If there is one single sector which could be immune to the crummy jobs data, it is biotech.  Just don’t look at Dendreon Corporation (NASDAQ: DNDN) for much warmth today.  There is not any new negative news on PROVENGE  accounting for the big drop.  Dendreon’s decline today is over potential reimbursement rate wars from Uncle Sam.  What is interesting is that this reimbursement rate may not really impact revenues for PROVENGE in the near-term.  Longer-term, this poses a severe risk for Dendreon.  This may also just be another inadvertent screw job for men dying of prostate cancer.

Medicare has said that it will take up to a full year to review PROVENGE as a treatment for advanced prostate cancer.  The company has a price tag of over $90,000 for the treatment.  While extremely expensive and while many were expecting a price tag of $70,000 or so, PROVENGE is the last line of defense for those with metastatic prostate cancer.  The result is that the treatment only buys more time rather than acts as a cure.

The big issue at stake here boils down to rationing health care expenditures for the end of life versus those who want to keep fighting for their life.

PROVENGE is in short enough supply now that the near-term supply will already be spoken for.  It is the demand that is expected down the road that is at real risk.  The company is building facilities to manufacture more PROVENGE.  Today’s news could actually jeopardize how fast Dendreon wants to build new capacity.

This is of course opinion here, but Medicare is making one of its first decisions here about rationing health care expenditures for “end of life” care.  Many doctors and many who want broader health care have noted how 80% or more of a person’s health care expenses come in the final six months of life.  Now, go ask those with months to live how many of them want to die now.  After having just personally gone through a rather brutal death of a family member with cancer (not prostate cancer), there is one phrase that comes back to memory immediately… “At the very end, even the priests fight death.”

Again, the immediate supply will be spoken for regardless of the Medicare decision.  Longer term PROVENGE sales could be at serious risk if Medicare denies coverage or limits coverage to a small part of the cost.

If the agency’s handling of PROVENGE holds, the Medicare Coverage and Analysis Group will propose a decision in Q1 or Q2 of 2011 and a final decision could be a year out.  A 30-Day public comment period is now in effect.  Medicare may have just found out that it fired a cruel shot in a PR war.

The FDA did a job to block PROVENGE until this April.  Now it is Medicare taking a stab at blocking PROVENGE.  If you or someone you know has prostate cancer, Uncle Sam is getting farther and farther away from being your friend.

JON C. OGG

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