Is New Distribution of Genentech Drugs Bad for Cancer Care?

Nick Mulcahy

March 09, 2015

Cancer patients and clinics are now worse off because Genentech has changed how it distributes its three top-selling cancer drugs, according to a surveyof pharmacy professionals at more than 200 hospitals conducted by Novation, the group purchasing organization (GPO) giant.

But Genentech responded that they have not heard from hospitals about logistical impediments to cancer care, with a few exceptions, all of which the company resolved.

The controversy extends from the fact that, in the past, Genentech's blockbusters bevacizumab (Avastin), rituximab (Rituxan), and trastuzumab (Herceptin) were distributed through large wholesalers.

But that changed in October 2014, when Genentech decided to distribute these three widely used drugs through six smaller specialty distributors, which, in effect, cut out the wholesalers.

And that is bad for cancer care because of higher costs and reduced efficiency, according to Novation's poll.

The poll was conducted in January, when Novation e-mailed approximately 1440 surveys to pharmacy professionals in US healthcare facilities and got 219 responses (15.2%).

Most (87%) of the respondents reported some degree of negative impact on expenses in the pharmacy department since the distribution switch, with 57% saying the impact has been "significant."

However, most respondents (72%) said that there was no negative impact on patient care.

Thus, only 28% said that patient care was affected, with the delays in patient in treatment "due to drug unavailability" cited most frequently.

But Genentech has a different accounting of patient-related concerns.

"We've only received 3 reports of patient access concerns directly from hospitals, and none have been reported since mid-October," reads a company statement, which also says the problems were resolved quickly.

 
We've only received 3 reports of patient access concerns.
 

"Our primary concern is that Novation states their survey uncovered impact to patient care and patient treatment delays," said Charlotte Arnold, director, corporate relations at Genentech, in an email to Medscape Medical News.

"If it is true patients are not getting these life-saving medicines, we are deeply concerned we are not hearing about it directly from hospitals or in a timely manner," she continued.

The Mayo Clinic is one of the organizations that have seen patients negatively impacted, according to Novation press materials. (However, Mayo Clinic did not respond to a Medscape Medical News request for information about the poll.)

"These survey results confirm that negative patient impacts have occurred due to delays or decreased access to needed treatments. The decision by Genentech has not been in the best interest of patients," said Kevin Dillon, PharmD, chief pharmacy officer for Mayo Clinic in Rochester, Minnesota, in the press statement.

 
The decision by Genentech has not been in the best interest of patients.
 

The Genentech statements on the distribution change do not address money.

But the Mayo Clinic is willing to talk about it. "The negative financial impact of the Genentech decision has been significant," said Dillon.

The financial woe of oncology clinics appears to be most widely rooted in the loss of "cost-minus" discounts, which result in higher drug purchase costs. Of the organizations that reported a financial hit, 93% cited the loss of this discount. A total of 80% said that increased inventory expense was also at play and 59% cited extra freight charges for emergency deliveries.

The cost-minus discount is actually provided by manufacturers such as Genentech "in the form of cash terms and fees" paid to the wholesaler or GPO, said a Novation press representative in an email to Medscape Medical News. This allows the GPO, in turn, to theoretically provide a reduced cost to hospitals such as the Mayo Clinic.

But the financial schemes used by GPOs, whereby manufacturers pay fees to be part of the GPO distribution network, have come under scrutiny by US authorities, despite being allowed by a special exception in federal law.

The arrangement was also recently criticized in a comment that was posted online to an article about the new survey in the Wall Street Journal.

"In effect, Genentech has opted out of the GPO 'pay-to-play' scheme. The Mayo Clinic, Cleveland Clinic and other Novation shareholder hospitals are whining because they are now being denied the 'patronage fees' — their 'share,' as it were, of the kickbacks — [that] Genentech had been forced to pay Novation for access to Novation's thousands of member hospitals," writes Phillip L. Zweig, executive director of Physicians Against Drug Shortages, a nonprofit firm that claims its staff and advisors are unpaid.

Novation would like to have Genentech back in the old fold.

"On behalf of our hospital members, we have asked Genentech directly to revert back to their previous model that worked extremely well for years," said Peter Allen, senior vice president at Novation, in the press statement.

Last year, this call was supported by a number of major oncology organizations.

In November 2014, leaders of 16 major healthcare systems, including Mayo Clinic, Cleveland Clinic, Yale New Haven Health, and Memorial Sloan Kettering Cancer Center, cosigned a letter with Novation that requested that Genentech reverse its decision to switch to a specialty distribution model.

The new survey is the latest attempt to pressure Genentech to change distribution, according to the Wall Street Journal. For instance, last year, Ascension Health, the large US hospital and clinic organization, responded to the distribution change and banned Genentech sales representatives from its 1900 facilities.

The three Genentech drugs are among the five best-selling cancer drugs in the United States.

In 2013, rituximab was the top seller, with sales of $3.59 billion, according to industry data. It was followed by bevacizumab at $2.78 billion. Trastuzumab was fifth, at $1.93 billion.

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