Those discounts will not be available from the specialty distributors. And healthcare executives are saying that will cost hospitals millions of dollars every year because the three Genentech drugs are vital and practically omnipresent in the outpatient cancer setting. Global sales of Avastin, Herceptin and Rituxan reached nearly $20 billion in 2013, according to Roche's financial reports, making them some of the most widely used cancer drugs in the world.
“These are really the workhorse drugs in cancer,” said Niesha Griffith, the administrator for oncology pharmacy and infusion services at The Ohio State University's James Cancer Hospital in Columbus.
Genentech said it “regularly assesses its distribution models” and is “committed to patient safety” when it comes to distributing its drugs. The company did not say how much money it would save with the change. “We believe this will best serve patient safety and patient access to these medicines, which have lengthy and complex manufacturing processes, and require special storage and handling,” Genentech said in a statement.
But the financial ramifications for all hospitals that use the drugs are projected to be significant, according to Novation, one of the largest healthcare group purchasing organizations in the country, which helps hospitals with drug supplies. Novation estimates Genentech's new distribution model will cost its 3,100 acute-care member hospitals a total of $50 million annually from lost discounts and ancillary costs. Industrywide, it could have a $250 million impact each year.
“While we certainly can respect the intent of ensuring efficient distribution channels, we believe the dramatic impact of this move on healthcare organizations in terms of costs and efficiencies has been underestimated,” Novation spokesman Michael Berman said in a statement.
Steve Rough, director of pharmacy at University of Wisconsin Hospital and Clinics, Madison, said Genentech’s decision “came as a complete surprise” and will immediately take a toll on the hospital’s budget. He said UW Hospital spends $11.6 million annually on Avastin, Herceptin and Rituxan. The new distribution model will add more than $500,000 in supply chain costs.
“I see zero value in this change,” he said.
Included in those increased costs are changes in inventory, OSU's Griffith said. When hospitals contract with wholesalers, drugs are delivered daily from distributors at specific times. But with specialty distributors, drugs are shipped via other courier services such as FedEx Corp., potentially at later times, compelling hospitals to increase the inventory of drugs they have on hand to ensure patient needs are met.
Griffith added that Genentech's decision will complicate shipping logistics at hospital pharmacies as well. Wholesalers deliver the cancer drugs directly to the pharmacies, while other courier services may drop the supplies off at a general loading dock. Wholesalers also often take back the packaging material. But hospitals now may be stuck with it, increasing waste disposal costs.
“We don't have room for big refrigerated boxes … it's crazy,” Griffith said. “Ultimately, (these costs) trickle down to our patients, and that's concerning to us.”
The Hematology/Oncology Pharmacy Association, an advocacy group for pharmacists involved with cancer care, has similarly voiced its displeasure at the change. Last week, it sent a letter to Genentech CEO Ian Clark (PDF), urging the pharmaceutical company to continue distributing Avastin, Herceptin and Rituxan through traditional wholesaler channels.
“Your decision to restrict distribution of these medications through authorized specialty distributors only will have detrimental consequences and negatively impact our abilities to deliver the gold standard in patient care,” the association said in its letter.
Follow Bob Herman on Twitter: @MHbherman