Genentech's cancer drug supply switch costs more, delays treatment, survey finds

Top hospitals are still irate about Genentech's decision to move its best-selling cancer drugs to specialty distributors. And they're not giving up on persuading the company to change back.

The latest salvo comes in the form of a survey by hospital services company Novation, which has been lobbying hard against the Roche ($RHHBY) unit's distribution shift. According to the survey of hospital pharmacy departments, moving Rituxan, Avastin and Herceptin to specialty distribution has increased costs and delayed patient treatment.

The survey was a direct attempt to counter Genentech's case for the change, Novation said. In announcing the new system to customers, Genentech had said that specialty distribution would help prevent shortages, boost efficiency, and keep counterfeits out of the supply chain. Plus, the cancer treatments require special handling and storage, and the company said the new model would help make sure that happens.

But 88% of the survey respondents said the new distribution model has caused treatment delays. And 93% said they'd never experienced a shortage of these drugs before the distribution change.

Genentech CEO Ian Clark

Genentech has been catching fire for the move since it notified hospitals last September. Hospital and pharmacy associations started firing off letters to CEO Ian Clark, and top teaching hospitals urged Congress to take a look at the change. Though the protests talk a lot about patient care, it's the bottom line that's easiest to understand: General distributors offer volume discounts that hospitals say aren't available from the specialty channel, and Genentech hasn't pressed the specialty pharmacies to change their pricing policies.

Then there are the additional costs, the hospitals say, including the expense of carrying bigger inventories of the meds. Between the lack of discounts and need for additional spending, more than half of survey respondents said the financial hit has been substantial.

Mayo Clinic's Kevin Dillon

"The negative financial impact of the Genentech decision has been significant at Mayo Clinic," Chief Pharmacy Officer Kevin Dillon said in a statement about the survey. "The new specialty distribution model is less efficient, forcing us to increase inventory levels of these expensive cancer drugs."

According to the survey, the distribution shift has caused treatment delays--and even cancellations--because the drugs weren't available when needed. General distributors have "just-in-time" inventory systems, allowing for deliveries almost daily, whereas the specialty channel relies on third-party carriers, and shipments are more irregular, Novation's release said. More than 60% of the survey respondents said their deliveries have been unreliable since the shift.

Genentech maintains that the specialty distribution model works well. The company has pointed out that its newer products, including the breast cancer drugs Perjeta and Kadcyla, are all distributed via the specialty channel. Pricey cancer drugs from other drugmakers are, too. Moving its older treatments into that supply system made sense, the company figured.

"Based on our experience with these medicines with this model, we have confidence that the specialty distribution approach best serves patient access and safety," a Genentech spokeswoman told FiercePharma as the controversy heated up late last year.

The outcry among hospital customers--even such august customers as the Mayo Clinic, Cleveland Clinic and Memorial Sloan Kettering Cancer Center--seems unlikely to sway Genentech to backtrack on its distribution change. The fact is that hospitals need Rituxan, Avastin and Herceptin--they're among the top-selling cancer drugs in the world--and will continue ordering them, whatever the supply channel. But if the hospitals complain loudly enough--and to the right people--they might be able to persuade the company to do something about their wholesalers' pricing.  Perhaps that's what the hospitals really want anyway.

- read the survey announcement

Special Reports: The top 10 best-selling cancer drugs of 2013 | Top 10 pharma companies by employees in 2014 - Roche

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