GLG News by Joe Atkins, RN, MBA, CNN, CHT

Implications: 1)  Concerns over the new FDA restrictions on ESA's is being overstated. 2)  Amgen will continue to do well in the ESA market place, in spite of these changes. 3)  J&J will receive the brunt of these changes, strictly because of their market concentration in the oncology market. 4)  Amgen will continue on as the "King of US ESA's".

Analysis: The majority of restrictions new restrictions being imposed by the FDA are directed at use by oncologists.  Sadly, for J&J, the majority of their business comes from oncology.  As well, J&J do not have access to DarbEpo, an exclusive Amgen long term ESA product.

Amgen, on the other hand, is working diligently to reduce the usage of their own Epoietin Alpha product, as well as J&J's Procrit, which Amgen makes for them.  Amgen's sales force has been aggressively touting the benefits of DarbEpo's long term action and selling it as being "the least expensive ESA in the long run.  As a result, hospital pharmacies, as well as oncologists and nephrologist with CKD ESA clinics, are switching to Darbepo.  Even the Veteran's Administration hospitals are switching from Epoietin Alpha, which was, primarily J&J's Procrit, to Amgen's DarbEpo.

From my surveys and market research, I've determined that the only company being primarily affected by the additional FDA ESA restrictions is Johnson & Johnson.  Amgen, as usual, will remain the catbird seat for US ESA's until their patent sunsets in about six years. 

Implications: The VA has already won many awards for an electronic medical records system, which tax payers have already paid for. Adopting the VA "CPRS" program would save the taxpayers and the private sector hundreds of billions of dollars.

Analysis:  The actual cost projected for a nationalized medical record system could be greatly reduced by using the Veterans Administration's CPRS Medical Records System.The VA has already won many awards for this system, which works very well.  The tax payers have already paid for the development of this system, so, it makes sense to adopt it as the nationalized standard.Adopting the VA CPRS program would save the taxpayers and the private sector hundreds of billions of dollars, money that would be wasted reinventing the wheel.We've got it and we've paid for it.  Let's use it!

Implications: First, and foremost, the only working link for this article can be found at: http://www.reuters.com/article/domesticNews/idUSWAT00934620080415?feedType=RSS&feedName=domesticNews Although there is no proof offered in the article to substantiate the suggestion of fraud, there is enough circumstantial evidence to suggest that it is so.

Analysis: The FDA is allowing China to investigate the real reason why chondriotin was used as a substitute for porcine intestines, which provides the base ingredient for sodium heparin.  However, this is little comfort for the families of 81 patients who have died, as well as many, many others who became ill due to tainted heparin.

There is a grand opportunity for US companies to come to the aid of the FDA by offering to subcontract themselves as proxy inspectors of Chinese manufacturing plants.  The profit potential is huge.

I predict that any companies that offer such services will become extremely profitable.  If publicly traded, the stock of those companies that have the vision to get involved with the FDA will explode.

There was a time when I would have been against the enlistment of the private sector in FDA proxy inspections, however, the more I read, the more it has become clear that something is better than nothing, which is what's presently occuring in Chinese manufacturing of food and medical products.

Implications: One only has to read about the Heparin debacle, which has killed, at least, 81 Americans, to realize that there is a serious issue with the quality of medicines produced in China.  Manufacturing of medical food and consumer goods in China is growing at such a rate, the Chinese government has neither the resources or the will to maintain adequate inspection of quality control.  The only way it's going to be done is if our FDA becomes involved, hence the increase in FDA fees.

Analysis: The base ingredient for the heparin spoken of, above, was produced by a Chinese manufacturer, that had never been inspected during it's seven years of existence.  Sadly, this is just the tip of the iceburg.

The good news is that the increase in fees will be passed onto anyone applying for FDA approval, regardless of location in the world.  An additional silver lining in the cloud is the fact that new business will be created for companies that will be sub-contracted to carry out proxy FDA plant inspections.

I see this an a new business opportunity for American based companies to rise to the occasion and offer their contracted services to the FDA.  I have no doubt that the majority of sub-contractors, should the FDA go in that direction, would be sent to inspect plants in China, as well as India and other emerging nations. 

Implications: It's easy to point fingers of blame and this article does that, very well.  According to the "annalysis" everybody is to blame.  And, they're right, everyone is to blame, but where the article fails is the authoris inability to point out a real solution to the problem of wasted dollars spent on the American healthcare system.

Analysis:

There was a time when hosptials were initiated and overseen by religious orders, whose goal it was to minister to the body, as well as the soul.  Every hospital was uniquely different, but each one was dedicated to ideals, such as "Faith, Hope and Charity."  I think we all know that as soon as the government and insurance companies became involed, all those good feelings went right out the door.

Today, doctors, peope who came into the field of medicine with great ideals of helping their fellow man, are now wrapped up in the mirer of needless paperwork.  In fact, there is so much paperwork to the done, they barely have time to spend with their patients.  To add insult to injury, doctors are constantly fighting with insurance companies, Medicare and Medicaid.  When they are not fighting to receive payment for services rendered, they are worrying about who is going to sue them for malpractice.

Identifying the paracites: A great deal of the overall high costs of healthcare can be blamed on lawyers and insurerors, who, produce nothing that contributes to the level of wellness of our citizens, yet they reap tremendous profits from the healthcare system.

Then, you have the U.S. drug industry, which has pretty much become a sacred cow, seeing that it's one of the few industries that hasn't been totally outsourced to China or India.  It's a sad fact that Americans are paying more for their medications than citizens in any other nation on earth.  In fact, unlike the Veterans Administration, Medicare Part D is dedicated to paying full price for our seniors' medicines, without any negotiation.

To make a long story short, everyone in the medical industry is doing great, or, at least, getting by, except the patient.  Somehow, in all the hubbub, it's the patient that's taking it on the chin.  More money is spent per patient in the United States than any other nation in the world, yet our patient's are not receiving the care they need and deserve.

Today, it's not about good patient outcomes.  It's all about profits.  Don't get me wrong, you have to make a profit in order to be able to deliver care.  No profit, no care; it's that simple.  However, I believe that, with the proper guidance, we can deliver excellent care, at a reasonable cost.

Presently, the Veterans Administration is the single largest healthcare provider in the world.  They have the best computerized medical records in the world.  Are they perfect?  Of course not.  On the other hand, they provide a model of standardization and efficiency that rivals most civilian hospitals.  As well, they have enough sense to make drug manufacturers bid for their business, getting taxe payers the best bang for their buck.

Not saying I'm in favor of socialized medicine, because I'm not.  However, I am in favor of streamlining the healthcare system in a way that really does reduce paperwork for physicians, and nurses and reduces the power that lawyers and insurance companies have over our healthcare system.

Implications: Over the last year, it has become clear that the over-use of anemia drugs for cancer and renal failure has become a problem.  The reason can be sumed up in one word, which is profit.

Analysis: Prior to the introduction of erythropoietic stimulating agents, the only thing a physician could do for a patient with anemia was to transfuse a unit of blood.  Particularly in the field of dialysis, especially prior to the 80's, blood borne pathogens of all types, such as HIV, Hepatitis B, C and D, were spread due to the fact that regulated testing, at that time, was not as good as it should be.  So, the advent of epoietin alpha was a God send to cancer and renal patients.  However, as time progressed, providers began to see the profit potential of the drug and that's when the abuse began. 

 I have followed Amgen and Johnson & Johnson since the introduction of epoietin alpha, back in the late 80's.  In the beginning, we were very careful about how much EPO we administered and how high the patient's hematocrit/hemoglobin rose, always being careful to keep the hemoglobin level around 11.  Sadly, as providers realized the profit potential of the drug, "experts" began to suggests that patient's hemoglobins be pushed to higher, nearly normal levels.  This could be done, but not without side effects, such as strokes and cardiac arrest.  And, for patients on dialysis, it could also cause clotting of the hemodialysis access, which is their life line.

As the negative side effects have become documented, the FDA and members of Congress have begun to evaluate and suggests lower hemoglobins.  As a result, both Amgen and Johnson & Johnson have seen less of their product used.  As well, profits for epoietin alpha have dropped dramatically.

Amgen and J&J are about to receive another wake-up call from Affymax's new ESA drug, Hematide (r).  Hematide, unlike DynEpo and CERA, has the capability to get around Amgen's ESA patent.  Hematide has passed phase II clinical trials of it's drug:
http://www.bio-medicine.org/medicine-technology/Affymax-Reports-Phase-2-Clinical-Dose-Ranging-Results-of-0AOnce-Per-Month-Hematide-for-the-Treatment-of-Anemia-214-2/.  In light of this fact, for the first time, I see competition for Amgen & J&J's EPO on the horizon.

Implications: 1)  Baxter was producing 50% of the worlds heparin requirements, which provided short term anticoagulation for hemodialysis and various interventions for cardiovascular disease. 2)  The base product of heparin comes from porcine intestines. 3)  The base product of Baxter's heparin was produced in a non-FDA inspected plant in China. 4)  The Chinese company that produced the "fake" heparin was partly, American owned. Bottomline:  Abraxis and APP are now the main providers of heparin in the United States, and possibly, the world.

Analysis: I've been following this story for the last three months and there is now doubt that Baxter is in deep trouble.  However, the FDA has a great deal of culpability in this issue.

The Chinese company that produced the "fake" heparin, had been operating for over seven years, without one FDA inspection.  Having been in the healthcare business for over thirty years, I can tell you that this has only happened since we have begun open trade with China.

For example, the FDA has never had a problem going down to Mexico or Italy to stop import of medical products when manufacturers in these nations failed to live up to the FDA's standards.  And, they were inspected prior to allowing import of their products into the USA.

That being said, I feel little sympathy for Baxter, as they are well aware of the reporting processes that should have taken place through the FDA.  They're not new at this game.

More disturbing is the fact that heparin is not a new, complex medication.  It was discovered back in 1916 and became readily available in the 1930's.  So, it's not rocket science to produce this simple medication.

In my opinion, Baxter has damaged it reputation and are at risk of losing hundreds of millions of dollars because they took a short cut to save chump change.

My advice:  Dump your Baxter stock and wait for it to bottom out before you buy back in.

Implications: 1)  Amgen's and J&J's ESA products are going to continue to receive more black box warnings from the FDA. 2)  A federal Judge may force Amgen to accept a royalty from Roche, allowing their CERA ESA to come to market in the USA. 3)  Their is potential for more problems to arise, in the way of side effects associated with EPO products in patients with Chronic Renal Disease and End Stage Renal Disease. 4)  Affymax, makers of a new drug called Hematide, is in phase III human trials and has the potential to finally beat Amgen's ESA patents. My strong suggestion:  Investors should buy Affymax stock.

Analysis:  Yes, it's true that Amgen is going to continue to receive more black label warnings on its ESA drugs.  However, that is only the beginning of Amgen's woes.Presently, a federal judge is on the verge of forcing Amgen to accept a set royalty from Roche, allowing them to bring their ESA drug CERA to market in the USA.  Furthermore, a possibly more importantly, Affymax's new ESA drug, Hematide, is in phase three human trials.  Affymax's ESA works in a totally different way than Amgen's or Roche's ESA's.  This gives Affymax a clear green light to walk around Amgen's ESA patents, which begin sunsetting in 2013.For those who want to buy Amgen stock, I would suggest waiting until it bottoms out before buying.  But, more importantly, I highly suggest that investors take a long hard look at Affymax and their new product Hematide.  If this drug receives FDA approval, it could blow Amgen's and Roche's ESA's out of the water.  My bet is on Affymax.

As for Amgen, sell now, before you lose your pants. 

Implications: Although patient deaths are of grave concern, the impact of a heparin shortage stand to put around 400,000 US dialysis patients at risk.  Heparin is the "oil of hemodialysis" and without it, hemodialysis would come to a standstill. There are alternatives available, such as Andiomax and Lovenox, however, they are not practical for the hemodialysis community owing to the fact that they do not have an antagonist, such as propomine sulfate, to counteract their anticoagulative properties. Since Baxter presently produces 50% of all the heparin in the world, and they are vunerable, it would behove their competitors to increase production and corner the market.

Analysis:  Although Baxter and the FDA have made an agreement, not to suspend production of heparin, there is still a grave concern over the quality of the base product being imported.  Heathcare providers are now complaining about the 5,000 unit and 10,000 unit vials, which, supposedly, are not a concern.I find it strange that the article talks about the FDA and Baxter trying to prevent a heparin shortage in the dialysis community, being that a shortage and panic already exits.  Every distributor I know has had their entire inventories purchased and large dialysis providers are hording heparin.Distributors are presently making a killing, some selling heparin anywhere from two to five times it's original value.The truth is that a shortage of heparin already exits in the dialysis community in the USA, which cares for around 400,000 patients.  Our only hope is for other heparin manufacturers to boost their production.  I only hope that their base souce of heparin is not from China and is produced in an FDA INSPECTED and approved facility.