A New Player

The FDA's approval this week of Affymax's new ESA peginesatide will bring competition to the anemia treatment market for dialysis patients for the first time in more than 20 years. But with contracts signed by Fresenius and DaVita to use Epogen for many of their patients, what will be the strategy for Affymax––and other companies with ESAs in the pipeline?

In September 1989, NN&I devoted much of its monthly issue to Medicare's proposed payment policy for a new drug called Epogen (epoetin alfa), manufactured by a small California-based biotech company named Amgen, to treat anemia in individuals with end-stage renal disease. The renal industry had scored a win when Medicare approved reimbursement for the drug, but there was concern about the new $40-per-treatment payment. Physicians and clinic administrators said it was inadequate––less, in fact, than what Amgen would be charging clinics for the dose that would be needed to bring hematocrits to the desired level. "This policy decision demeans [the Health Care Financing Administration's, now the Centers for Medicare & Medicaid Services] understanding and commitment to beneficiaries," wrote John H. Sadler, MD, NN&I's then-Editorial Advisory Board chairman. "It also forces conscientious physicians to contrive means to evade it, in order to serve patients fairly."

Ultimately, Sadler's words have proven correct: Clinics used less drug than Amgen suggested, and hematocrits stagnated in the first year. Meanwhile, Congressional leaders complained to HCFA that the $1 billion a year estimated cost for the new wonder drug was too high. In one of his kinder words about Amgen, Congressman Fortney 'Pete' Stark, described the biotech company as "entrepreneurs who risked so much in the development of the product." As Medicare's cost of Epogen skyrocketed in years following––and Amgen fought off competitors in court to remain the sole manufacturer––Stark's view of the company was less complimentary, particularly since most of the company's huge profits were being paid for by Medicare.

We suspect he was feeling pretty good, however, on March 27, when the FDA approved drug maker Affymax's peginesatide, also known by the brand name Omontys, to treat anemia in adult dialysis patients. Omontys works by stimulating the bone marrow to produce more red blood cells ––a different approach than Amgen's Epogen. It also is administered as a once-a-month injection, versus dialysis clinic's usual three-times-a-week injection of Epogen. Omontys is the first real competition for Amgen in the U.S. market for treating anemia in individuals on dialysis (Omontys has not been approved for pre-dialysis patients or any other medical applications). And many dialysis providers welcome having a new option. Talking with physicians and practice managers at the recent Renal Physicians Association meeting in Washington, D.C., it was clear they were ready for a change––including Sadler, who was quoted in a New York Times article on the day of the FDA approval: "We have suffered under a monopoly now for many years, and Amgen has done pretty much whatever they've pleased."

But it will be challenging for Affymax to claim a stake in the dialysis market: The days of using high doses of ESAs to raise hematocrit levels are now gone. Clinics are heeding research that shows high doses are dangerous, and Medicare's new bundled payment system no longer makes EPO a source of profit. It has hurt the bottom line of Amgen's flagship product.

Like any company threatened by competition, Amgen has made efforts to protect its turf by signing purchasing contracts with both Fresenius Medical Care North America and DaVita Inc. DaVita agreed to use Amgen's drugs for at least 90% of its needs through the end of 2018. Fresenius signed a three-year nonexclusive deal.

But John A. Orwin, chief executive of Affymax, is optimistic that the rest of the midsize and small dialysis providers in the United States ––like Sadler's Baltimore-based Independent Dialysis Foundation group of clinics––will be ready to talk to a new supplier. The once-a-month injection can save clinics on staff nursing time and, if the price is lower than Amgen's Epogen, it will make it more attractive for maintaining the bundle. "We know we need to be part of the solution to lower costs," Orwin told The Times.

As the Motley Fool's Brian Orelli said in a March 29th editorial, "This drug battle will be anything but anemic."

]]>