GENENTECH's ACTIVASE WILL NOT BENEFIT FROM MEDICARE DRG RECALIBRATION DUE TO WIDESPREAD OUTPATIENT REIMBURSEMENT UNDER MEDICARE PART B -- GENENTECH EXEC

Genentech's recombinant TPA Activase is unlikely to benefit from the upcoming recalibration of Medicare's diagnostic-related groups (DRGs) in October, Genentech Reimbursement Development Director Randall Perry told a recent Food & Drug Law Institute meeting in Washington, D.C.

Perry explained that Medicare reimbursement data probably will not significantly alter those DRGs that affect TPA, because most Activase charges are for outpatient reimbursement under Part B. DRGs for fiscal 1990 go into effect Oct. 1. The rule to update the system, including recalibration of all DRG weights, will be issued about one month before. The recalibration will be based on charge data collected during fiscal 1988.

Perry indicated that Genentech's TPA marketing strategy targeting outpatient use could in the long run come back to "haunt" the firm.

"We knew that if a patient were to go into a community care hospital without a [catheter] lab, without an angioplasty specialist and without the CABG [Coronary Artery Bypass Graft] backup ability, that the patient could be treated on an outpatient basis, transferred within 24 hours to a tertiary care center that was equipped to provide the advanced coronary care services and payment would be made to the hospital treating on an outpatient basis 80% of reasonable cost," he said. Perry added that "without that mechanism, we would not have been as successful at selling Activase as we were."

Because Medicare will use inpatient charge data to recalibrate the DRGs, Perry observed only one problem "will arise from Genentech's first-year strategy." If we were having all these payments under Medicare Part B, those charges are going to an outpatient bucket," Perry noted at the May 25 meeting. "The inpatient charges, where they did occur, are not substantial. So in fact, the DRG recalibration is not going to be that helpful this year. But we hope in future periods it will be." Without "Part B we couldn't have done it," Perry added. "But with Part B, it will come back to moderately haunt us in the future."

Genentech unsuccessfully sought a special DRG payment increase in 1988 when TPA was introduced. Perry attributed Medicare's decision against increased payment in part to Genentech's lack of cost/benefit data for the drug. He noted that preliminary results from cost/benefit studies begun in early 1988 are expected by the end of this year. The studies, conducted by the D.C. research and consulting firm, Medical Technology and Practice Patterns Institute, will assess hospital costs for TPA, including associated personnel expenses ("The Pink Sheet" Nov. 28, T&G-3). The studies do not compare TPA to other thrombolytics.

A recent editorial in the New England Journal of Medicine concluded that current data show "little difference" between TPA and streptokinase in left ventricular function, predischarge patency rates, or mortality.

The editorial responded to a New Zealand study of 270 acute myocardial infarction patients that found, in a double-blind comparison, that TPA and streptokinase have "similar effects on the preservation of left ventricular function" if given within three hours of onset of a first acute MI. Patency rates for the affected artery at three weeks were also similar, the study showed.

In response to the editorial, Genentech said that mortality should be the most important final consideration and not the endpoints chosen by the researchers. The firm also is critical of the size of the study, which it maintains should have enrolled at least 800 patients, and the study's failure to weigh the 20 patients who died more heavily in its conclusion.