Ascension Health Bans Genentech Sales Reps After Losing Drug Discounts
A change in the supply chain for three important Genentech cancer medications elicits a strong reaction from one of the nation's largest operators of hospitals.
After a change in distribution strategy at Genentech, Ascension Health has prohibited sales representatives from the drug maker to solicit physicians at Ascension’s 1900 sites of care around the country. The ban is the result of a supply-chain move that routes three infused cancer medications—Avastin (bevacizumab), Rituxan (rituximab), and Herceptin (trastuzumab)—out of the regular distribution channels and into the specialty pharmacy channel.
Most large-molecule biologics are moved through the specialty channel because they require special temperature-sensitive handling and are usually higher-priced medications that need to be tracked more carefully to avoid waste. The specialty channel is actually a distribution model that typically allows for better inventory management, Genentech said in a statement to The Wall Street Journal. A narrow network also helps maintain integrity in the supply chain.
Genentech’s decision to move these cancer medications to a new distribution model will mean the drugs will go through just five distribution centers instead of the 80 that had previously been processing the orders. The specialty distributors are actually divisions of the same wholesalers that have already been distributing the drugs, so not much will change in terms of whom will actually move the product. Switching the drugs to a narrower channel, however, will also mean that the hospitals and medical centers will lose the discounts from wholesalers they once had when the drugs traveled through the normal route.
The Hematology/Oncology Association (HOPA) wrote to Genentech to express their concerns about the “unnecessary burden” this change would have on patients and pharmacies. The letter cited negative financial repercussions, treatment delays, and waste management problems caused by the disposal of packaging materials associated with shipping biologics. HOPA also wrote about the contracting headaches this change may set into motion: “The untimely communication of the change in distribution channels has caused undue strain on healthcare systems to develop new contracts in order to obtain drug in such a short time frame.”
Hospitals and clinics may be forced to incur additional inventory costs, as specialty distributors are not as robust in the delivery of these products, said Steven D. Lucio, senior director, clinical solutions and pharmacy program development at Novation, a healthcare services company that manages competitive contracts for hospitals and providers, to BioPharm International. “Currently, there are almost no therapeutic alternatives for these frequently used biologics. Until such time as we have competition from biosimilars, our member institutions will have no choice but to incur this additional expense and inefficiency in providing patient care.”
Although Ascension banned future interaction with Genentech representatives, it will continue to use the three biologic drugs in its locations, even though the additional cost of the medications could be more than $50 million annually, according to some estimates.
“While there are business efficiencies for Genentech, there is no change to the list price or wholesale acquisition cost that Genentech charges for these medicines as a result of this change,” Genentech spokeswoman Charlotte Arnold told BioPharm International.
How much cost will trickle down to patients is less known, however. “We are not privy to and do not influence the terms between hospitals and distributors, or what hospitals charge the patient for the medicine,” noted Arnold. “We also do not anticipate it will result in any change in patients’ insurance or out-of-pocket cost responsibility.”
“While we certainly respect the intent of ensuring efficient distribution channels, we think the significant impact of this move has been fully underestimated,” Lucio countered. “We would like to see Genentech revisit its decision and encourage them to take the time to talk directly with those organizations affected by the move.”
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