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has been engaged in a long-running battle with Medicare officials over what the biotech giant believes are unfair and overly conservative reimbursement policies for its anemia-fighting drugs Epogen and Aranesp. For the most part, Amgen has been on the losing side of the argument -- until Thursday.

In a small but positive victory for Amgen, the U.S. government's Centers for Medicare and Medicaid Services (CMS) released draft guidance on Thursday night for the Medicare reimbursement on Epogen when it is used to treat anemia in patients with end-stage renal disease. The new guidelines somewhat loosen the restrictions on Epogen's use.

While not yet finalized, the new reimbursement policy muffles at least one concern investors have had about lower Epogen sales moving forward. These concerns have contributed to the underperformance of Amgen's stock this year.

Amgen shares were up 39 cents to $53.71 in recent Friday trading. For the year, Amgen shares are down 14%.

Epogen works by raising the number of oxygen-carrying red blood cells in the body, and is used to treat patients with kidney disease and cancer. Epogen and its second-generation cousin Aranesp combined for nearly $4 billion in sales in 2003.

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The issue at hand in Thursday's CMS ruling focused on setting a threshold for a patient's proper hematocrit level, or the percentage of packed red blood cells in a blood sample and a diagnostic measure of anemia.

Medicare payouts for Epogen use have grown from $550 million in 1998 to $1 billion in 2001, leading to CMS concerns that its payment formula was creating a financial incentive for doctors to overprescribe the drug. This led CMS to mandate that Epogen claims be reviewed for patients with a hematocrit level above 37.5.

The CMS draft policy released Thursday raises that review threshold to a hematocrit level of 39. Public comments on this new policy will be accepted for the next 60 days, at which time CMS will issue formal guidelines.

"Although difficult to quantify the net impact of this proposal, we view it as a positive for Epogen use on the whole, as it may alleviate concerns of dialysis physicians who may be reluctant to push Epogen doses for fear of overshooting the high end of the permissible range," said Banc of America Securities analyst Mike King in a Friday research note. King rates Amgen a buy and his firm has done banking for the company.

There are still concerns about Epogen reimbursement looming on the horizon. Starting next year, Medicare will base reimbursement payments on a formula that relies on the drug's actual selling price, not its wholesale price, which was more financially lucrative for doctors. CMS has not yet defined the drug's wholesale price, so the impact on Epogen sales, if any, is not yet clear.

Adam Feuerstein writes regularly for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to