Rerun: Avastin instead of Lucentis: Something’s not quite right

I’m taking a break from blogging this week so am rerunning some favorite posts from 2010. Please visit the original post to comment.Sometimes bio/pharma companies cry wolf over regulations, for example when they claim that the emergence of bio-generics or bio-similars would devastate their businesses by lowering the incentive for investment. But other times they find themselves in a no-win situation and need someone to defend them.The Avastin/Lucentis story is one such situation and I’ll gladly step up.Avastin is a highly-effective anti-cancer drug. Lucentis is basically the same drug, but it’s indicated for an ophthalmic condition: wet age-related macular degeneration. Since Lucentis is injected in the eye only a little bit is needed. Some enterprising doctors and pharmacists figured out they could split up one Avastin dose into lots of Lucentis doses. Instead of $2000 or so for a Lucentis treatment they have an Avastin equivalent for less than $100 –maybe as low as $20.The situation has caused Genentech a lot of grief. Their revenues have suffered, they’ve taken a lot of hits in the press and from eye doctors, and the FDA has started holding Avastin production facilities to stricter standards usually reserved for ophthalmic products. The company is in a tricky situation and has had to fall back on the notion that Lucentis has gone through clinical trials for wet AMD while Avastin hasn’t. That’s a weak argument and is undermined by a new Kaiser study showing equivalence.In the short run only Genentech loses out. Patients get a much less expensive drug and insurance premiums are a little lower than they would be otherwise.But it’s also shown the world that the price point for a wet AMD treatment is $20 or so. Now who on earth is going to bother developing a new treatment for wet AMD? I’ve already seen situations where companies chose to drop development of early stage compounds in this therapeutic area because they are afraid they can’t make money.The problem is really the way that drugs are priced. Avastin is priced by volume, but really what patients are getting is a treatment for cancer that’s worth a certain amount of money, regardless of the amount of physical product used. In the past I’ve proposed a software licensing model for drugs. Despite the challenges of implementation I still think it’s a good idea.