After much anticipation, the Centers for Medicare & Medicaid Services last night issued its new rules on the bundling payment system for meds used to treat anemia. The bottom line is that after the rules goes into effect, the use of anemia drugs - notably, Amgen’s Epogen - will likely drop, which was expected. But the agency did offer one surprise: some oral meds will be exempt until 2014.

Right now, Medicare pays a set fee for each dialysis treatment, but drugs such as Epogen are reimbursed separately. This sparked controversy because hospitals and clinics had more incentive to use more Epogen, which racked up $2.65 billion in sales last year. But widespread use is not only a big expense for Medicare, but also a concern ever since studies found such drugs were linked to heart attacks and strokes (see here).

“The purpose of a bundled payment system is to make available all treatment options under the same payment system,” CMS wrote in its ruling. “When drugs remain outside of the payment bundle, financial issues can influence both facility and patient behavior, as the over-utilization of (such drugs) to the detriment of patient care in the past has demonstrated.” However, CMS also acknowleged that Epogen may end being used less often than is needed, which would not be good for patients. One alternative which, until now was often eschewed, would be to administer Epogen under the skin instead of intraveneously.

One analyst, RW Baird’s Chris Raymond, views the new rules as a plus for Amgen, because the base payment rate for dialysis was increased to nearly $230, instead of the $198 initially proposed, and also because target hemoglobon ranges were untouched. “Significantly for Amgen,” he writes, “pay-for-performance provisions left target Hb levels in the 10-12 g/dL range with up to 2 percent payment penalties kicking in at levels above and below this range (effective January 2012)….this provision is a very big deal in that it allows protocols to continue as-is and may be construed as an enticement to opt into the bundled system earlier.”