Major Medical Centers Ask Congress To Probe Genentech's Distribution Changes

November 12, 2014

By Mark Terry, BioSpace.com Breaking News Staff

In mid-September, Genentech changed its distribution policy for three high-profile cancer drugs, Avastin, Herceptin and Rituxan. In response, Ascension Health banned Genentech sales representatives from all of its 130 acute-care hospitals and facilities. Now, 10 major academic U.S. medical centers have sent a letter letter to Congress asking them to review Genentech’s changes.

Effective Oct. 1, Genentech made Avastin, Herceptin and Rituxan available only through six authorized specialty distributors: ASD Healthcare, BioSolutionsDirect, Cardinal Health Specialty Distribution, McKesson Plasma and Biologics, Morris & Dickson Specialty Distribution and Smith Medical Partners. Prior to the changes hospitals could purchase the drugs through wholesale distributors.

Hospital administrators and healthcare analysts fear the changes will add to the costs of the drugs. In a Modern Healthcare article, Steve Rough, the director of pharmacy for the University of Wisconsin Hospital and Clinics (Madison, WI), estimated the new distribution model for those three drugs would add more than $500,000 in supply chain costs.

According to the letter to Congress, the original $500,000 estimate is low. It states, “We have heard from many of our health care professionals that this change will adversely affect patient care, create an undue financial burden and lead to inefficient, labor intensive, and costly pharmacy operations. Many of our centers have already estimated impacts around $1 million to their operations as a result of this decision.”

The letter was sent by executives from Partners Healthcare (Boston); Mt. Sinai Medical Center (New York); New York Presbyterian Hospital (New York); Woodruff Health Sciences Center at Emory University (Atlanta); Ohio State University Medical Center (Columbus, OH); the University of California System; the University of Michigan; Johns Hopkins University (Baltimore); the University of Pennsylvania Health System; and BJC Healthcare (St. Louis, Mo.).

In a Wall Street Journal blog published yesterday, a Genentech spokeswoman is quoted as saying that, “prior to this change, most hospitals were typically ordering these medicines for next day delivery. Specialty distributors also provide next day delivery as part of their standard service.” She added that the “majority of hospitals were already using this model for purchasing other medicines.” Her responses seem to address the access concerns, but not the cost concerns of the healthcare providers.

The letter to Congress says, “(M)ost hospitals purchase supplies through a group purchasing organization that negotiates prices on their behalf, maximizing purchasing power in order to realize discounts. Genentech’s decision to restrict the distribution methods for three of the most common outpatient cancer drugs forces hospitals to receive the drugs only via six authorized specialty distributors instead of the less expensive wholesaler channels.”

It is questionable whether Congress will respond soon, given the recent turnover due to mid-term elections.