ErnieBilco
4 days ago
Ardelyx Lost The Lawsuit, But The Kidney PATIENT Act Will Save It
Nov. 24, 2024 6:36 AM ETArdelyx, Inc. (ARDX) Stock14 Comments
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Avisol Capital Partners
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Summary
Ardelyx lost a lawsuit against Medicare, impacting XPHOZAH's revenue potential, with no other major prospects in its pipeline.
CMS's decision to move XPHOZAH to the bundled payment system significantly reduces its revenue, forcing Ardelyx to negotiate complex reimbursements.
The Kidney PATIENT Act, if passed, will delay the inclusion of oral-only ESRD drugs in the bundled payment system, benefiting Ardelyx until 2027.
Despite the lawsuit loss, bipartisan support for the Kidney PATIENT Act offers hope for Ardelyx's financial stability and tenapanor's coverage.
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Richard Drury
Ardelyx (NASDAQ:ARDX) lost the lawsuit against Medicare, the one that I was worried about in my earlier article. With that loss, XPHOZAH faces the prospect of much reduced and declining revenue. ARDX has no other major prospect in its pipeline, something that has always been a concern. It put all its eggs in that one basket, and now it would have had to pay for that poor gamble. However, the new Kidney PATIENT Act will come to its rescue, at least until 2027, if not longer. It just needs to be quickly passed into law.
Background
Ardelyx has a single molecule known as tenapanor, branded as IBSRELA and XPHOZAH, which targets IBS-C and hyperphosphatemia in CKD patients. IBSRELA was approved in 2022 for irritable bowel syndrome with constipation (IBS-C) in adults. XPHOZAH was approved for phosphate binder refractory DD-CKD patients with hyperphosphatemia.
By the first couple years of launch, these drugs were guided to be making over $200mn (IBSRELA + XPHOZAH) per year, with tremendous intake in market uptake for the drugs. This was facilitated by the lack of effective approved options in IBS-C, and metal overload related safety issues in Hyperphosphatemia. The two markets together were worth several billion dollars, and the company was hopeful that the drugs "can achieve at least a 10% share of the IBS prescription market and as well on the path to becoming a $1 billion product before patent expiry."
All those expectations suffered a major setback when the US Department of Health and Human Services and the Centers for Medicare and Medicaid Services (CMS') added tenapanor and other oral-only phosphate-lowering therapies (PLTs) to the bundled payment system for dialysis patients. This canceled their separate coverage under Medicare Part D and moved them to the End-Stage Renal Disease Prospective Payment System (ESRD PPS). The CMS decision to remove XPHOZAH from Part D to Part B affects XPHOZAH for hyperphosphatemia in DD-CKD patients, and not IBSRELA. However, once the new payment system sets in from January 1, 2025, the impact is going to be quite negative.
When a drug is added to a bundled payment system for dialysis patients, it can significantly impact the revenue potential for the drug developer. A bundled payment system comes with a bundled, negotiated price, so the drug may not make as much as when it was separately priced. Moreover, Ardelyx now has to engage in complex negotiations and contracting with health plans and dialysis providers to ensure they are properly reimbursed. XPHOZAH will often not be adequately covered by a single, bundled payment, and that may force healthcare providers to look for cheaper alternatives - there are several approved phosphate binders - like ??Calcium acetate (several prescription brands including PhosLo and Phoslyra); Lanthanum carbonate (Fosrenol); Sevelamer hydrochloride (Renagel); Sevelamer carbonate (Renvela) - that are available as generics, and cost a fraction of what XPHOZAH costs. Of course, they have safety issues that XPHOZAH may not have, but healthcare providers will find workarounds since the drugs are approved.
For various reasons that sound logical but are essentially - and perhaps justifiably - meant to preserve pricing power, Ardelyx sued the CMS for this decision. It was backed by powerful friends - the American Association of Kidney Patients (AAKP) and the National Minority Quality Forum (NMQF).
Outcome
The matter was dealt with in the District Court of Columbia. As the Court explained, Part B provides insurance for outpatient health services, while Part D provides prescription drug coverage. "All ESRD patients are eligible for coverage under Part B; most (around 80%) have additional coverage under Part D." The incentive for healthcare facilities to opt for Part B for PLTs was that the "facilities could retain any amount of the payment that exceeded their costs." On the other hand, there could be potential misuse of Part D reimbursement because, as the Court noted with the example of Epogen, "Dialysis facilities had an incentive to rely heavily on such drugs because they were separately reimbursable and thus did not come out of the lump sum payment that they could otherwise retain." This was the concern for Congress and created the legislative intent. As the Court stated:
The goal was to remove the incentive for dialysis facilities to rely more heavily on drugs reimbursed on a fee-for-service basis, as opposed to ones included in the bundle, and to motivate these facilities to use whatever combination of treatments would be most effective and economical.
The government also limited judicial review of the bundled payment system. As pertinent parts of subparagraph (G) noted:
There shall be no administrative or judicial review under section 1395ff of this title, section 1395oo of this title, or otherwise of the determination of payment amounts under subparagraph (A), the establishment of an appropriate unit of payment under subparagraph (C), [or] the identification of renal dialysis services included in the bundled payment . .
Thus, when Ardelyx filed a motion arguing that CMS's actions go against Part (B) which describes what oral drugs can fall under the bundled system for ESRD dialysis services, CMS said that "review of that question is precluded by subparagraph (G)."
Bottomline, this is what the Court agreed with. They are basically telling Ardelyx - if you want to change the system, talk to Congress. You cannot directly attack CMS, which is merely implementing what Congress directed it to do.
Ardelyx does just that, and supports the Kidney PATIENT Act, which aims to limit oral-only ESRD drugs from moving into the ESRD bundled payment system. As the American Kidney Fund describes it, the act is a "bipartisan legislation that would delay the move of oral-only ESRD drugs into the ESRD bundle until 2033 or until new intravenous therapies come to the market. The bill would ensure patients have access to the medications they and their doctors have determined work best for them. In addition, the bill would save money for taxpayers because it would delay an increase in the ESRD base rate that determines the bundled payment that would occur when adding oral-only drugs to the bundle."
This bill has bipartisan support and is going to be passed as legislation - however, from my limited knowledge of how the system works, it seems it is still running through the process. Meanwhile, it is being amended to be made even more comprehensive. Bottom line, while Ardelyx may have lost the lawsuit on a technicality, this new bill will ensure tenapanor gets adequately covered.
Whalatane
1 week ago
Jefferies note ...via Frank on X
$ARDX Jefferies reiterated Ardelyx, Inc (ARDX) at a Buy rating and $11 price target.
-Mgmt is confident it can navigate the various Xphozah dynamics going into 2025 and are optimistic underlying patient demand should grow despite pot'l changes w/ Xphozah reimbursement. We'd also flag the CMS litigation is not completely over as mgmt will likely challenge / appeal imminently and there's still a scenario a PI / stay could happen by YE.
We appreciate there's still near term uncertainty but are confident stock can rebound once we're in 2025.
-Mgmt will move quickly to appeal the motion to dismiss...should hear more by YE. The Judge in ARDX's lawsuit against CMS recently granted a motion to dismiss though the case has not been closed. We think ARDX could file a "motion to reconsider" and point out specific flaws in the Judge's logic. The Judge could reconsider and grant a Pl or summary judgement, or if denied ARDX could appeal to the Circuit, which could possibly grant a stay before Jan 1st 2025 given the imminent irreparable harm. All in all, a Pl could still be possible before YE vs our initial belief that this is no longer on the table.
-The House and Senate bills continue to make steady progress in gaining co-sponsors and mgmt thinks a minibus/omnibus bill package could be possible as a vehicle for YE. HR5074 has gained bipartisan support in both the House and Senate and it's likely such a non-controversial bill could move forward before YE to "clear the deck" for a Republican House and Senate next year.
Also note that the initial bill for a bundling delay until 2033 was proposed by Republicans but Dems pushed for a much shorter 2 year delay. Thus, one could argue a Republican majority in the House/Senate could favor add'l bills in the future to delay bundling. ( my comment ...interesting )
-ARDX is also well-equipped and prepared to preserve volumes if Xphozah enters the bundle in 2025. Xphozah reps are out in the field messaging cont'd access and doctor feedback has mostly been (+). That said, docs need to actually go through the process themselves and importantly for substantially higher volumes to gain confidence Xphozah scripts will still be fulfilled.
Medicare scripts will be adjudicated by ARDX's existing patient assistance program Ardelyx Assist and filled at an external specialty pharmacy. Docs are already using the PAP in a small proportion of patients but key is that the PAP will need to be able to handle many thousands of scripts. The PAP has now been expanded in anticipation of greater volumes with all new staffers already hired, trained, and ready for Jan 1st, 2025, and external vendors are also ready to take on add'I patients.
It's also notable ARDX has continuity of care programs in place that will automatically enroll Medicare patients and provide free drug for 2 months....my emphasis ....good move
-Net net, mgmt is optimistic Xphozah won't face significant disruption in 2025 from a volume perspective though investors are understandably cautious.
Kiwi
Whalatane
2 weeks ago
Big bet by an insider ...open market purchase David M Mott
http://archive.fast-edgar.com/20241114/AWZZ3Q2COZ22UZ3Z2C9N2ZZ2P4KUZ22IZY62/
David M. Mott is a prominent figure in the biotech investment landscape, with a long and successful career spanning over three decades. Here's an overview of his biotech investments and career:
Investment Career
David Mott is currently a private investor through Mott Family Capital12. Prior to this, he served as a General Partner at New Enterprise Associates (NEA) from 2008 to 2020, where he led the healthcare investing practice25. During his time at NEA, Mott oversaw $1 billion in health care venture capital8.
Board Positions
Mott holds several chairman positions in biotech companies:
Chairman of Adaptimmune since January 20174
Chairman of Ardelyx, Inc. since 200812
Chairman of Mersana Therapeutics since 201312
Chairman of Novavax, Inc. since June 20202
He previously served as chairman for Epizyme and Imara, Inc.12
Notable Investments
Throughout his career, Mott has been involved in numerous biotech investments, including:
Sagimet Biosciences
Cydan
Nightstar Therapeutics
Vtesse
XTuit Pharmaceuticals
Clementia Pharmaceuticals3
Industry Experience
Before his investing career, Mott held executive positions at MedImmune:
President and Chief Executive Officer from 2000 to 2008
Various roles including Chief Operating Officer and Chief Financial Officer from 1992 to 200012
During his tenure at MedImmune, Mott led the sale of the company to AstraZeneca in June 2007 for $15.6 billion1.
Investment Impact
Mott's expertise in the biotech sector has led to significant achievements:
Involved in more than $40 billion in corporate acquisitions, fundraising, and partnerships
Supported over 35 initial public offerings or corporate acquisitions
Brought more than a dozen new drugs through development to commercialization
Served on 25 corporate boards1
David Mott's extensive experience and successful track record have established him as a key figure in biotech investing, with a particular focus on venture capital and growth equity investments in the healthcare sector.
Kiwi
Whalatane
3 weeks ago
Also beginning Jan. 1, 2025, the bundled payment will include oral-only renal dialysis drugs and biologics β a move initially set to begin in 2014 but delayed until now by several laws and court challenges.
βIn response to comments that we received on the proposed rule [released in July], we are finalizing a policy to pay the [transitional drug add-on payment adjustment] for phosphate binders based on 100% of the average sales price, increased by a fixed amount of $36.41 for incremental costs such as dispensing and storage of phosphate binders, which will be added to any monthly claim for which there is a [transitional drug add-on payment adjustment] payment for phosphate binders. We expect that incorporating oral-only drugs and biological products into the [End-stage Renal Disease Prospective Payment System] will increase access to these drugs,β CMS stated in the release.
In a response statement, Kidney Care Partners (KPC), a non-profit coalition of stakeholder organizations, expressed concern that βthe base rate is insufficient to support adding new treatment options without adding new money.β
βWe applaud CMSβs efforts both in recognizing that providing oral-only medications as part of the bundle requires additional funding, as well as creating access for AKI patients to home dialysis,β Mahesh Krishnan, MD, MPH, MBA, chair of Kidney Care Partners, said in the statement. βHowever, KCP has consistently raised concerns that significant changes are needed to the ESRD PPS system to maintain an appropriate level of care, access and reimbursement for the more than 557,000 Americans who rely on regular dialysis treatment.β
KPC urged support of the Chronic Kidney Disease Improvement in Research and Treatment Act of 2023 (H.R. 5027/S. 4469) to provide a permanent reimbursement pathway for innovative drugs and devices.
Kiwi