Moving to protect its turf against archrival Johnson & Johnson in the lucrative market for anemia treatments, Amgen Inc. on Friday sued the federal government for slashing the Medicare reimbursement rate on its drug Aranesp.
The suit, filed in U.S. District Court in Washington, seeks an injunction to prevent the rate cut, which would make Aranesp more expensive for hospital outpatient treatment than the Johnson & Johnson anemia drug Procrit.
At stake is a portion of a Medicare market for anemia drugs worth nearly $1 billion annually. In its suit, Amgen said it could lose sales of $86 million to $119 million in 2003 unless an injunction is granted. According to one congressional study, Medicare drug payments for Procrit are second only to those for a medication commonly used for prostate cancer.
Aranesp and Procrit are used to treat patients with anemia caused by kidney disease or chemotherapy treatments for cancer. Amgen considers Aranesp, launched just a year ago, its single most important drug and the key to winning a long-running competition with its estranged business partner, Johnson & Johnson. J&J markets Procrit under a contentious 17-year-old licensing agreement with Amgen, which invented the drug.
Procrit is J&J's brand of EPO, a genetically engineered copy of the protein that spurs production of red blood cells. Aranesp is a modified version of the EPO molecule that Amgen said is more potent than Procrit and does not have to be taken as often. Thousand Oaks-based Amgen launched Aranesp last year to regain markets it long ago ceded to J&J in Europe and the United States.
Amgen's dispute with Medicare centers on an arcane pricing mechanism that assigns higher reimbursement rates to new drugs to encourage and reward innovation. Medicare proposed in a tentative reimbursement schedule last summer to cover Aranesp at the higher rate. Under the proposal, Aranesp would have been a more economical choice for hospitals than Procrit.
Faced with a potential loss of market share, J&J argued that Procrit and Aranesp are functionally equivalent and should be reimbursed at the same rate. After reviewing 40 scientific studies, meeting with Amgen and J&J representatives and hiring an independent contractor to review the data, Medicare sided with J&J.
In its suit, Amgen argues that Medicare broke the law when it lowered the reimbursement rate for Aranesp, and that it used a faulty methodology to determine equivalent doses of the drugs.
