Genentech, the San Francisco biotech firm, implemented a stealth price hike for three critical cancer drugs, a move that infuriated multiple hospitals.
On September 16th, Genentech told hospitals and oncology clinics that starting October 1st, Avastin, Herceptin and Rituxan could only be purchased through specialty distributors instead of general line wholesalers they’ve been using for years. These three drugs are the biggest weapons in the cancer arsenal.
Avastin is used to treat colorectal ovarian and other cancers. Herceptin is a HER2 used to combat breast cancer franchise.
This shift means hospitals will lose out on standard industry discounts. Genentech and its distributors will pocket the discounts. Novation, health care services company that negotiates drug contracts, estimates that it will cost $300 million more in the U.S. overnight in what folks are paying for these lifesaving drugs.
Novation estimates that the hospitals it represents will take a $50 million it, and that is before the added costs of additional inventory, handling and paperwork.
Last year Avastin sales hit $6.6 billion. Sales in Herceptin, Perjeta and Kadcyla rose to nearly $7 billion, 14%.
The decision to use specialty distributors is resulting in unprecedented price hikes which will harm patients.
Price hikes have already become evident. A 400 mg dose of Avastin have increased from $2,382.28 on October 12th to $2,511.3 on October 14th, this is practically an 8% increase. Hospitals can’t pass this increase on to insurance companies since the list price remained the same, therefore patients find themselves paying the difference.
Genentech is owned by Roche, which had $50 billion in sales last year. The company claims that the switch to specialty wholesalers will improve the efficiency and security of the supply chain. The company says that its new cancer drugs like Perjeta, Kadcyla and Gazyva are already supplied this way. This method of supply allowed the company to reduce the number of distribution center from 80 to 5. The company however refused to explain the specifics of why the specialty model is better.
Hospitals, however, aren’t buying these claims. Novation says that there is nothing about these drug that would make them safe to be in the specialty channel. It is a difference without a distinction, except that Genentech will earn more money.