Who could foresee that a supply-chain decision would result in so much blowback? Genentech CEO Ian Clark is again being publicly chastised for his company's decision to move three of its best-selling cancer drugs to specialty distributors. Groups representing more than 5,000 hospitals say, besides higher costs, the move is as likely to encourage counterfeiting as to deter it.
The letter follows the decision in September by the Roche ($RHHBY) division to restrict Avastin, Rituxan and Herceptin to specialty suppliers. It already goes this route for cancer drugs Perjeta and Kadcyla and Gazyva. It pointed out that the drugs take a long time to manufacture and need special handling and storage. It said for patient access and safety, it decided the specialty distributors were a better model. Genentech said the move would reduce the number of distribution centers between its manufacturing facilities and hospitals and clinics from more than 80 to 5.
The newest challenge follows a public outcry from the Hematology/Oncology Pharmacy Association (HOPA) that made many of the same arguments. In response to the HOPA concerns, Genentech said, "Recent experiences, such as counterfeit issues, have informed our viewpoint that the specialty distribution model is the most appropriate distribution model for all our infused cancer medicines."
Genentech made clear that counterfeiting was not the main reason for the change, but something to bear in mind after counterfeit vials of MabThera and Herceptin, some first stolen from hospitals, have been discovered in Europe this year.
But to that, the hospital groups say the use of specialty distributors will raise the cost of the drugs and so make them more appealing to counterfeiters. It says, "While these cancer drugs have been a target for counterfeiting overseas, there is no evidence of this problem occurring in the U.S. supply chain. An unintended consequence of your action could be to encourage counterfeiting of these products, as their market prices will rise significantly under the new specialty distributor system." It also says that reducing distribution to just 6 wholesalers could also mean an interruption to the entire nation's supplies in the event of bad weather or a natural disaster.
Spokeswoman Charlotte Arnold pointed out in an email Wednesday that there have been cases of counterfeit Avastin showing up in the U.S. and that Genentech has focused on enhancing its overall supply chain security since then. Besides that, specialty distributors have been important in managing the supply of these very complex drugs.
"For example, when Perjeta, a medicine for patients with an aggressive type of advanced breast cancer, was launched in 2012, the FDA only approved a limited supply because we were having manufacturing challenges. We were able to launch this medicine with a limited supply with no customer outages or patient impact. This was possible, in part, because the specialty distribution model allowed us to better manage our limited inventory at the time," Arnold said.
"Our relationships with our customers are extremely important to us. We're working closely with our authorized specialty distributors to educate hospitals about this change and ensure the transition is as smooth as possible," she said.
Of course, it is the higher cost that the hospital associations are most concerned about. Their regular wholesalers offer volume discounts they do not expect to get from the specialty divisions, and those discounts account for hundreds of millions of dollars in savings each year to the nation's hospitals. "Given the steep financial pressures facing hospitals today, your surprise decision has sent a shock wave through the hospital community that will completely up-end pharmacy budgets, thereby compromising hospitals' ability to continue to invest in patient care and other community health efforts," their letter says.
- read the letter (PDF)