Clearly, the market took this development as bad news, but please explain why.

Two words: Risk and delay. The odds seems small given Provenge's clinical data, but yes, CMS could decide not to cover Provenge at all, or CMS could decide to place severe restrictions on the product's use. Either of these scenarios would be disastrous for Dendreon.

Now, again, I don't think this will happen but the risk is there, which adds another overhang to Dendreon in the early stages of the Provenge launch.

Second, the NCD process for Provenge is going to take a year! CMS plans on holding a meeting before the end of 2010 to review Provenge's clinical data, which will be followed by a proposed NCD being issued in March 2011. After more public comment, a final NCD will be announced in June 2011.

In other words, the Medicare reimbursement overhang is going to be around for quite some time.

Will this effect Dendreon's ability to sell Provenge today, or stop insurance carriers from reimbursing for Provenge?

We don't know. Last night, Dendreon said the NCD process does not impact existing coverage decisions. That's correct. Private insurers can continue to reimburse for Provenge as can local Medicare carriers. Nothing about CMS spending the next year on an NCD for Provenge changes that.

However, some local Medicare carriers may decide to hold off or delay making coverage decisions about Provenge pending the final NCD. If that happens, Provenge sales could be adversely affected.

This is crazy! Provenge prolongs the lives of prostate cancer patients? How could the government say no to that?

You're right. The Food and Drug Administration approved Provenge for the treatment of advanced prostate cancer based on data demonstrating a 4.1-month survival benefit for the therapy compared to the control group. No cancer drug with a proven survival benefit has ever been denied insurance coverage before, and I find it hard to see how Provenge becomes the first.

Haven't some insurance carriers already decided to cover Provenge?

Yes, which is another factor in Dendreon's favor as it makes the case for Provenge in front of CMS. Recently, Aetna ( AET) and Humana ( HUM) -- private insurers -- have announced positive coverage decisions of Provenge. Perhaps more importantly, one of the country's largest local Medicare contractors announced its intention to cover Provenge.

Treatment with Provenge has also received a strong endorsement from the National Comprehensive Cancer Network.

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