All Eyes on Roche's Competing Ophthalmology Drugs

| About: Roche Holding (RHHBY)

How is this for timing? The UK’s NICE has rejected Roche’s (OTCQX:RHHBY) Lucentis med for treating diabetic macular oedema because of insufficient value for the price. And the decision comes shortly before the US National Eye Institute releases results of a trial of 1,200 patients with age-related macular degeneration given Lucentis or Avastin, another Roche drug that costs less to treat eye problems.

The rejection by the UK agency underscores the difficulties Roche has encountered with Lucentis, a newer medication the drugmaker has marketed for different eye ailments. And price has been a big issue. There are “reservations about the cost effectiveness estimates provided in the manufacturer‟s submission,” stated the UK’s National Institute for Health and Clinical Excellence, which already endorsed (pdf) Lucentis for AMD.

In the US, all eyes are on the NIH’s National Eye Institute. Of the two drugs, only Lucentis was approved by the FDA to treat AMD, but many docs believe Avastin is equally effective and because of huge differences in price - $30-plus an injection for Avastin versus about $2,000 for Lucentis - Avastin is widely used by many ophthalmologists. The pricing disparity has plagued the drugmaker.

Two years ago, Roche’s Genentech yanked Avastin from compounding pharmacies, which were repackaging and selling the drug to ophthalmologists. After outcries, Genentech struck a deal with the docs to loosen the restrictions. The episode, which Genentech blamed on an FDA inspection, prompted a probe by the US Special Senate Committee On Aging into Medicare expenditures for Avastin. Meanwhile, a study found Medicare saved more than $500 million annually by using Avastin.

For its part, Roche’s Genentech has decried the use of Avastin to treat AMD as unsafe (pdf), although a recent study found otherwise, and recently began offering a rebate to retinal specialists, a move that may reverse a trend of Medicare reduced reimbursements and convince some to use Lucentis for treating a newly approved indication, retinal vein occlusion.

However, if the NIH head-to-head study suggests the two drugs are equally effective, the possibility exists the FDA may grant approval for Avastin to treat AMD. And that would encourage many docs to switch from the more expensive Lucentis and, of course, prompt insurers to review reimbursement. The implications for Roche? Lucentis notched about $1.6 billion in sales last year. Then again, many docs already use Avastin on an off-label basis, suggesting a switch may not pinch sales too much.