Genentech tightens distribution on top cancer meds, triggering blowback from hospitals

Roche's ($RHHBY) Genentech unit is getting some high-profile blowback from a change to its distribution model on three top cancer meds. Hospital and pharmacy executives claim the new regime--which restricts Avastin, Rituxan and Herceptin to specialty distributors--will cost them big money.

That's because these three drugs are "really the workhorse drugs in cancer," Niesha Griffith, a pharmacy exec at Ohio State University's James Cancer Hospital, said during a recent conference call. Every cancer clinic uses them. Everyone spends big money on them. They're the top three best-selling cancer drugs in the world, according to FiercePharma research.

Genentech announced the change in a Sept. 16 letter to its customers, without offering specific reasons. The company did say that it regularly reviews its supply chain "to ensure we utilize the most appropriate distribution model" for its various medicines. And the company said it's committed to patient safety--and to protecting the integrity of its drugs as they move through the supply chain.

Infused cancer treatments like these three drugs require special storage and tight inventory management, Genentech spokeswoman Charlotte Arnold told FiercePharma. The company has already been using specialty distributors to supply its three newest infused cancer products: the breast cancer treatments Perjeta and Kadcyla, and the leukemia drug Gazyva.

"Based on our experience with these medicines with this model, we have confidence that the specialty distribution approach best serves patient access and safety," Arnold said. Cancer treatments from other drugmakers, including Bristol-Myers Squibb's ($BMY) melanoma treatment Yervoy, are also distributed this way, she noted.

Sounds perfectly reasonable. But top hospital customers disagree. The authorized distributors won't be offering volume discounts that providers previously enjoyed, the buying consortium Novation said. The move could cost the buying group's 3,100 members $50 million in lost discounts and other expenses each year, Novation said.

"We believe the dramatic impact of this move ... in terms of costs and efficiencies has been underestimated," Novation spokesman Michael Berman said in a statement (as quoted by Modern Healthcare).

Steve Rough, director of pharmacy at University of Wisconsin Hospital and Clinics, said his facility spends $11.6 million a year on the three drugs. Under the new distribution arrangement, the hospital will add another $500,000 in supply chain costs, Rough said during a Wednesday conference call about the change, arranged by Novation.

Genentech CEO Ian Clark

As Modern Healthcare reports, the Hematology/Oncology Pharmacy Association (HOPA) has lodged its complaints with Genentech CEO Ian Clark. In a letter to Clark last week, the group cited the loss of wholesaler rebates, difficulty in storing large volumes of the drugs, and potential delays in patient care.

Genentech's Arnold said the distribution change won't trigger any change in list price or wholesale acquisition cost on any of the three drugs. The company doesn't believe it will change costs or copays for patients, either, she said. As for the hospitals' loss of rebates, "We're not privy to the terms between hospitals and distributors," she said.

The tighter distribution comes after fake and/or foreign versions of all three drugs have shown up in the supply chain. Counterfeit Avastin, Rituxan and Herceptin have surfaced as some clinics in the U.S. and E.U. have purchased the drugs at big discounts from small suppliers.

One smuggler pleaded guilty in July to selling fake Avastin at cut-rate prices. Just last month, Roche said fake versions of MabThera, sold in the U.S. as Rituxan, cropped up in Europe. Counterfeit Herceptin appeared earlier this year.

"Avastin has been targeted by people acting outside the legitimate supply chain," Arnold said. "That didn't necessarily impact the hospital supply chain, but we have been focusing on enhancing our overall supply chain security."

- check out Genentech's statement
- read the HOPA letter (PDF)
- see the Modern Healthcare story

Special Reports: Top 10 pharma companies by 2013 revenue - Roche | Top 10 best-selling cancer drugs of 2013 - Rituxan - Avastin - Herceptin

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