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Dialysis Discussion => Dialysis: News Articles => Topic started by: okarol on December 17, 2010, 12:02:59 AM
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Goldman’s Bold Call On Dialysis Bundling: Sell Amgen, Buy DaVita
Dec. 16 2010 - 6:14 pm | 1,053 views | 0 recommendations | 1 comment
By DAVID WHELAN
Starting next year the dialysis business will change dramatically. Medicare pays for almost all of it, regardless of patients’ age. Until now kidney treatments have been billed in pieces. Epogen, an Amgen drug given to dialysis patients to treat anemia (~$50 per patient session), and dialysis services (~$150) were billed separately.
Now Medicare will pay about $220 per patient session. The dialysis center itself will be responsible for buying and prescribing drugs. Epogen dosing levels and Amgen’s lobbying of Medicare have been controversial for many years. With bundling Medicare hopes to remove incentives to overprescribe the expensive biologic drug.
In a new report Goldman Sachs analyst Sapna Srivastava writes that the change to bundling will shake up several stocks, and more than people think.
Right now Amgen is projected by Wall Street analysts to sell $2.3 billion of Epogen next year. But Goldman is more bearish. It predicts a 20% drop-off in sales and a 45% drop by 2014. By 2015 Epogen sales will fall to $1.4 billion, significantly lower than the consensus of around $2 billion.
Why? Goldman says that dialysis centers are aggressively developing treatment protocols that maximize profitability by using bare minimum levels of Epogen, within the boundaries of what’s good for the patient. The analysis is based on a proprietary survey of dialysis centers.
On the flip side the analysis brings good news for DaVita and Fresenius, the McDonald’s and Burger King of dialysis. “DaVita should benefit from the move to bundling given numerous ways and means to trim Epogen and other costs in a fixed reimbursement environment. The majority of survey respondents indicated revised treatment protocols have already been introduced at their centers, supporting our expectation for immediate results,” says Goldman. It projects an operating margin next year of 15.4% vs. the 14.8% consensus view.
Baxter is another company likely to benefit from bundling, says Goldman. It makes a system for performing an alternative form of dialysis at home.
For those readers interested in dialysis check out ProPublica’s recent investigative work, which shows how kidney care often is low-quality in the U.S. compared to other countries. Perhaps bundled payments will help in better aligning caregivers’ financial incentives.
Follow me on Twitter. And if you have a story idea e-mail me at dwhelan@forbes.com.
http://blogs.forbes.com/davidwhelan/2010/12/16/goldmans-bold-call-on-dialysis-bundling-sell-amgen-buy-davita/?boxes=Homepagechannels
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This is very interesting. I looked at my last labs because they have cut all epogen for me. It says that 10-12 is a okay. I pulled last years labs and they said that it had to be 11 or higher. I looked up a number of sources and they say that for males it should be 14-18 for the most part. So, they are going to have us all walking around anemic so their profit margin increases?
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YLGuy, from what I understand Epogen is quite dangerous to use if your hemoglobin is over 12.0. My hgb recently went to 12.6 and they stopped my Epogen immediately. I think I feel much better knowing they can't/won't overuse it.
http://www.epogen.com/patient/safety_info/important_safety_information.html (http://www.epogen.com/patient/safety_info/important_safety_information.html)
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This is very interesting. I looked at my last labs because they have cut all epogen for me. It says that 10-12 is a okay. I pulled last years labs and they said that it had to be 11 or higher. I looked up a number of sources and they say that for males it should be 14-18 for the most part. So, they are going to have us all walking around anemic so their profit margin increases?
YLGuy. Your stated Hgb level of 14-18 g/dL is for normal, young & healthy active adult male, not for someone who is ESRD, inactive older male. High levels of erythropoietin in the elderly is associated with higher mortality.
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The target HGB kevels are 11-12.