Ascension's memo came in response to a letter Genentech sent to hospitals and health systems in the middle of September. The letter stated that effective Oct. 1, Avastin, Herceptin and Rituxan—three of the most common outpatient cancer drugs and a hugely profitable part of Genentech's business—will be shipped only via six authorized specialty distributors instead of wholesalers. Genentech, headquartered in South San Francisco, Calif., is part of Swiss healthcare conglomerate Roche.
Hospitals and pharmacists lambasted Genentech's move, saying they will lose rebates from wholesalers and will consequently incur higher costs to manage their drug-distribution process. The Patient Protection and Affordable Care Act and the shift toward lower reimbursement are spurring providers to find ways to trim their budgets. The supply chain is often targeted for budget cuts since hospitals have more control over what they buy than the rates they earn.
Ascension's decision to bar Genentech's sales reps is largely symbolic. The system will still purchase Genentech's drugs, as will other hospitals, considering the drugs' importance for oncology patients.
But hospitals want to turn up the heat on Genentech because they say its business decision attempts to redefine specialty drugs and will negatively affect everyone downstream. At the University of Wisconsin Hospital and Clinics in Madison, for example, the new distribution model for Avastin, Herceptin and Rituxan will likely add more than $500,000 in supply chain costs, UW Hospital Director of Pharmacy Steve Rough told Modern Healthcare.
Ascension's memo said Genentech's short-notice switch will also complicate next year's budget, which does not account for the distribution change.
“This action, combined with Genentech's choice to not contract for cost relief on any of their products, reduces the dollars needed to provide the breadth of care important to our communities,” Ascension's memo said. The message was sent on behalf of two leaders of the Resource Group, Ascension's supply chain and group purchasing subsidiary.
St. Louis-based Ascension, which had more than $20 billion in revenue last year, confirmed the memo's authenticity and declined to comment further.
In response to Ascension's move, Genentech spokeswoman Charlotte Arnold said, “Our relationships with our customers are extremely important to us. We will continue to work with hospitals on this change.”
Arnold added that three other Genentech cancer infusion drugs—Gazyva, Kadcyla and Perjeta—are already part of its specialty distribution model, which the company believes will allow it to better track where its drugs are going. “There are some business efficiencies for Genentech, but we also believe this model best preserves patient safety and access,” she said.
The Hematology/Oncology Pharmacy Association, which has derided Genentech's new distribution policy, said it did not take a position on health systems' decision to prohibit facility access to the drug company's representatives. But the group is hopeful Genentech will change course. “HOPA is optimistic that continued messaging from professional organizations and individual institutions regarding the patient and financial impacts related to Genentech's decision will persuade them to have a stakeholder's meeting to find a mutually agreeable solution,” the group said in a statement.
Genentech's move coincided with the federal government's new Open Payments database that details financial relationships between physicians and teaching hospitals and the manufacturers of medical devices and pharmaceuticals. The CMS rolled out the Open Payments website this week under a provision of the Affordable Care Act with data spanning Aug. 1, 2013, through Dec. 31, 2013.
Genentech reported $210.2 million in research and general payments to physicians and hospitals during that timeframe. Almost 60% of that total, or $122.5 million, were non-research royalties paid to City of Hope, a not-for-profit network of cancer treatment centers headquartered outside of Los Angeles. Many of the royalties for City of Hope were for Avastin, Herceptin and Rituxan, which are at the heart of the broader distribution dispute.
Genentech also has ties with several large academic medical centers, including Houston Methodist Hospital, which received almost $748,000 for research involving Kadcyla. Arnold said the company “supports efforts to increase transparency around the partnership between the industry and healthcare professionals.”
