Medicare Overspending Millions on Epogen

A new report says Medicare has been overpaying hospitals and dialysis clinics millions of dollars for Epogen, an anemia drug marketed by Amgen Pharmaceuticals.  According to the report, the overpayment has been going on for years because Medicare reimburses facilities based on outdated estimates of use, rather than how much Epogen they actually administer to patients.

According to the Washington Post, Medicare’s usage estimates are currently based on 2007 numbers.  But, partly due to concerns about the safety of Epogen and similar drugs, use has dropped off about 25% since then.  The Post’s analysis, as well as calculations by experts, indicate that Medicare’s Epogen overspending amounts to more than $400 million per year.

Epogen is known as erythropoiesis-stimulating agents (ESAs). Other drugs in this class include Procrit and Aranesp.  As we’ve reportedly previously, ESAs are bioengineered versions of a natural protein made in the kidney that stimulates the bone marrow to produce more red blood cells. They are used to treat anemia in patients with chronic kidney disease, while Procrit and Aranesp are also approved to treat anemia in cancer patients undergoing chemotherapy. All are made by Amgen, but Procrit is marketed Johnson & Johnson under a licensing agreement.

According to a Washington Post report published last month, Amgen racked up huge sales of Epogen and other ESAs – $8 billion/year in U.S. sales alone – partly due to incentives it paid to doctors, hospitals and clinics that administered the drugs.  ESAs were also profitable for healthcare providers, as the spread between what they paid for a dose and what Medicare paid them to administer one reached as high as 30%.   The Post found that these factors caused widespread overuse of ESAs, with 80% of patients undergoing dialysis were receiving the drugs in far higher doses than what is considered safe by 2007.

But since 2007, it’s become apparent that the benefits of ESA’ were been greatly overstated, and federal health regulators issued a series of warnings regarding their serious side effects, including cancer and heart attacks. As a result, Medicare has changed its payment system to remove the incentives for larger doses, and use of ESAs has dropped off significantly.  But now, hospitals and clinics stand to make more money if they use the drugs “frugally,” the Post said.  The problem is,  Medicare’s new reimbursement policy assumed that patients would receive just about the same amount of Epogen as they were receiving in 2007, before use of the drug started to drop off.

Dialysis clinics, some of the biggest users of Epogen, are resisting any change to the current reimbursement scheme, asserting Medicare payments for dialysis are already too low.   But according to the Post, some in Congress may be considering taking another look at the issue, in light of the financial strain Medicare is currently facing.

“If independent analysis concludes that seniors and taxpayers are overpaying for dialysis services, then Congress will revisit this issue,” Rep. Wally Herger (R-Calif.), chairman of the Ways and Means subcommittee on health, told the Post.

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