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Provenge Reimbursement Already On The Way To A Solution

|Includes:Dendreon Corporation (DNDN)
You would have to be living under a rock, together with some of the more well-known characters from an insurance company’s television commercial, not to know that the common stock of Dendreon took a significant ‘hit’ in the after-hour and succeeding markets following the announcement that Provenge providers were concerned about reimbursement. At this writing, the stock is trading at just over $12, down from $35 when the stock was halted for the quarterly conference call.
One of the two major reasons cited for the shortfall in earnings was the reluctance of some centers to administer Provenge. The reason cited by Dr. Mitch Gold, CEO of Dendreon, was that small business medical providers, many of whom lacked the infrastructure and financial resources (e.g., a line of credit) needed to survive in an environment that required them to lay out $93,000 for the full treatment, were reluctant to administer Provenge. This apparently was not an impediment until Dendreon began expanding its provider base beyond the academic medical community, which is better able to operate in an environment where delays in Medicare and Medicaid reimbursement at the federal and state levels can take many months.
I recently spoke about the reimbursement problem with Dr. Leonard Liang, a urologist and transplant surgeon with a solo private practice in Los Angeles, CA. Dr. Liang is an ‘early adapter,’ and long ago saw Provenge as what he perceived to be a preferred way of treating end stage prostate cancer. [Full disclosure: Dr. Liang is a Dendreon shareholder.] Thus, when it became possible for his practice to administer the treatment, Dr. Liang was one of the first to apply for, and obtain, authorization. To aid in his marketing efforts, and more importantly, to help him explain Provenge and its benefits to his patients, Dr. Liang even developed his own presentation, which now is available on the Web.
To date, Dr. Liang has administered Provenge to two patients. The information below is current as of August 4, 2011. Obviously, for reasons related to patient privacy, only the most general data are provided. The charges cited do not include office visits or the administration of the infusions. The doctor has a four-month line of credit with McKesson, which supplies him with Provenge.
Patient A has what should be considered good insurance. He has Medicare primary, Blue Shield PPO secondary. As primary, the Medicare allowable was calculated to be $32,860 for one infusion ($31,000 plus 6%).
Patient A: First infusion
Date of infusion - 6/6//2011
Code used: J3490
Date charges given to billing service: 6/7/2011
Date billing sent out: 6/14/2011
Date Medicare payment received: 7/14/2011
Amount Medicare paid: $26,288 (80% of $32,860)
Date Blue Shield payment received: 7/19/2011
Amount Blue Shield paid: $6,572 (20% of $32,860)
Date $31,000 payment to McKesson is due: 10/6/2011
Patient A: Second infusion
Date of infusion: 6/20/2011
Code used: J3490
Date charges given to billing service: 6/28/2011
Date billing sent out: 7/14/2011
Payment pending
Date $31,000 payment to McKesson is due: 10/20/2011
Patient A: Third infusion
Date of infusion: 7/11/2011
Code used: Q2043
Date charges given to billing service: 8/1/2011
Date billing sent out: In process
Payment pending
Date $31,000 payment to McKesson is due: 11/11/2011
You can see from the data above why having a four-month line of credit is so important to this type of operation. The need to ‘carry’ charges for Provenge over a period of several months are not insignificant.
The second patient has received two infusions. Liang called him Patient B. The third infusion has been delayed but will be given in a couple of weeks. This patient has what would be considered marginal insurance. He has Medicare primary and MediCal secondary. MediCal is insurance from the state of California for low-income patients. It's what is known as Medicaid elsewhere in the U.S. Prior to infusing this patient, MediCal had not reimbursed for Provenge, so for Dr. Liang, infusing Patient B was a leap of faith. Happily, he reported that he received a check from MediCal for essentially the full secondary amount on the afternoon of August 4, 2011. This is important information because reimbursement for Medicare/MediCal patients has been a significant issue.
Here’s the full billing and payment history, to date, for Patient B.
Patient B: First infusion
Date of infusion: 6/3/2011
Code used: J3490
Date charges given to billing service: 6/7/2011
Date billing sent out: 6/14/2011
Date Medicare payment received: 7/14/2011
Amount Medicare paid: $26,288 (80% of Medicare allowable $32,860)
Date MediCal payment received 8/4/2011
Amount MediCal paid: $6,463.85 (19.7% of Medicare allowable $32,860)
Date $31,000 payment to McKesson is due: 10/3/2011
Patient B: Second infusion
Date of infusion: 6/17/2011
Code used: J3490
Date charges given to billing service: 6/28/2011
Date billing sent out: 7/14/2011
Payment pending
Date $31,000 payment to McKesson is due: 10/17/2011
Here’s a summary of what Dr. Liang had to say regarding payment: “Speaking only for myself, I currently have no reimbursement concerns regarding Provenge for patients with good private insurance, patients with Medicare/private insurance, or patients with Medicare/MediCal insurance. I would still be reluctant to infuse a patient with MediCal insurance alone.”
Finally, with the issuance of the final CMS J-Code for Medicare reimbursement of Provenge expected momentarily, the procedures should be in place to speed payment to all medical service providers. There already are indications that some providers are being reimbursed in as little as two weeks.
Disclosure: I am long DNDN and will not alter my position within 72 hours of the time of publication of this article.
Stocks: DNDN