November 3, 2010
Genentech Offers Secret Rebates for Eye Drug
By ANDREW POLLACK

Genentech has begun offering secret rebates to eye doctors as an apparent inducement to get them to use more of the company’s expensive drug Lucentis rather than a less costly alternative.

Under the program, which started on Oct. 1, 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.

Lucentis, approved in 2006, is mainly used to treat age-related macular degeneration, the leading cause of blindness in the elderly. It costs about $2,000 for each injection, with an injection into the eye needed as often as once a month.

The competition comes from Avastin, another Genentech drug that has the same mode of action. While Avastin is approved only to treat cancer, many retina specialists say it works just as well in the eye as Lucentis. So they are using it off-label because each injection costs only $20 to $50.

Using Avastin instead of Lucentis saves Medicare — and costs Genentech — hundreds of millions of dollars a year.

The rebates are considered a form of volume discount, and have been offered for some other drugs. They are legal if they adhere to certain guidelines.

Still, some doctors said they had ethical concerns about the arrangement.

“There’s no way to look at that without calling it bribery,” said Dr. Greg Rosenthal, a retina specialist in Toledo, Ohio, who has been critical of attempts by Genentech to get doctors to use Lucentis. He is not a participant in the rebate program.

Genentech, which is owned by the Swiss company Roche, said in a statement, “Rebate and discount programs are a common business practice across the industry, including in the field of ophthalmology.” The company said it had such programs for other drugs and that they “help reduce the cost of our medicines for hospitals, pharmacies and doctors.”

Senator Herb Kohl, chairman of the Special Committee on Aging, who has investigated efforts to curtail the use of Avastin in the past, criticized the Lucentis incentives.

“This rebate program appears to be an attempt to reverse the trend of significantly reduced reimbursements that Genentech has been receiving from Medicare for Lucentis,” Mr. Kohl, a Democrat from Wisconsin, said in a statement. “I am highly doubtful that Medicare will benefit in any way from the rebates being offered to doctors.”

Since both Lucentis and Avastin are administered in the doctor’s office, doctors buy the drugs and are then reimbursed by Medicare or private insurers.

Medicare reimburses at 6 percent above the average selling price of a drug, so that doctors can profit from use of a drug. For Lucentis, that 6 percent would translate to roughly $120 a dose. That potential profit increases if the doctors get a bigger discount when they purchase the drug, or a rebate later. Rebates are counted by Medicare in calculating the average selling price of a drug, so the new Lucentis rebates might help slightly lower the amount Medicare pays per injection in future quarters.

The issue of doctors profiting from drugs is fairly new to ophthalmology. Cancer doctors, however, have long made money on the chemotherapy drugs they administer in their offices, though such profits have been sharply reduced in recent years because they were perceived to be giving doctors an incentive to overtreat.

In 2008, Amgen stopped offering rebates to oncologists using its anemia drug Aranesp. Critics, including Senator Charles E. Grassley, Republican of Iowa, said the rebates might have been increasing usage even as studies were showing that high doses of the drug might be harmful.

Genentech suggested that it started the Lucentis rebate program now to spur doctors to try the drug to treat retinal vein occlusion. Lucentis was recently approved to treat that condition.

Some doctors said they thought the company might be worried about the results, expected next spring, of a clinical trial comparing Avastin and Lucentis in treating macular degeneration. If the drugs are proven equivalent, the rebates might help slow the defection to the cheaper alternative.

The rebates might also encourage doctors to give Lucentis off-label for other eye diseases or give more frequent injections.

Many doctors inject the drug less frequently than once every four weeks, the interval specified in the drug’s label.

Several retina specialists who were contacted did not know about the rebate program because it is being offered only to practices that use a certain amount of Lucentis. And doctors who have signed up for the rebates are not allowed to acknowledge even the existence of the program, let alone to talk about the specific terms.

“The existence of this agreement is confidential,” says the contract that medical practices are asked to sign.

One retina specialist who is not in the program but heard about it from a colleague said that his Genentech sales representative declined to talk about it, instead handing him a slip of paper containing a number to call at Genentech.

This doctor, who spoke on condition of anonymity because he did not want to offend the company, said he was told when he called the number that the rebates were being offered only to the top 300 Lucentis-using practices. But he said that might still represent most use of Lucentis.

The program offers rebates based both on volume and on increases in use. For the volume part, the rebates range from 0.25 percent to 1.5 percent of the wholesale cost. One example provided in the document was that a practice using 600 vials a quarter would get a rebate of $8,775.

The rebate based on increased usage ranges from 1 percent to 1.5 percent. Growth in usage of only 0.01 percent qualifies for the 1 percent rebate, while growth of 10 percent or more qualifies for the top rebate. The example provided in the document was of a rebate of $9,652.50.

A practice meeting the minimum requirements for the largest rebates in both categories would receive more than $58,000 in the quarter, according to a calculation done by The New York Times.

Dr. David W. Parke II, chief executive of the American Academy of Ophthalmology, said the society was looking into the new program. “The issue is really does this constitute a financial inducement that in some way alters delivery of care in a way that is not in the patient’s best interest?” he said.

Dr. Parke said that Genentech obviously believed the rebates would sway physician practice. But he said he doubted a rebate of $20 or $30 an injection would be that influential.

“The dollars involved for the average practice are not likely to massively change a physician’s prescribing practices,” he said.

Dr. Susan Malinowksi, a retina specialist in Southfield, Mich., disagreed, saying that with doctors’ income already facing cuts because of health care reform, the rebates would be welcome. Just on Wednesday, Medicare proposed cutting the separate fee, apart from the drug cost, that it pays doctors for giving injections into the eye. “$18,000 a quarter, $19,000, why would that not incentivize you?” said Dr. Malinowski, who was not offered the rebates.

The clinical trial that will directly compare Avastin and Lucentis is being sponsored by the National Eye Institute and will be closely watched.

“If Avastin is as good as or better than Lucentis, it’s obviously going to win,” said Dr. Lawrence J. Singerman, a retina specialist in Cleveland. He said the trial results would have more influence on doctors than the rebate.

Practices seem split now, with some using mostly Lucentis and others mostly Avastin, and some using Lucentis for well-insured patients and Avastin for others.

In 2008, Medicare paid for about 480,000 injections of Avastin to treat macular degeneration, compared with only 337,000 injections of Lucentis, according to Dr. Philip J. Rosenfeld of the University of Miami, who studied the records with Medicare officials. Yet the fewer Lucentis injections cost Medicare $537 million while the Avastin injections cost only $20 million.

Sales of Lucentis in the United States rose 29 percent in the first nine months of this year, to 1.08 billion Swiss francs, or about $1.1 billion, according to Roche’s financial report.