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Genentech’s Controversial Distribution Move Deemed a Failure

Hospitals report negative financial impact

A survey of hospitals and academic medical centers released in February indicates that Genentech’s controversial move to change distribution channels for three of its cancer treatments is backfiring. The survey was conducted by Novation, a health care services company that manages and develops competitive contracts with more than 700 medical suppliers.

In September 2014, Genentech sent a letter to hospitals and health systems indicating that its three high-profile cancer drugs –– Avastin (bevacizumab), Herceptin (trastuzumab), and Rituxan (rituximab) –– would be 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. Before that, hospitals could obtain those drugs through wholesale distributors.

Many hospitals retaliated by banning Genentech sales representatives. Leaders from 16 major health care systems, including the Cleveland Clinic and the Mayo Clinic, joined Novation in calling for Genentech to reverse its distribution move. Genentech asserted that the change was to improve efficiency and safety and to prevent shortages.

The Novation survey found that the opposite was true. Approximately 87% of hospitals that participated in the survey reported a negative financial impact. Fifty-seven percent indicated the financial impact was significant. In addition, 25% of survey respondents said the change had a negative impact on patient care, which resulted in patient treatment delays and even cancellations because the drugs were not available.

“When Genentech made its decision, Novation and major health care systems from across the country expressed concerns that it would hinder the ability of providers to deliver high-quality care in the safest and most efficient manner to cancer patients,” said Peter Allen, senior vice president at Novation. “As the survey results demonstrate, those concerns have been borne out. 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.”

“The negative financial impact of the Genentech decision has been significant at the Mayo Clinic,” said Kevin Dillon, chief pharmacy officer for the Mayo Clinic in Rochester, Minnesota. “The new specialty distribution model is less efficient, forcing us to increase inventory levels of these expensive cancer drugs. These survey results confirm that negative patient impacts have occurred due to delays or decreased access to needed treatments. The decision by Genentech has not been in the best interest of patients.”

For its part, Genentech says that only three problems have been reported by hospitals or medical centers since the changes were put into effect in October 2014. “We understand hospitals have some concerns around their own finances and how to implement the changes,” a Genentech spokesman said in a statement. “If their survey suggests patients aren’t getting a drug or it’s delayed, we would ask they work with us to at least get that remedied, but we’re not getting the information we need.”

Sources: BioSpace; March 3, 2015; and Novation Survey; February 2015.

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