Amgen Looking Anemic

The FDA isn't bound by its advisers' suggestions, but it usually adheres to them. Last week, the panel voted 17-0 for more clinical trials and 15-2 for more prescribing restrictions. Later this year, a panel of experts will review the safety and effectiveness of the drugs when they're given to patients with chronic kidney disease.

In March, the FDA told Amgen and J&J to place tougher notices on the drugs' labels, alerting doctors and patients that higher-than-recommended doses of the drugs raise the risk of death, heart attack, stroke or blood clots. The FDA said the labels must contain a black box warning, its strongest alert. The FDA decision triggered the Medicare agency's proposal.

"We pay close attention to FDA black box warnings," Leslie V. Norwalk, acting administrator for Medicare and Medicaid, said Monday. "We have carefully examined the evidence surrounding these labeling changes and have issued this proposed decision to protect our beneficiaries."

After the FDA advisory panel meeting last week, "it was hard to believe things could rapidly get much worse" for Amgen and J&J, says Geoffrey Porges, of Sanford Bernstein, in a research note. "The government's proposal is "much more severe than even those we had contemplated."

Porges, who has market perform ratings on both companies, said the restrictions could cut the market in half for the affected anemia drugs. The proposal "could be the straw that breaks the camel's back," forcing Amgen "into serious and extensive restructuring to reduce their expense base," he says.

At the same time, Porges criticized the government's plan as the "end of evidence-based regulation," arguing that the FDA and the Medicare agency "are significantly over-reaching the available evidence of risk, or lack of benefit," from the anemia drugs.

His firm has provided noninvestment banking services for J&J.