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Lilly's Xigris Becomes First and Only Medical Product Approved for BIPA Payment in Medicare Patients; Approval Affirms Xigris' Ability to Help Save Lives.

Business Editors, Health/Medical Writers

INDIANAPOLIS--(BW HealthWire)--July 31, 2002

Today, Xigris(R) (drotrecogin alfa (activated)) discovered and marketed by Eli Lilly and Company (NYSE:LLY) became the first and only new medical product to be granted new technology status from the Centers for Medicare and Medicaid Services (CMS-formerly HCFA) under the provisions of the Benefits Improvement Act of 2000 (BIPA). Beginning Oct. 1, 2002, this designation will allow hospitals that use Xigris in the treatment of Medicare patients with life-threatening severe sepsis to receive additional reimbursement.

"We congratulate CMS on this landmark decision and believe it positively reinforces the value of Xigris. We believe that CMS is sending a strong signal to hospitals, healthcare providers and its beneficiaries that Xigris represents a substantial improvement in the treatment of adult patients with life threatening severe sepsis vs. conventional care." said Elaine K. Sorg, Lilly U.S. Critical Care Business Unit Leader. "Receiving new technology status for Xigris is an important interim step in our long-term goal of making positive changes in the reimbursement hospitals receive for treating adult patients with life-threatening severe sepsis. Specifically, our primary goal is to work with CMS to facilitate the creation of the new DRG for severe sepsis."

About BIPA

The Benefits Improvement and Protection Act of 2000 requires the Medicare program to make additional payments for certain approved new medical services and technologies furnished under the hospital prospective payment system (PPS) until the DRG (diagnosis related group) system is eventually adjusted to account for the cost of the new technology. Until this law was passed, Medicare paid for new technologies by assigning them to existing DRGs and not increasing the overall DRG payment. Payment for each DRG is determined prospectively, based on the average relative costs of treating patients with that diagnosis. The diagnoses and procedures included in a DRG are identified by ICD-9 codes (ICD-9 is the abbreviation for the International Classification of Diseases 9th Edition-Clinical Modification, the procedural coding system for inpatient services).

To be eligible for the special payments, a technology must meet three criteria:

1. The technology must present a substantial improvement in the

diagnosis or treatment of Medicare beneficiaries,

2. the technology must be new; and

3. total charges per case for patients undergoing procedures

involving the new technology must be demonstrated to be

significantly more than the average charges for all cases in

the DRG to which the new technology would be assigned.

Under the new technology provision, CMS will make additional payments to hospitals on a case-by-case basis, covering 50 percent of the costs of the case in excess of the standard DRG payment for cases involving new technologies, as long as the additional payment does not exceed 50 percent of the estimated average cost of the new technology. The special payments for new technologies would be made for two to three years, until the regular payments for the appropriate DRG can be adjusted to reflect the new technology's costs or the cases using the new technology can be assigned to a more appropriate DRG.

Regarding Severe Sepsis

Severe sepsis occurs when an infection (viral, bacterial or fungal) - often the result of trauma, surgery, burns or cancer - triggers a cascade of immune system responses that can lead to acute organ dysfunction and often death. Three of every 10 patients with sepsis will die within one month. Before FDA approval of Xigris, treatment options included treatment for the infection and supportive care such as mechanical ventilation and kidney dialysis.

The number of severe sepsis cases has been rising significantly over the past few decades - growing nearly 300 percent over the past 25 years(1) - and the incidence is expected to continue climbing. This year alone, more than 750,000 Americans will develop severe sepsis, and at least 215,000 of them will die from the disorder - about as many as die as a result of an acute heart attack. Research suggests more than 6.8 million new cases of severe sepsis will occur in the United States between 2003 and 2010. Approximately 95 percent of these will be among people who are 65 or older, with the majority of these cases - nearly 60 percent - occurring among people aged 65-75. (2)Nonetheless, sepsis can strike regardless of a person's age.

More About Xigris

Xigris (drotrecogin alfa (activated)) is a recombinant form of human Activated Protein C. It is administered by intravenous infusion and is available in 5 and 20 mg vials.

In November 2001, the Food and Drug Administration (FDA) approved the use of Xigris for the reduction of mortality in adult patients with severe sepsis (sepsis associated with acute organ dysfunction) who have a high risk of death, e.g., as determined by APACHE II(a). Efficacy of Xigris has not been established in adult patients with severe sepsis and a lower risk of death. Safety and efficacy have not been established in pediatric patients with severe sepsis.

Bleeding events are common in patients with severe sepsis. In the PROWESS (Recombinant Human Activated Protein C Worldwide Evaluation in Severe Sepsis) trial, bleeding was the most common adverse reaction associated with Xigris therapy. Serious bleeding events were observed during the 28-day study period in 3.5 percent of Xigris-treated patients and 2.0 percent of placebo-treated patients. The difference in serious bleeding occurred primarily during the 96-hour period of infusion.

Intracranial hemorrhage (ICH) may occur in patients with severe sepsis. In PROWESS, the incidence of intracranial hemorrhage was 0.2 percent for Xigris-treated patients and 0.1 percent for placebo-treated patients. ICH has been reported in Xigris-treated patients in non-placebo controlled trials with an incidence of approximately 1 percent during infusion. The risk of ICH may be increased in patients with risk factors for bleeding.

This year, Lilly plans to begin large-scale trials involving approximately 13,000 patients to investigate the use of Xigris in lower-risk patients with severe sepsis, the use of Xigris in children with severe sepsis, and the optimal use of low-dose heparin with Xigris.

For complete Xigris (drotrecogin alfa (activated)) prescribing information and labeling, call 800-423-2313 or visit www.Xigris.com.

About Eli Lilly and Company

Lilly, a leading innovation-driven corporation, is developing a growing portfolio of best-in-class pharmaceutical products by applying the latest research from its own worldwide laboratories and from collaborations with eminent scientific organizations. Headquartered in Indianapolis, Ind., Lilly provides answers - through medicines and information - for some of the world's most urgent medical needs. Additional information about Lilly is available at www.lilly.com.

This news release contains forward-looking statements that reflect management's current beliefs about the potential for drotrecogin alfa (activated) in the treatment of severe sepsis, but actual results may differ materially due to various factors. As with any pharmaceutical under development, there are significant risks and uncertainties in the process of development and regulatory review. The product's results may also be affected by such factors as competitive developments in the field, the timing of anticipated regulatory approvals and launches in various countries, other regulatory developments, the impact of governmental actions regarding coverage and reimbursement for pharmaceuticals, and the impact of exchange rates. For additional information about the factors that affect the company's business, please , see Exhibit 99 to the most recent Form 10-Q filed with the SEC in May 2002.The company undertakes no duty to update forward-looking statements.

Xigris(R)(drotrecogin alfa (activated), Lilly)

(1) Society of Critical Care medicine web site (www.sccm.org/pressroom/sepsis_info.html)

(2) Angus D, et al. Epidemiology of severe sepsis in the United States: analysis of incidence, outcome, and associated costs of care. Crit Care Med 2001; 29(7): 1303-1310.

(a) Acute Physiology and Chronic Health Evaluation Score
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Comment:Lilly's Xigris Becomes First and Only Medical Product Approved for BIPA Payment in Medicare Patients; Approval Affirms Xigris' Ability to Help Save Lives.
Publication:Business Wire
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Date:Jul 31, 2002
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