CMS Shocks Pharma

As covered in the RPM Report, CMS announced June 30 that it had opened a national coverage analysis (NCA) for Provenge to determine whether the therapy is “reasonable and necessary.”

The Medicare agency said specifically: “CMS opens this NCA for autologous cellular immunotherapy treatment of prostate cancer. CMS is requesting public comments on the evidence regarding the effects of this treatment on health outcomes in patients with prostate cancer…CMS considers all public comments, and is particularly interested in clinical studies and other scientific information relevant to the subject under review. CMS is commissioning a technology assessment from an external entity and plans to convene a meeting of the Medicare Evidence Development and Coverage Advisory Committee (MEDCAC) in 2010.” The National Coverage Decision is expected in March 2011.

How big an impact did CMS’ announcement have? For Wall Street, it is simple: CMS’ decision to review coverage of the therapy erased all the gains from the approval of the product, with the stock dropping all the way back to the levels it had in January.

Put another way, investors seem to feel that the uncertainty surrounding the coverage policy means as much to the value of the company as did the uncertainty around FDA’s regulatory decision.

Using an alternative metric, based on Dendreon’s market cap of approximately $7.3 bil. the day following FDA approval, Dendreon would have to give Provenge to more than 78,000 men with prostate cancer to meet the cap number. Following the CMS announcement, the number of prostate cancer patients dropped to just over 41,000 needed to meet the $3.9 bil. market cap in early July.

And investors wondered: If CMS is taking on Provenge, will it take on other cancer therapies, like Roche AG’s Avastin, Herceptin and Rituxan?

The answer to that question is: it just might.

All indications are that the decision to review Provenge was triggered by specific circumstances surrounding what is, after all, a completely new type of therapy: a cell-based cancer “vaccine.” In that sense, it is probably an over-reaction to read into CMS’ decision a blanket review of coverage of high-priced cancer therapies.

But, having opened up the conversation in this specific context, there is nothing to stop it from expanding to look more broadly at what everyone in the health care policy world agrees is a key issue for the future: what if anything to do about the exploding cost of cancer treatment in the US.