
payment system wouldn't take effect until 2011, Heldman states it could reduce
Epogen usage by 20 percent, lowering Thousand Oaks, Calif.-based Amgen's
earnings per share to $5.16 from $5.88.
Dialysis centers would fare better under the proposal, receiving bonus
payments for meeting certain service requirements proposed by the new bill.
Germany's Fresenius is the world's largest dialysis services company; Davita
Inc. is the second-largest.
Companies that supply oxygen equipment to seniors with respiratory problems
are also on Democrats' proposed chopping block. The Medicare bill would freeze
or lower payments for oxygen supplies with the goal of saving nearly $1 billion
over five years.
Those cuts would have the largest impact on companies like Lincare Holdings
Inc. and Apria Healthcare Group Inc., which deliver oxygen to seniors' homes.
However, Lehman's Clapsis cautioned it could be difficult for Baucus to gain
enough support in the Senate to pass such large pay cuts.
The Senate Finance Committee's ranking Republican, Charles Grassley of Iowa,
is expected to release his own Medicare spending proposal this week, triggering
negotiations that could last until July.
One proposal that seems certain to become law is aimed at spurring the use
of electronic prescribing software made by companies like Cerner Corp. and
Allscripts Healthcare Solutions Inc. Both Democrats and Republicans have
endorsed online prescribing as an effective way to avoid deadly medication
errors and reduce spending on expensive medications.
Under Baucus' bill, doctors in the government's Medicare program would
receive bonuses when they use the software.
Along with the software makers, increased electronic prescribing would
benefit pharmacy benefit managers, like MedcoHealth Solutions Inc. and Express
Scripts Inc. The software allows doctors to see detailed lists of medication
options, including cheaper, generic drugs. If doctors increasingly switch to
less-expensive medications, pharmacy-benefit managers will see their medication
costs drop.
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