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Roche's Genentech defends supply shift for top cancer drugs

By Bill Berkrot

Nov 24 (Reuters) - Genentech, U.S. biotech unit of Roche Holding, faces growing pressure over a decision to allow only a handful of distributors to supply three of the world's most widely used cancer drugs, a move that prominent hospitals say will create delays and raise costs.

Genentech in October began distributing Avastin, Herceptin and Rituxan to hospitals and clinics through six specialty drug distributors, rather than through drug wholesalers, which distribute a wide range of medicines, devices and equipment on an enormous scale. Specialty distributors supply biologic infusion medicines that often require special storage and handling.

Novation, which negotiates supply contracts on behalf of prominent healthcare providers such as Cleveland Clinic and Mayo Clinic, on Sunday urged Genentech to reverse the decision in an open letter placed in The New York Times.

Cancer patients could face delays in therapy due to shipping inconsistencies, while its member hospitals would pay an additional $50 million a year due to the changes, Novation said. It said the new distribution model eliminates a discount of about 5 percent of the cost of the three medicines from big wholesalers, such as Cardinal Health and McKesson .

"This is a direct transfer of money from hospitals into Genentech and specialty distributor pockets," Peter Allen, head of sourcing operations for Novation, said in a telephone interview.

Genentech defended the move, saying it was not aware of any delays for patients and that it allowed the company to better guard against counterfeit versions of its drugs from entering the supply chain. In 2012, Roche discovered that fake Avastin had been sold to U.S. medical practices.

"By utilizing specialty distributors, which have specific expertise in distributing specialty medicines and significantly fewer distribution centers, we are better able to manage and track our supply," Genentech said. It noted it has already been using the same model to supply its much newer cancer drugs.

Rituxan has annual sales of more than $7 billion, while sales of Avastin and Herceptin are each well above $6 billion.

Genentech said it does not know how Novation came up with its cost estimates and that its move should not affect patients' out-of-pocket expenses for care, which are determined by individual hospitals and insurers.

"We are disappointed to see the inaccurate characterization of our decision and the accusation that it will negatively impact cancer patients," the company said.

(Reporting by Bill Berkrot; Editing by Diane Craft)