One Blockbuster Drug Explains A Lot About Our Out-Of-Control Healthcare Costs

One Blockbuster Drug Explains A Lot About Our Out-Of-Control Healthcare Costs
June 06 01:00 2014

One Blockbuster Drug Explains A Lot About Our Out-Of-Control Healthcare Costs Medicare, the federal health insurance program for Americans 65 and older, could save $18 billion over the next 10 years if doctors switch to a less expensive drug to treat blindness. The switch could also save patients $5 billion in insurance copayments, according to a new study in Health Affairs.

Ranibizumab, more commonly known by its brand name Lucentis, is delivered as an injection to the eye and runs about $2,023 per dose. Many patients require up to 12 injections per year. That’s why some doctors choose to prescribe the much cheaper drug Avastin (bevacizumab) instead, which costs around $55 per dose.

While Avastin is designed to treat cancer, not blindness, many doctors say it works just as well as Lucentis – with significant potential cost savings to patients, insurers, and the government.

Battle of the Eye Drugs: Lucentis v. Avastin
Both drugs were developed by Genentech, a division of the Swiss biotech giant Roche Group. Opthamalogists prescribe both Lucentis and Avastin to treat two of the leading causes of blindness in the U.S. – neovascular age-related macular degeneration and diabetic macular edema. While the names are complicated, both diseases affect the macula, the part of the retina that helps you see objects straight ahead.

Here’s the catch: Lucentis has approval from the U.S. Food and Drug Administration (FDA) to treat eye disorders and Avastin doesn’t. Avastin was originally manufactured to treat certain cancers, but it is used by many doctors in an “off-label” capacity – meaning not approved by the FDA to treat eye diseases.

It is legal for doctors to prescribe drugs for off-label uses. According to Consumer Reports, about one in five prescriptions are written off-label. However, drug companies are prohibited from promoting off-label uses of their drugs.

“Lucentis and Avastin are not the same medicine and should not be treated as if they are the same,” a Genentech spokesperson said in an email. “Avastin is not manufactured or approved for use in the eye. Genentech does not promote the off-label use of Avastin for disorders of the eye.”

Yet according to Medicare data, more than two-thirds of Medicare patients who have macular eye disorders are being treated for those disorders with Avastin, even though it is considered an off-label use. Doctors who use the much more expensive Lucentis are actually in the minority.

“Lucentis is Avastin – it’s the same damn molecule with a few cosmetic changes,” J. Gregory Rosenthal, a Toledo ophthalmologist and co-founder of Physicians for Clinical Responsibility, told The Washington Post. “Yet Americans are paying a billion dollars every year for no good reason – unless you count making Genentech rich.”

In April of this year, the Centers for Medicare and Medicaid Services released billing data for physician services. And, as we reported, the highest biller, Dr. Salomon Melgen, a South Florida ophthalmologist, received nearly $21 million in Medicare payments in 2012. Melgen billed for more than 37,000 doses of Lucentis.

More Expensive Drugs Make More Money
So why doesn’t Genentech just get approval from the FDA to use Avastin to treat eye disorders?

Genentech said that findings from randomized clinical trials suggest “the risk of systemic serious adverse events may be higher when injecting Avastin into a person’s eye compared to Lucentis.” And since Avastin must be repurposed as an eye injection, generally at a compounding pharmacy, there is an additional risk, however small, of contamination.

To be sure, doctors who choose Lucentis over Avastin may do so because they believe it is safer or because the reimbursement rates are higher. For its part, though, Genentech has been accused of promoting Lucentis to make money.

In fact, Bloomberg reports, “Italy is seeking $1.6 billion in damages over allegations that Roche and Novartis AG, which both sell Lucentis, are colluding in directing patients toward more expensive medicines.”

Genentech can make even more money from Lucentis in the United States.

In the U.S., the average retail price for Lucentis is more than $2,000. In the United Kingdom, it retails for about $1,100 per dose, according to The Washington Post. One of the main reasons that Lucentis costs more in the United States has to do with the way drug prices are negotiated.

By law, Medicare cannot negotiate drug prices directly with the drug companies. Instead, prices are negotiated between drug companies and health insurers. This basically means that the Centers for Medicare and Medicaid Services, the single largest health insurer in the country, can’t negotiate prices. In countries like the U.K., the government health programs directly negotiate prices with drug companies.

When doctors use a drug to treat a Medicare patient, they are directly reimbursed by Medicare for the average sales price of the drug, plus an additional 6%.

That means that when doctors prescribe Lucentis, their profit is $95 per dose. For each dose of Avastin they prescribe, the profit is only $29, according to a report from the Department of Health and Human Services. So there is an economic incentive for doctors to prescribe the more expensive drug. If a patient gets 12 eye injections in a year, the doctor will make $650 more per patient if they use Lucentis over Avastin.

Similarly, there is no financial incentive for Genentech to sell less Lucentis and more Avastin. When Avastin is used to treat cancer patients, it is often delivered at more than 100 times the dose needed for an eye injection, and a full course of Avastin treatment for cancer can cost up to $50,000 per patient. But when doctors use Avastin to treat eye disorders, they buy 100-400 mg vials and then divide them into the 1.25 mg dose needed for the eye injection. That’s why a drug that’s still under patent ends up seeming like such a bargain – it was never priced to be used in such small doses.

In November 2010, The New York Times reported that Genentech was offering secret rebates to eye doctors to encourage them to use Lucentis.

Under the program […] medical practices can earn up to tens of thousands of dollars in rebates each quarter if they use a lot of Lucentis and if their usage increases from the previous quarter, according to a confidential document outlining the program that was obtained by The New York Times.

In a response to the Times, Genentech said: “Rebate and discount programs are a common business practice across the industry, including in the field of ophthalmology.”

Bottom Line
In 2010, the combined cost of using Avastin and Lucentis to treat eye disorders was around $2 billion – or about one-sixth of the entire Medicare Part B drug budget. Because the number of people eligible for Medicare is exploding as our population ages, if prescribing patterns stay the same, that number would increase to $20 billion over the next 10 years, according to the new Health Affairs study.

Phasing out Lucentis and using Avastin instead may be the fastest way to reign in those ballooning costs.

The Health Affairs researchers, led by David Hutton, assistant professor of Health Management and Policy at the University of Michigan, developed a mathematical model to determine the lowest and highest possible spending levels over a 10-year-period if doctors changed their prescribing patterns.

If all patients switched to Avastin to treat neovascular age-related macular degeneration and diabetic macular edema, Medicare would only spend $2 billion over the next 10 years, compared to the projected $20 billion.
If all patients switched to Lucentis to treat the same eye disorders, Medicare would spend $47 billion over the next 10 years, an increase of $27 billion from current spending rates.
Given that total spending for all the Medicare program combined was more than $570 billion in 2012, a projected $20 billion may seem like a meager sum. But the amount of money spent on Lucentis and Avastin to treat eye disorders is clearly disproportionate to the rest of Medicare Part B drug spending.

Here is a full statement from Genentech:

We believe doctors should have the ability to prescribe the medicine they think is right for their patients.

However, Lucentis and Avastin are not the same medicine and should not be treated as if they are the same. Lucentis and Avastin were designed for different purposes and may have different safety profiles when used in the eye. We specifically designed Lucentis for use in the eye and to clear quickly from the bloodstream to minimize side effects.

Avastin is not manufactured or approved for use in the eye. Genentech does not promote the off-label use of Avastin for disorders of the eye. Avastin is only approved by health authorities for the treatment of certain forms of cancer and is manufactured, formulated and packaged specifically for administration by intravenous infusion to people with cancer. Patient safety is our primary concern.

Safety findings from prospective randomized clinical trials and large observational studies comparing Lucentis and Avastin intravitreal treatment in wet AMD patients suggest the risk of systemic serious adverse events may be higher when injecting Avastin into a person’s eye compared to Lucentis. Therefore, uncertainty remains about the safety of Avastin for the treatment of off-label indications in the eye.

Lucentis is FDA-approved for wet age-related macular degeneration (AMD), macular edema after retinal vein occlusion (RVO) and diabetic macular edema (DME). The medicine has prevented blindness and improved vision in countless people who have been diagnosed with these potentially blinding diseases. Lucentis has made a tremendous impact in the lives of patients since its introduction in 2006.

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