Once-ailing firm gets boost from Medicare
Higher Apligraf fee to aid Organogenesis
Organogenesis Inc., a once-bankrupt biotech company that manufactures artificial skin, received good news for 2004: The government Medicare program nearly doubled what it will pay for its principal product, Apligraf, to $1,199 per treatment, from $680.
The news, mandated by a provision deep in the details of the Medicare prescription drug benefit bill, became effective New Year's Day. It was too late for investors who had helped to raise $20 million for the Canton company prior to its bankruptcy in 2002, but company executives hope it will boost the privately held corporation that emerged from bankruptcy proceedings last year.
"This is an extremely positive step for the company and the product," said Gary Gillheeney, executive vice president, chief operating officer, and chief financial officer.
The change, which company officials said they won with the help of Massachusetts Senator Edward M. Kennedy, illustrates the effect government price policies can have on the biotechnology and pharmaceutical industries. Medicare cases make up about 70 percent of Organogenesis sales, according to the company, so the level of government payment is critical. Organogenesis had its reimbursement rate slashed in 2003, and sales plummeted from 500 artificial skin patches a week to 250, executives said. Now it is expecting "significant more patient access to the product than we had last year," Gillheeney said. The payment change was among dozens of pricing moves for individual drugs and treatments that Congress ordered, moves that had no direct bearing on the bill's main purpose, providing prescription benefits for 40 million senior citizens. The bill was signed by President Bush in December; the Centers for Medicare and Medicaid Services issued the final reimbursement figures on Dec. 27 and 31, just days before they took effect.
Some Boston-area companies that manufacture and market biotech cancer drugs, such as Millennium Pharmaceuticals Inc., received favorable reimbursement rates. Velcade, Millenium's new cancer treatment, will be reimbursed at the government's highest premium, 95 percent of average wholesale price. Biogen-Idec, meanwhile, won better pricing for its expensive Zevalin radiation therapy for non-Hodgkins lymphoma.
Dr. Robin M. Joyce, an oncologist at Beth Israel Deaconess Medical Center and a Harvard Medical School professor, said government pricing had put barriers in the way of the novel and promising treatment, which carries radiation through the bloodstream directly to tumors.
"Here's a drug that's fantastic, and it's not flying off the shelves," she said. By improving reimbursement rates, the result will be better access and improved treatment, she said.
Other oncologists, however, gave the new regulations negative reviews. Their worst fears about price cuts, voiced last year, were not realized. But they nonetheless warned of damage to oncology care, particularly starting in 2005 because of potentially inadequate administration fees. The Centers for Medicare and Medicaid Services said the fees will match office expenses; oncologists remain skeptical, saying the fees will be insufficient to retain highly skilled chemotherapy nurses.
Dr. Therese Mulvey, president of the Massachsuetts Society of Clinical Oncology, said the government's cost-saving efforts will result in financial losses for doctors' offices and ultimately reduced access to chemotherapy treatments for patients. Organogenesis is hoping to turn a corner on a tough year. It ended its relationship with a powerful marketing partner, Novartis Pharma AG. But a second marketing partner, PDI Inc., said in a Securities and Exchange Commission filing last fall that it was pulling out of its deal with Organogenesis because sales of Apligraf had not produced expected returns. That marketing deal is scheduled to end Jan. 12.Yesterday, Organogenesis executives said they have hired an in-house sales force of 25 and are poised to undertake a major new marketing push. Key to the rebound strategy was ensuring that hospitals are reimbursed sufficiently by the government, company executives said. They gathered hospital expenditure data on Apligraf for 50 percent of all US patients in their bid to persuade government officials of the need for higher reimbursement. The data showed that hospitals were refusing to buy the product because they were losing money, Gillheeney said.
Christopher Rowland can be reached at crowland@globe.com.
