Genentech Distribution Decision

This is an example of a pharmaceutical company helping another group of healthcare stakeholders, health plans, because of an issue with health systems increasing cost of care.

Stakeholders in the healthcare market, while working to reduce the cost of care, are trying to determine the best path to profitability.

An example is Genentech’s decision to change the way it ships three high-profile cancer drugs to hospitals that has shaken the health system and hospital purchasing of oncology drugs.

Genentech recently announced that hospitals could receive Avastin, Herceptin and Rituxan only through six authorized specialty distributors. The approved companies are ASD Healthcare, BioSolutionsDirect, Cardinal Health Specialty Distribution, McKesson Plasma and Biologics, Morris & Dickson Specialty Distribution and Smith Medical Partners.

For hospitals, this means they will have to contract with one of those specialty distributors if they want to continue receiving those three cancer drugs. Previously, hospitals purchased the drugs through wholesale distributors, which offer hospitals discounts based on purchase volume.

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Ascension Health, which is one of the nation’s largest operators of hospitals and clinics, has banned Genentech sales representatives from visiting its 1,900 hospitals and clinics around the country as a result of its decision.

Genentech’s decision is a 340B issue, not a patient safety one. The 340B Drug Pricing Program requires drug manufacturers to provide outpatient drugs to eligible health care organizations/covered entities at significantly reduced prices.