Roche Makes Germans An Offer It Hopes They Can't Refuse

| About: Roche Holding (RHHBY)

By Michael Fitzhugh

Roche (OTCQX:RHHBY) is proposing to refund hospitals and public insurers in Germany for the cost of Avastin if initial courses of the cancer drug fail to help patients.

Avastin in Germany costs about $4,584 (€3,300) per patient each month, making public expenditures on the drug an easy target for criticism in a country where a value-based drug-pricing scheme has been implemented. The country’s new federal drug pricing law known as AMNOG launched in January and is designed to generate savings of $2.32 billion (€1.7 billion) in 2011 and annual savings of $2.73 billion (€2 billion) thereafter by tying a drug’s price to the value it provides.

Under Roche’s proposed German contracts, if Avastin were shown to not slow tumor progression for a patient, Roche would reimburse the hospital or the public insurer the cost of the drug, a company spokesman says.

The pay-for-performance arrangement could potentially ease government concern over use of the drug in the wake of a May report by a regional medical group in the country questioning Avastin’s value. The agreement covers the use of Avastin for breast, lung, kidney, and colorectal cancers and is complementary to a price-capping program for Avastin already in place in Germany.

Roche is offering contracts including the refund arrangement now because such contracts were not possible in the German healthcare system, the spokesman told Reuters. The new pay-for-performance plans are available for both health insurers and hospitals, though none have signed up for the program yet.