Healthcare providers continue to criticize Genentech's limited-distribution action

Last October, Genentech announced that it was restricting distribution of three oncology drugs—Herceptin, Avastin and Rituxan—to six specialty distributors, rather than making it available through open distribution from many distributors and pharmacies. Almost immediately, major national healthcare networks, led by Novation (Irving, TX) protested, claiming that the change would result in higher costs and lower service quality. Now, the group has released a survey of over 200 hospitals taken in January, with results that it says confirm its earlier stance:

• 87% of hospital respondents reported a negative financial impact with 57% saying the impact has been significant.
• More than 25% of respondents indicated the distribution change has had a negative impact on patient care, resulting in delays and even cancellations in patient treatment due to drug unavailability.
• 93% said they had never experienced shortages of any of those three drugs prior to Genentech’s change in the distribution model.
• Essentially all the respondents (99%) indicate that Genentech’s decision to change its distribution model did not improve supply channel safety/integrity.

Between higher costs for ordering and maintaining inventory of the drugs, and the costs for delayed patient care, the healthcare group claims a financial impact of $300 million (presumably, for the first year after the change). Peter Allen, senior vice president at Novation. “As the survey results demonstrate, … Genentech’s decision to use a higher cost, less effective, less efficient distribution system is reducing the availability of these critical cancer drugs, and is increasing costs to hospitals,” said Peter Allen, SVP at Novation, in a statement.

Genentech’s stated reason for making the change was improved supply chain operations and product integrity (which is an issue for many fragile, temperature-sensitive biologics); but limited distribution is also a way to maintain tighter control of drug availability and pricing. What’s hard to fathom is that specialty distributors are supposed to provide better service (faster and more tailored delivery, assistance in prior authorizations and other dispensing factors) than open distribution. Buried somewhere in these claims and counterclaims is the fact that some healthcare systems have their own specialty pharmacies that overlap, to a degree, with specialty distribution.

Limited distribution is becoming a more common element for specialty pharmaceuticals, which in addition to the logistics complexities also often carry a burden of outcomes data reporting back to FDA; for many rare diseases, it is a preferred way to coordinate drug delivery effectively. Genentech is not being accused of an improper activity (and the Novation statements are careful to talk about costs of delivery, and not price of the drug). But, like the brouhaha over hepatitis C therapies, this dispute is not going away anytime soon.