) agreed to pay $55 million in a bid to settle a lawsuit, indicting
it for overuse of
) Epogen, an Anemia drug used for increasing the red blood cell
count in kidney patients. While the company maintains its stand
that the charge is baseless and physicians employed by it are not
guilty, it believes that a settlement is the most beneficial option
for its shareholders. Apart from the settlement amount, the company
will also have to pay attorney fees.
The lawsuit was filed a decade ago in a district court in Texas
by a whistleblower, who claimed that DaVita overused Epogen for
almost 10 years. Although the government investigated into the
mater but it did not take any action against the company.
Epogen is highly beneficial for patients suffering with
kidney-related diseases as it increases the red blood cell count,
which trims down the need for blood transfusions. However, it is
also believed that the risk of stroke doubles with regular use of
the drug, making its overuse detrimental for the patients'
As DaVita still stands by its anemia management policy and made
it clear that the settlement does not translate into admission of
guilt, the news does not seem to have reduced shareholders'
confidence. The company's share price increased 0.09% to close at
$97.71 on July 3, when the announcement was made.
Moreover, DaVita has adequate cash balance for the settlement
payment. As of March 31, 2012, the company had cash and cash
equivalents of $449 million.
However, DaVita is involved in various other lawsuits as well.
In October last year, two law firms started investigations against
the company regarding alleged over-billing of Medicare by the
company. Going ahead, such charges could weigh on the company's
DaVita, which competes with
Lincare Holdings Inc.
), currently retains a Zacks #3 Rank, implying a short-term 'Hold'
rating. We maintain a long-term 'Neutral' recommendation on the
AMGEN INC (AMGN): Free Stock Analysis Report
DAVITA INC (DVA): Free Stock Analysis Report
HEALTHSOUTH CP (HLS): Free Stock Analysis
LINCARE HLDGS (LNCR): Free Stock Analysis
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