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Medicare Boosts Drug Rivalry

June 25, 2004|Denise Gellene and Vicki Kemper | Times Staff Writers

WASHINGTON — A Medicare demonstration project unveiled in Washington on Thursday opened a new front in the competition among biotechnology companies in the multibillion-dollar rheumatoid arthritis market.

Amgen Inc.'s Enbrel and Abbott Laboratories' Humira are among the 25 drugs for cancer and chronic diseases that are eligible for coverage under the 18-month, $500-million program. Currently, Remicade, an intravenous biotechnology drug from Johnson & Johnson Inc., is the only biotech drug covered by Medicare, the federal program for the disabled and elderly.

Medicare covers a few medications that are administered by a doctor, such as Remicade. The demonstration project extends coverage to certain drugs that are taken orally or self-injected. Enbrel and Humira, like insulin, are administered in shots that patients give themselves.

Analysts have said that Medicare payments accounted for 20% or more of Remicade's 2003 sales of $1.4 billion. The demonstration project gives Abbott and Thousand Oaks-based Amgen a crack at a portion of J&J's business, although the real contest begins in January 2006, when the full Medicare prescription drug benefits take effect.

Under the outlines specified by Congress, up to 50,000 Medicare beneficiaries will be randomly chosen to participate in the demonstration. Half the participants must be cancer patients, and 40% of the funds, or $200 million, is dedicated to coverage of anti-cancer drugs. Medicare officials said about 5,000 rheumatoid arthritis patients were expected to participate.

Other drugs covered under the demonstration program include Gleevec, a Novartis drug for gastrointestinal tumors and certain lymphomas; Iressa, an AstraZeneca pill for non-small-cell lung cancer; and Avonex, a Biogen Idec Inc. shot for multiple sclerosis.

The drug coverage benefit offered to project participants will work much like the full Medicare drug benefit. Participants will incur a $250 deductible, must pay out-of-pocket expenses and will be responsible for full payment of drug expenses roughly between $660 and $1,200.

Health and Human Services Department officials estimate that the savings to project participants, who cannot have other drug coverage, will be substantial. The average retail cost for a year's supply of Enbrel, for example, is about $16,000. The department estimates that most participants could save 75%; patients with very low incomes might pay no more than $60 a year.

Shares of Amgen closed at $54.52, up 30 cents, on Nasdaq. J&J, based in New Brunswick, N.J., rose 5 cents to $55.69, and Abbott, based in Abbott Park, Ill., fell 4 cents to $41.91, both on the New York Stock Exchange.

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Kemper reported from Washington and Gellene from Los Angeles.

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