butterflytrans

You are absolutely right....the kidneys do produce erythropoetin, and lack of this factor (as in chronic kidney disease) can lead to anemia. The thing is though, it matters what the rest of the blood picture looks like. I understand that his BUN and creatinine may be increasing, but it depends on how MUCH they have increased over time, and what exactly his kidney function is at right now. Is there any way you could get those kidney figures? It would help alot. Does he have other signs of renal failure? Though even if he doesn't, it doesn't necessarily mean that he does not have renal failure--a lot of people are asymptomatic. The signs, though, include: ankle swelling, nausea, loss of appetite, shortness of breath, itching etc.
Narcotics really don't affect the kidneys that much, but NSAID drugs like aspirin, naproxin etc. etc. are the ones that can exacerbate damage in renal failure. Your brother has diabetes and hypertension eh? Well, those are two of the 4 biggest reasons for chronic kidney failure. The four are:

hypertension
diabetes
glomerulonephritides
polycystic kidney disease.

It would be very important to ask...how old is your brother?

Well, as you probably know, the bone marrow is the site of the production of all of the cells in your blood. I'm wondering if possibly in your brother's blood count that OTHER cells were low as well. If just his red cells were low, then it is less likely there is a primary bone marrow problem. But if his platelets and white cells were low too, then maybe this is the reason the doctor wants to do the bone marrow biopsy. (I don't know the full story of your brother's condition)
I agree with you.

Would it be possible for you to answer a few more questions that I asked above, and then maybe I can give you a clearer picture.