Endocare Cancer Treatment to Be Covered by Medicare

Endocare Inc. in Irvine and Cryomedical Sciences Inc. prostate cancer treatments won government approval for coverage by the Medicare health insurance program for the elderly, the Clinton administration said.

Medicare now will cover devices and procedures used to freeze tissue to destroy cancer cells, a technique known as cryosurgery, the government announced Friday night.

To gain Medicare reimbursement, the procedure must be used as a primary treatment for prostate cancer that hasn’t spread and not as a treatment of last resort, the administration said.

Shares of Endocare on Tuesday slipped 81 cents to $5.19 in trading of 1.3 million shares, 10 times its three-month daily average. The stock had climbed 23% on Friday. Shares of Cryomedical, which is based in Rockville, Md., rose 38 cents to 92 cents in trading of 2.4 million shares, nine times its three-month daily average.

The decision to cover the procedure actually was approved Jan. 20 by the head of the Medicare coverage and analysis group, a Medicare spokesperson said. The program didn’t notify the public about the decision until after the close of U.S. markets on Friday, the spokesperson said.

Nonetheless, some investors anticipated a favorable decision. Endocare shares rose to a 52-week high of $6 on Friday from $2.88 on Jan. 20. Cryomedical shares rose to 54 cents a share on Friday from 22.5 cents on Jan. 20.

Medicare officials contacted company officials for information to help in the decision-making process, and “it is possible for those people to draw inferences” based on the questions that Medicare will approve coverage of their technology soon, the spokesperson said.

Endocare Chairman and Chief Executive Paul Mikus said the company was notified about the coverage decision over the weekend.

Medicare could generate as much as $200 million in annual revenue for the cryosurgery prostate procedure, said John Calcagnini, industry analyst with CIBC Oppenheimer, who rates Endocare a strong buy.