All that worrying, essentially for nothing.

Dendreon (Nasdaq: DNDN) is trading up 7% early this afternoon after a panel essentially recommended that the Centers for Medicare and Medicaid Services (CMS) pay for its prostate cancer treatment Provenge.

Technically it wasn't a yes or no vote, but rather a sliding scale from 1 to 5, with 5 being the most confident in the data supporting the use of the drug. Provenge received an average score of 3.6 from the 10 experts on the panel when asked whether there was evidence that the treatment prolongs lives. Not a 5, but certainly confident enough.

Dendreon has already secured reimbursement from some of the major health insurers -- Aetna (NYSE: AET), Humana (NYSE: HUM), and Kaiser, for example -- but ensuring coverage for Medicare patients is most important given the age of men that get prostate cancer.

The next step is a preliminary report from CMS in March, followed by more comments and a final report in June; no one ever said the government worked quickly. Fortunately, the local Medicare contractors are allowed to make their own decisions until national coverage guidelines are announced, so Dendreon isn't losing sales while it waits. Given the relative strong backing, it seems likely that CMS will recommend paying for the drug, at least for on-label use.

The panel was less confident about the data for off-label use, so there will likely be restrictions to ensure that the only patients who get Provenge are those that fit the description on the label: metastatic cancer after hormone therapy has stopped working. That's fine with Dendreon, there are plenty of patients that fit that description, and Provenge doesn't seem to be having a problem wrestling patients away from sanofi-aventis' (NYSE: SNY) Taxatore.

Now investors can get back to worrying about the manufacturing ramp.

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