Editor

The "Quality of Care Demo Project" might sound like a slide show put together by some customer service department for employees to sit through, but the program turns out to be something a little more valuable.

Potentially, at least.

Launched last year by the Centers for Medicare & Medicaid Services, the Demo Project paid oncologists to evaluate and report chemotherapy patients' pain, nausea, vomiting and fatigue. The intent is to help transition providers to the new reimbursement formula for drugs covered under Medicare Part B, under which drug providers are reimbursed at average sales price (ASP), plus 6 percent.

"There was a lot of angst about 2006, and when CMS re-upped [the program], people breathed a sigh of relief," Christopher Raymond, analyst with Robert Baird & Co., told BioWorld Financial Watch. But the feeling of relief might have come prematurely. Baird analysts recently toured a major oncology clinic for a "nice, first-hand view of how this program is administered" and the take-away was that "docs probably aren't going to use this thing much, because it doesn't make any sense whatsoever for them to do it," Raymond said.

The reimbursement fallout next year could be significant for some companies and their drugs.

Baird analysts toured the West Clinic in Memphis, Tenn., one of the larger free-standing, for-profit oncology clinics in the U.S., treating 400 to 600 patients per day an operation that is "at the forefront of what we believe is a major consolidation and rationalization of private oncology practice currently under way," Raymond wrote in a research note.

Funded at about $300 million last year, the Demo Project's total bill probably will reach $400 million to $500 million. Its flexibility and ease of use allowed many to take part, since support staff could easily fill out the necessary paperwork. Not so next year, Raymond warned.

In 2006, there will be a total of 81 codes that must be billed for, across three main categories intent to treat, use of and adherence to treatment guidelines, and staging of disease in a "cumbersome, manual procedure" likely to demand first-hand doctor involvement across the board, Raymond said. The project "will not make sense for a good chunk of physicians," he predicted.

A "halo effect" caused by 2005's Demo Project for supportive-care oncology drugs is likely to go away, which could mean bad news for some firms.

Likely to emerge less scathed than others is Amgen Inc., which could benefit from other factors such as "practice consolidation, increased economic focus and adherence to treatment protocols," Raymond said.

Amgen has the red-blood cell booster Aranesp, the second generation of Epogen (epoetin alfa, sold by Johnson & Johnson under the trade name Procrit), along with Neulasta (pegfilgrastim) used to decrease infection during chemotherapy and Neupogen is that compound's first and shorter-acting version. By offering rebates and performance-based agreements, Amgen may bring about "an increasingly binary market" in which doctors will tend to favor Aranesp over Procrit, said Raymond, not changing his Aranesp sales estimate of $3.87 billion next year.

MGI Pharma Inc. might face a less happy future with its Aloxi (palonosetron hydrochloride) for chemotherapy-induced nausea and vomiting. Physicians at the West Clinic told Baird that Aloxi is a better product than Zofran (ondansetron hydrochloride), from GlaxoSmithKline plc, but the GSK drug becomes available as a generic compound at year's end so "the decision to use Aloxi may be much more difficult to make based on efficacy alone, according to physicians we talked with," Raymond wrote, pointing to consensus estimates (as well as Baird's) that presume 20 percent Aloxi growth for 2006 and 2007.

A trend away from off-label use for higher-priced therapies could have meaning for Genentech Inc.'s Avastin (bevacizumab) for colorectal cancer and Herceptin (trastuzumab) for breast cancer. For the former, Genentech has expressed optimism due to positive data in lung and breast cancer, and for the latter, the clinical news has been good in breast cancer as an adjuvant. The visit with the West Clinic "doesn't provide us with any comfort that this trend will reverse itself next year before a label expansion for either drug," Raymond wrote.

Another to be punished the off-label aversion might be Celgene Corp., which has Revlimid (lenalidomide), a thalidomide analogue that won backing from an advisory panel earlier this year for myelodysplastic syndromes, though an approval decision was delayed last month. The agency's Oncologic Drugs Advisory Committee had voted 10-5 in favor.

Although assumptions are that Revlimid will be marketed at a price upward of $30,000 for a standard multiple myeloma course of treatment and promptly will be taken up as a front-line therapy for multiple myeloma, Raymond sees "a disconnect between these expectations and feedback" from the West Clinic.

He modeled $240 million for Celgene from Revlimid next year, generally in line with consensus, but "wonder[s] if physician/payer dynamics, coupled with increasingly tight operating environments for the average community oncologist will enable such aggressive uptake."

Placing the West Clinic "at the forefront of some very basic structural changes taking place within private oncology practice," Raymond noted that physicians and management from West helped found and operate the Community Oncology Alliance, a physician advocacy group and lobbying vehicle that was "largely instrumental, we believe, in garnering from CMS the funding for 2005's Demo Project."

In other words, West is a voice to be heard on industry trends and on the Demo Project, which next year could become a relic because of its complexity.

"The devil is in the details," Raymond said.