In the red-ink-drenched biotechnology sector the success of Amgen takes on a fairy-tale quality.
This 26-year-old firm has scored several blockbuster drugs that boost blood-cell production in kidney dialysis and cancer patients. Last year it earned $3.7 billion on revenue of $12.4 billion. The 8,000 employees at its headquarters in Thousand Oaks, Calif. need a shuttle bus to traverse its 194-acre campus.
What's not to like about this happy story? Just three things.
One is that Amgen's patents are expiring, probably too fast for the company to make up the lost revenue with new inventions.
Next is that the firm's sharp-elbowed sales tactics could come back to haunt it. It uses leverage from a must-have drug to pressure doctors into also prescribing the Amgen product in a market where there is competition.
That strategy has precipitated an antitrust lawsuit by Johnson & Johnson (nyse: JNJ - news - people ) and has backfired at some medical practices whose M.D.s don't like feeling strong-armed.
The third problem is that a dispute is brewing about whether certain Amgen patients are getting more of one costly drug than they really need.
The drug in question is Epogen, which stimulates the body to produce red blood cells. Dosing levels have crept up by a factor of four over the past decade, though some doubt that this makes dialysis patients live longer. The higher doses have the side effect of fattening the bank accounts of both Amgen and the clinics that choose the prescriptions.
The insurers who pay the bills have taken notice. That group includes Medicare, which spent $1.75 billion on Epogen last year, more than on any other drug.
Read on.
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