This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Dendreon's Medicare Coverage Conundrum

SEATTLE ( TheStreet) -- The Dendreon (DNDN) drama continues.

The latest wicked twist hit Wednesday night after the Centers for Medicare and Medicaid Services, or CMS, said it had begun an evaluation process to determine national coverage of Dendreon's prostate cancer therapy Provenge.

Investors were already worried about Provenge reimbursement in the early days of the product's launch, so when the CMS news hit the tape, investors freaked out. Dendreon shares tumbled as much as 23% to $25 in Wednesday's after-hours trading session from their $32.33 close.

In early Thursday trading, Dendreon shares are down 10% to $29.12.

If you thought the tempest over Dendreon and insurance coverage of Provenge was going to end soon, I suggest grabbing a comfy chair, ordering another drink (or three) and settling in for a longer-than-expected wait.

Meantime, I'll try to answer the most pressing questions arising from Wednesday's surprising development:

What the heck is a National Coverage Determination?

Medicare is a health care insurance program for seniors administered by the federal government, but in fact, nearly all coverage and reimbursement decisions for products and services are made at the local level by states or private contractors that administer Medicare programs.

Sometimes, however, CMS chooses to unify coverage on a nationwide basis -- essentially telling all the individual Medicare providers how to cover a certain product or service. This top-down process is known as a National Coverage Determination (NCD).

Why is CMS starting an NCD for Provenge?

CMS almost never issues NCDs for cancer drugs, which is why investors were so surprised Wednesday.

From what I can surmise, there have been only three NCDs ever issued for cancer drugs -- Avastin and Erbitux (both for off-label uses) and another for the radio-immunotherapy drugs Bexxar and Zevalin. One additional and commonly cited NCD in the cancer arena is for the red blood cell stimulating drugs Epogen, Aranesp and Procrit.

The reasons for CMS wanting to place Provenge under an NCD are not clear, but a couple of guesses. Local Medicare providers may have asked for it because they want guidance from CMS on how to cover Provenge. Second, Provenge is not a run-of-the-mill cancer drug -- it's a cellular immunotherapy which stimulates the patient's own immune system to target and destroy cancer cells. Given the uniqueness of Provenge, CMS may think it best to coordinate coverage nationally.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AET $114.55 0.66%
DNDN $0.06 -6.02%
HUM $177.89 0.19%
AAPL $94.74 -3.10%
FB $116.85 7.30%


Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,074.51 -20.64 -0.99%
NASDAQ 4,805.6670 -57.4740 -1.18%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs