Literally gouging

An effective eye drug is available for $50. But many doctors choose a $2,000 alternative.

The two drugs have been declared equivalently miraculous. Tested side by side in six major trials, both prevent blindness in a common old-age affliction. Biologically, they are cousins. They’re even made by the same company.

Avastin costs about $50 per injection.

Lucentis costs about $2,000 per injection.

Doctors choose the more expensive drug more than half a million times every year, a choice that costs the Medicare program, the largest single customer, an extra $1 billion or more annually.

Spending that much may make little sense for a country burdened by ever-rising health bills, but as is often the case in American health care, there is a certain economic logic: Doctors and drugmakers profit when more-costly treatments are adopted.

Genentech, a division of the Roche Group, makes both products but reaps far more profit when it sells the more expensive drug. Although Lucentis is about 40 times as expensive as Avastin to buy, the cost of producing the two drugs is similar, according to scientists familiar with the drugs and the industry.

Doctors, meanwhile, may benefit when they choose the more expensive drug. Under Medicare repayment rules for drugs given by physicians, they are reimbursed for the average price of the drug plus 6 percent. That means a drug with a higher price may be easier to sell to doctors than a cheaper one. In addition, Genentech offers rebates to doctors who use large volumes of the more expensive drug.

“Genentech continues to maintain that Lucentis is the most appropriate medicine,” the company said in a statement, adding that it costs “significantly” more to make and is tailored for use in the eye. The drug “has made an immense impact.”

Many ophthalmologists, however, are skeptical that it provides any added value over the cheaper alternative.

“Lucentis is Avastin — it’s the same damn molecule with a few cosmetic changes,” said J. Gregory Rosenthal, a Toledo ophthalmologist who, outraged by the price, co-founded a group called Physicians for Clinical Responsibility to protest its use. “Yet Americans are paying a billion dollars every year for no good reason — unless you count making Genentech rich.”

The story of Genentech’s two drugs, Lucentis and Avastin, began with a scientific marvel — a breakthrough in biology that, thanks to the vast budgets of U.S. entitlement programs, has produced enormous financial returns.

Those profits have yielded benefits. By paying for such drugs without regard to cost, the Medicare system has helped stimulate investment in medical research that contributes to the development of more lifesaving technologies.

But the flow of cash also pushes up the health-care costs that are projected to deplete federal budgets. For while Genentech has aggressively marketed the more expensive drug and sought to restrict the use of the cheaper one, critics say, Medicare has been powerless to do anything but pay up.

That’s because over the past seven years, despite pleas from the Food and Drug Administration and doctors groups, Genentech has maintained the barriers that make it harder for doctors to use the cheaper drug.

Avastin was not originally intended for use in the eye, and the company has refused encouragement from the FDA to seek official approval for using it to treat eye ailments, according to unpublished internal FDA documents. This forces doctors to use it “off-label,” or in ways not specified on the medicine’s label.

The company also packages the drug, which was approved for cancer in 2004, in doses far too big for use in ophthalmology, meaning that the drugs must be repackaged by other companies for use in the eye, raising the risk of contamination.

Genentech has argued that Avastin may pose a greater danger of severe side effects than does Lucentis, although independent scientists say such worries are unsupported by the six trials that have been conducted.

In a statement, the company said that it has not sought FDA approval of the cheaper drug for use in the eye because it has already developed one drug for the ailment known as wet age-related macular degeneration, or wet AMD.

“Genentech continues to maintain that Lucentis is the most appropriate medicine for wet AMD as supported by clinical and other scientific data,” the statement said.

“We specifically designed Lucentis for use in the eye and to clear quickly from the bloodstream after leaving the eye to potentially minimize side effects,” the statement said. “The two medicines were designed for different purposes and, we believe, may have different systemic and ocular safety profiles when used in the eye.”

Genentech defended its pricing by noting that the Roche Group spends $9 billion annually on research and development.

“The price of Lucentis supports the research and development of new potential medicines, including the 92 percent of drugs that never make it to patients,” the company said. “We re-invest a larger portion of our revenue into clinical research than most pharmaceutical companies. Genentech believes it is in the best interest of patients to continue to focus our efforts in ophthalmology on discovering and developing new potential medicines for other serious diseases of the eye.”

Most doctors, however, prefer to use the cheaper drug. Despite the company’s position, U.S. doctors have been using Avastin in about 56 percent of such cases, according to Medicare data analyzed by The Washington Post. In the most recent survey by the American Society of Retinal Specialists, about 61 percent of doctors preferred using Avastin for macular degeneration, with the rest of the market split between Lucentis and Eylea, a new drug made by Regeneron that is almost as expensive as Lucentis.

Because so many doctors continue to use Lucentis, Genentech has rung up more than $1 billion in U.S. sales of the drug for four years running. Roughly 80 percent of U.S. sales are paid for by Medicare and its beneficiaries.

The rising cost of U.S. entitlement programs such as Medicare has prompted outrage in Congress, but it is Congress that has made it difficult in this case and others for Medicare to limit such expenses.

To begin with, the Medicare agency is blocked from seeking better drug prices by negotiating directly with the drug companies, as health agencies in other countries do. Authorities in Britain, for example, have negotiated a price of about $1,100 per dose of Lucentis, and in the Netherlands a dose sells for about $1,300.

Moreover, in cases in which two equivalent options are available, such as Lucentis and Avastin, Medicare is forbidden from restricting payment to the amount of the less costly alternative. After it sought to do so in 2009, a federal appeals court said it lacked that authority.

It’s often difficult, of course, to know when two drugs are equivalent. When the debate over the two drugs and their pricing erupted more than six years ago, Genentech asserted that its more expensive new drug was superior. At the time, it was hard to show otherwise. No one had tested them in side-by-side comparisons.

Since then, the six randomized clinical trials involving more than 3,000 patients have found the drugs to be largely equivalent.

Yet in 2012, the Medicare program and its beneficiaries spent $1.2 billion on Lucentis, according to The Post’s analysis of Medicare data.

Medicare officials said they have no choice but to pay the bill when a doctor prefers to use Lucentis.

“We do not have the authority to dictate treatment based on cost,” Tami Holzman, a spokeswoman for the Centers for Medicare and Medicaid Services, said in a statement. “Under current law, Medicare must cover treatment that is deemed reasonable and medically necessary by a physician or other provider.”

Pharmaceutical firms argue that this is the way it should be.

The industry’s main lobbying group, known as PhRMA, opposes allowing the government to negotiate prices with companies — a process it calls “price controls” — and similarly opposes attempts by Medicare to pursue a policy of paying only for the least costly alternative.

The industry has spent more than any other in the United States to have its voice heard in Washington. Over the past 15 years, the pharmaceutical industry has far outstripped any other in the money it has devoted to lobbying, according to data from the Center for Responsive Politics. Drug companies spent a total of $2.7 billion over that time.

“Proposals to change this system by imposing price controls or only giving patients access to treatments deemed the ‘least costly alternative’ by Medicare would have severe unintended consequences,” Matthew Bennett, a senior vice president at PhRMA, said in a statement.

Such proposals could discourage medical progress, he said. Moreover, because every patient responds differently to a treatment, it may be difficult for the government to set rules for coverage.

“The cheapest option on average is not always the best option for many patients,” he said.

What’s the right price for a miracle?

Every year, about 200,000 people in North America are diagnosed with wet age-related macular degeneration, a chronic disease characterized by abnormal blood vessels that leak blood or fluid into the retina.

Sufferers lose clarity in the center of their field of vision, and among older people it has long been the leading cause of blindness.

Then came Avastin and Lucentis.

Both are the outgrowth of pioneering work done by Napoleone Ferrara, a Sicily-born molecular biologist.

Ferrara studied at the University of California at San Francisco and joined Genentech in 1988. First assigned to the company’s efforts to develop a hormone called Relaxin, Ferrara devoted his discretionary research to a theory that blood vessel growth could cause cancer and other illnesses.

Over several years, Ferrara and his collaborators identified a protein called VEGF that causes blood vessel growth. They then linked that protein to cancer and macular degeneration. Finally, they developed an “anti-VEGF” drug that would attack VEGF, halting the harmful blood vessel growth.

The first anti-VEGF drug was Avastin, which won approval from the FDA in 2004 for the treatment of colorectal cancer.

Lucentis followed. It is a stripped-down version of the same molecule, and it can likewise attack VEGF and bind more closely to it. It won FDA approval in 2006.

“People weren’t sure that VEGF would prove particularly important, but sometimes in science, you just follow your own ideas,” said Ferrara, now a distinguished professor at the University of California at San Diego School of Medicine. “The magnitude of the benefit of these drugs far exceeded our expectations.”

The company spent almost $1.4 billion on the development of Lucentis, which included 18 clinical trials, a Genentech vice president testified to Congress in 2011.

The company appears to have recovered those costs and quite a bit more.

In the first 2 ¹/₂ years, it sold $2.1 billion worth of Lucentis in the United States alone. Another Swiss company, Novartis, in partnership with Genentech, sells billions more overseas.

Much of that is profit.

The company will not disclose how much it costs to manufacture a dose of Lucentis, saying only that it costs “significantly” more to make than Avastin. But scientists knowledgeable about manufacturing drugs of this kind say that the costs of making Lucentis are not much different from those of making Avastin.

Indeed, some scientists said that some aspects of Lucentis make it cheaper to produce.

The Avastin process begins with growing a culture from mammalian cells taken from the ovary of the Chinese hamster.

The Lucentis process begins with growing cultures of the common bacteria E. coli, and these are easier to produce.

The subsequent purification process with bacteria may be more complicated, but “production in bacteria is cheaper than in mammalian cells for several reasons,” said Hervé Watier, a medical professor at the University of Tours in France who has studied the drugs.

While there are some “drawbacks” to the bacteria production method, Watier said, “the financial result still remains in favor of bacteria.”

“I think the difference in cost in producing them is very modest. They cost almost the same, from what I can tell,” Ferrara said.

If so, Genentech is making a lot on each dose. The manufacturing costs may account for 10 percent or less of the price of a Lucentis dose, according to a conservative calculation generated with industry experts.

The company declined to reveal how much it is making from Lucentis above the drug’s manufacturing costs.

“Lucentis and Avastin are not the same medicine and should not be treated, nor represented, as if they are,” the company said in a statement.

After the development of Lucentis in the early 2000s, it was the only drug known to have such effects.

It seemed to be in a class by itself and seemed poised to win even more in sales than it gathers today.

But then Philip J. Rosenfeld, a Miami ophthalmologist, made a discovery.

Rosenfeld was lead investigator on some of the Lucentis trials that Genentech had conducted, and he recognized how effective it could be.

After reading the research that some Genentech scientists had published, he realized that Avastin and Lucentis were derived from the same antibody and thus were functionally equivalent.

“I realized they would perform in the same way,” he said.

Under a university-approved research program, he’d also learned that Avastin, injected into a patient’s arm as is done with cancer patients, had the same effects as Lucentis. The trouble was, since the Avastin was going into the entire body, a large dose was needed, and that could produce dangerous side effects. He calculated that a much smaller dose injected into the eye would be just as effective as Lucentis.

In May 2005, Rosenfeld had a patient who was quickly losing her vision. A retired nurse in her 60s, she’d lost the use of one eye already, and none of the available remedies could slow the disease’s progression.

Rosenfeld knew that Lucentis could help her, but it would be another year or more before the FDA would approve it.

With the patient’s permission, he injected her eye with a small dose of Avastin — one milligram — and ordered her back the next week.

“We were astounded by the results,” he said.

The billion-dollar drug Lucentis was about to be beaten to market, and by one of Genentech’s own products.

In July 2005, Genentech held what amounted to a coming-out party for its new drug.

At the annual meeting of the American Society of Retinal Specialists, the company presented several detailed studies showing how effective it was in treating macular degeneration. With hundreds of ophthalmologists crowded into the room, speakers for Genentech described the marvel of Lucentis.

“Our jaws were on the floor,” recalled Daniel F. Martin, chairman of the Cole Eye Institute at the Cleveland Clinic.

Right after, Rosenfeld presented his Avastin experiment on one patient.

“Phil showed one case report — no animal studies, no randomized trials,” Martin said. “But after this meeting, every ophthalmologist on the planet was injecting it. The therapeutic effect was so powerful.”

Because Lucentis had yet to win FDA approval and couldn’t be sold, ophthalmologists quickly embraced Avastin, which had been approved the year before, albeit as a cancer remedy.

When Lucentis did go on sale, Genentech’s blockbuster drug already had a competitor. How could the company convince doctors and hospitals that Lucentis had any major advantage over Avastin?

Over and over again, it sought to discourage the use of Avastin by raising concerns about its safety.

They told doctors that Avastin was not approved by the FDA for use in the eye — Lucentis was. They reminded doctors that if the repackaging firms cutting Avastin into smaller doses were careless, infection could be introduced. And despite the lack of conclusive evidence on the point, they said that Avastin patients might suffer more adverse events than Lucentis patients.

Sometimes, senior FDA officials said, these warnings stretched the truth.

In October 2007, the company announced a move that would severely restrict the supply of Avastin for ophthalmology: It would no longer sell the drug to the repackaging firms that were cutting it into eye-appropriate doses.

The company’s president of product development at that time, Susan Desmond-Hellmann, explained in a letter that Lucentis was already available. Moreover, she said that during a routine FDA inspection of the company’s Avastin manufacturing facility, “concerns were raised by inspectors related to the ongoing ocular use of Avastin because it is not designed, manufactured or approved for this use.”

An FDA ophthalmology official, Wiley A. Chambers, told colleagues that the company had misconstrued the agency’s position.

That routine FDA inspection at a Genentech plant, Chambers told his colleagues, was unrelated to the intrinsic safety of Avastin in ophthalmology. Instead, it showed that Avastin had been contaminated by glass particles, a danger that could have harmed cancer patients or eye patients.

“Genentech has found a way to blame FDA for their decision to limit the distribution of Avastin,” Wiley wrote to colleagues in an e-mail. “The manufacturing problem at their facility that resulted in glass in their product would be an issue for either the on-label oncology indications or the off-label ophthalmology indications.”

Genentech said in a statement: “We have never sought to restrict the ability of physicians to prescribe Avastin as they see fit for their patients. . . . Genentech did not blame the FDA and took the decision independently.”

Eventually, after ophthalmologists and their professional societies strenuously objected to Genentech’s move to limit Avastin sales — they even threatened lawsuits to make sure the flow of Avastin continued — Genentech backed down and continued to provide the drug to the repackaging firms.

About the same time, Genentech asked the FDA for permission to change the Avastin label to instruct doctors that it was not to be used for eyes. The FDA said there was no evidence to support such a change to the label.

The FDA believed “there was no safety-related basis adequately justifying that labeling change,” according to an internal agency e-mail, and the label was not changed.

Today, millions of doses of Avastin have been administered successfully. Six randomized clinical trials around the world, beginning with one called Comparison of AMD Treatments Trials, have found its effectiveness equivalent to that of Lucentis. After the CATT study, the National Institutes of Health issued a news release headlined, “Study finds Avastin and Lucentis are equally effective in treating age-related macular degeneration.”

The effort was funded by the NIH because Genentech had refused to test the drugs itself and, in a break from industry custom, had refused to provide the drugs to government researchers. An internal company document described the strategy of not performing a test or contributing the drugs as “in the interests of shareholders and the interests of patients,” according to a Senate Aging Committee investigation memo from 2008.

Because it had developed Lucentis, the company said, “there was no need to invest substantial resources and years of clinical development to explore the safety and efficacy of another medicine.”

Since the CATT study, five more head-to-head trials have been conducted. They also found Avastin just as effective as Lucentis.

“There have now been six randomized clinical studies that show no difference in the major areas of safety concern — deaths, heart attacks and stroke,” said Martin, the Cleveland Clinic doctor who also led the CATT trial.

Indeed, Genentech has acknowledged that the drugs are similarly effective. But the company has argued that Avastin may be dangerous when used in eyes.

“The emerging data consistently show differences in safety — particularly in systemic serious adverse events — between Lucentis and Avastin,” Anthony P. Adamis, global head of ophthalmology at Genentech, said in an interview.

These differences are “biologically plausible,” Adamis said, because studies have shown that Avastin remains in the blood longer.

The main basis for Genentech’s safety argument is a finding in the CATT trial that has not reappeared in any of the following five trials and that some scientists involved regard mainly as a curiosity.

The incidence of what are known as serious adverse events — a catchall category that includes hospitalizations for any reason — was slightly higher in the Avastin group: 40 percent vs. 32 percent. The adverse events included broken bones and urinary tract infections.

“The majority of the adverse events would be difficult to imagine being caused by the drug,” Martin said. Martin noted that while small, probably random effects favored Lucentis in some cases and in others they favored Avastin. Neither should be viewed as conclusively related to the drug, he said.

It is very difficult for such trials to detect differences in rare safety events. To do so, a trial might need more than 10,000 patients. Running a trial of that size could cost billions of dollars.

To look for effects in large numbers of patients, researchers often turn to Medicare claims records, examining how patients fared on the treatments in question. It is this kind of review that Lesley H. Curtis, a Duke University medical professor, performed, looking at 146,000 patient claims.

After fully adjusting for patient and provider characteristics, Curtis and her colleagues found that there was no difference in the safety profiles in the drugs.

“In conclusion, we found no evidence of increased risks of mortality, myocardial infarction, bleeding, or stroke,” their research paper said.

The other danger to using Avastin, however, has attracted a lot of publicity in recent years.

The fact that the drug needs to be repackaged into smaller doses introduces an element of risk because it opens the possibility that the drug could be tainted during the repackaging process. (Genentech says because the FDA has not approved it for use in the eye, the company cannot legally distribute Avastin in doses appropriate for the eye.

Indeed, in three cases that made the news — in South Florida, Nashville and Los Angeles — just such a problem has arisen. Several patients reportedly suffered vision loss as a result.

“I’ve never used Avastin because of the potential for contamination,” Warren L. Herron Jr., a Pensacola, Fla., ophthalmologist, said after a morning in which he did 11 eye injections. “Is it a rare thing? Yes, it’s a rare thing. But I can’t stand the idea of ever telling my patients that they can no longer see because I used a tainted drug.

“Besides,” he said, “I don’t think the extra money being spent for Lucentis is totally wasted because it’s going into research and development.”

But as Herron noted, the likelihood of contamination is negligible. Globally, hundreds of thousands of injections are doled out every year without trouble, making the risk of contamination in repackaging smaller than the risks that doctors routinely ignore when deciding on a treatment.

Whether a patient gets Avastin, Lucentis or the new drug Eylea depends on an array of factors. Some doctors use only one of the drugs; some let their patients choose; many decisions are guided by whether the patient’s insurance covers the entire cost or just a portion; and some doctors may consider how much they earn with each drug.

John Thompson, a Baltimore ophthalmologist who is president of the American Society of Retinal Specialists, noted that most doctors use Avastin and that even more would do so if the company sought FDA approval for using it in eyes and packaged it in appropriate doses.

“If Genentech decided to get FDA approval and make Avastin available in small quantities for the eye,” he said, “the American Society of Retinal Specialists would applaud.”

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