Genentech's Avastin: An Undeserving Target for Politicians and the Media

I typically write about stocks of interest to investors, but today I am just hacked off. Bear with me and pardon the pun.

Not all drugs and biotech companies are created equal -- and the belief that a drug may cost too much because of its price, is representative of the simplicity and shallowness of the current debate in politics and in press about healthcare costs in the United States.

We live and, for the most part, benefit from a capitalist healthcare system built into a capitalist economy -- with all the commensurate risks and rewards. High-priced drugs with large profit margins are part of this system, and the numbers kicked around by politicians and the press obscure the central reality of our system: A high price for a drug is not necessarily a high cost to society when a drug saves or extends a life and when profits spur the development of treatments that (over time) reduce costs by saving or improving the lives of patients.

Two recent editorials complained about the price of cancer treatment Avastin, made by biotech giant Genentech (DNA), and Genzyme's (GENZ) treatment, Cerezyme, for Gaucher disease.

Avastin fights various forms of cancer and costs upward of $110,000 per annum or more, while Genzeyme's product can top more than $400,000 per annum. The Times's editorialists believe this is way too expensive. Tell that to a patient with Gaucher's disease or a cancer patient who lived, on average, the five and a half months predicted by the median survival of patients in the Avastin clinical trial that led to the drug's approval. In a country that rewards creativity and success, don't you want to reward companies for saving patients so they can reinvest the money to save more patients in the future?

I am no apologist for an industry holding many companies that currently make far too much money for what they return in improvements in public health -- Amgen (AMGN) and its anemia drugs come to mind -- but this specific complaint is misplaced and depressingly similar to the hollow campaign rhetoric dominating the air waves.

While the editorial reflected public frustration with medical costs, it also is a mirror of the poverty of the healthcare debate which is increasingly dominated by the inability of patients and the general media to separate prices from costs. In reality, a seemingly high-priced drug may actually save money in the short or long run, not to mention the life of a patient.

I do not deny that patient, public and political frustration is well grounded - too many things cost too much, from allergy shots to fifteen dollar boxes of sterile tissues -- but price should and can not be confused with cost. In this instance, the clarity of the target (a $100,000 a year drug) and the vast size of the company led the debate.

If the company were a start up that had never made a penny, tried for 10 years to develop the drug and finally succeeded, would there have been criticism? Of course not, and the focus would have been on the happiness felt by surviving patients and the money saved when they left the hospital and went home to live, and not to die in a hospice.

A new report that came out Tuesday made this point all too well.

Genentech's cancer drug Rituxan, in combination with chemotherapy, has helped younger patients with non-Hodgkin's lymphoma live two-thirds of the time for five years or more, compared to 50% of the time in the early 1990s. Call it longer living through high-profit chemistry. Genzyme has a robust pipeline paid for with profits from Cerezyme.

This does not seem to faze politicians, patients and pundits who fail to discriminate among the products and the companies that supply them. Avastin is not a "me-too" product; it is not the umpteenth variation of the same pain killer; it is not a treatment for a brand new disease like restless toe syndrome. Avastin, along with many other high-priced drugs, extend and, sometimes, save lives. That is Genentech's mission. Reducing the price of Avastin, and the flow of dollars available to develop new products at a company like Genentech will materially affect the development of new products and eventually lead to the premature death of many patients.

Do I exaggerate?

The drugs in question took more than a decade to develop and are (or were) unique when approved. Avastin is a first and best-in-class anti-angiogenesis cancer drug that reflects billions of dollars in past, current and future development costs. I follow many companies in the life sciences industry and can say without hesitation the drug's parent and creator is considered by many (including me) to be the world's finest cancer company. Genentech has more than 100 clinical trials underway, and is always pushing the envelope and looking for new ways to save lives. The funds for the trials and "envelope pushing" come from high-priced drugs already on the market.

Some surveys also find Genentech to be the finest place to work in the United States -- and it would be difficult to find a company with a better track record for working with, and listening to, the FDA. You won't see pictures of Genentech scientists on yachts with Congressional lobbyists and call girls -- instead they spent their money on R&D last year -- more than they declared as a net profit.

The laws of economics are simple -- a reduction in price of current drugs will reduce Genentech's ability to improve Avastin, develop new treatments and serve patients. Ultimately, a lower price for Avastin may actually mean a higher cost to society.

Genentech and Avastin are easy targets for politicians, the media and complaining patients. The harder (and real) targets are avoided by too many people.

What are the real drivers of runaway costs? People, not patients.

According to Dr. Mark McClellan -- former FDA and Medicare chief now at the Brookings Institution -- the key to cost control is keeping people healthy. The current system rewards the treatment for illness and its reimbursement and often does not pay for routine physicals and other measures to improve health, like managed exercise and diet programs.

Of course, no one ever sold a newspaper or got a vote by saying "Hey, fatso, you may need help, but the first place to start is by getting the potato chips out of your mouth."

But sticking it to a company that has improved or saved 10s of thousands of lives (but is an easy target because of a $100,000-a-year drug) is sexy.

It would be better if the politicos, the public and the media took a look at the real cost and value of a drug, not the price -- and that's something we currently don't do.

A good example is the recent demise of drug BiDil and NitroMed.

BiDil was the first drug ever approved by the FDA for one ethnic group: African Americans. This heart medication was so successful in trial that the patients on placebo were put on BiDil midway through the trial for ethical reasons -- the patients receiving the drug saw a 43% reduction in deaths from heart attacks.

No matter -- BiDil failed in the marketplace because payers (insurers and Medicare) would not pay. Medicare and private insurers asked for too high of a co-payment from patients who could not afford the drug. These payers did not, and would not, factor in a 43% reduction in deaths, and all the costs associated with a sick and dying patient, when demanding these co-payments. And this narrow view of the costs won the day! Since the drug has been approved it is probable that more patients have died unnecessarily of heart problems who could have been managed with BiDil, than the number of soldiers who have died in Iraq.

Narrow-but-headline-grabbing analyses of high-priced drugs undermine the truth: It is the value of a drug relative to its price that matters. Narrow, artificial price limits on life-saving, unique drugs can kill -- and, are likely, already doing so.

Comments

[DrAlexUNC]

The comments above are very off-base. First - please give the example of where Avastin in combination with "more advanced chemotherapy did not show any benefits to patients." Quite wrong. The only trials where avastin has not shown efficacy has been in the Pancreatic population. Those trials were stopped. The results of the large adjuvant CRC trials are expected to show prolonged survival and those results are expected late 2008/early 2009.

The breast approval was controversial in some eyes, but not in the eyes of the majority of the patients and oncologists already using Avastin for prolonged patient benefits. By the way, the "independent scientific review committee" that you tout, is an extension of the FDA, and was comprised that day of 3 temporary voting members that were needed to fill the quorum of 9 voting members. The original vote of 5-4 against was reported to have privately been changed to a 6-3 vote for approval as one of the members of the temporary panel - an oncologist from MD Anderson - and a patient advocate changed their votes. The vote for approval from the practicing clinicians was 5-1 in favor of approval.

The FDA has been using antiquated methods of looking at data to base how the new biologics work against cancer cells. Avastin alone has very little anti-tumor effect; but in combination with standard chemotherapy, it's mechanism of action allows for greater targeting of cancer cells and thus increased response, increased PFS, increased OS in some tumors, and better QOL. Does it have side effects - yes. But to those people who have benefited from Avastin therapy, those risks are worth the benefit.

One last point, the European Community approved Avastin for Breast Cancer Months before the FDA approved Avastin's use for breast cancer - based on the same data which was presented before the FDA's ODAC panel.

2008 Mar 26 09:51 AM

[Manifestor]

The article does not explain why $110,000 per annum is the right cost for using Avastin. Why not $55,000? What about the people in poor countries who too get cancer but cannot afford this price? Some one hasto ask these questions.

2008 Mar 26 01:18 PM

[pharma]

"The results of the large adjuvant CRC trials are expected to show prolonged survival and those results are expected late 2008/early 2009."
These are just speculations. Such data are not available yet.

Now, speaking about Avastin in breast cancer patients.

"The original vote of 5-4 against was reported to have privately been changed to a 6-3 vote for approval as one of the members of the temporary panel - an oncologist from MD Anderson - and a patient advocate changed their votes. "
I am wonder what kind of "private incentives" were offered to the panel member to change his vote? It were not new data since getting ones would take many months.

The most important fact is that Avastin does NOT offer any survival benefits to breast cancer patients!

PS
"What about the people in poor countries who too get cancer but cannot afford this price? Someone has to ask these questions."
Too bad but nothing can be done about it. Any new drug development [if successful since 9 iout of 10 will fail] cost close to $1B, and somebody must pay for it.

2008 Mar 26 03:05 PM

[UCLA MDO]

pharma, your comments are misguided and the conversation you overheard about this subject is above your head. To not recognize the fact that Avastin is helping breast patients is ridiculous. Please start small, try wikipedia, and broaden your horizon to a real medical journal. It's in all of our best interests to stop spreading ignorant information that another someone like yourself may misinterpret and pass on again.

2008 Mar 26 03:32 PM

[pharma]

Panel Recommends Against Avastin for Breast Cancer
Final FDA Decision Still to Come

Report from official American Cancer Society website
Article date: 2007/12/07

An advisory panel for the US Food and Drug Administration (FDA) says the drug Avastin (bevacizumab) should not be approved for breast cancer treatment.

The Oncology Drug Advisory Committee recommended against FDA approval by a 5-4 vote Wednesday, noting that Avastin does not help breast cancer patients live longer and can cause severe side effects.

Avastin is approved to treat colon cancer and lung cancer. Studies have shown that Avastin helps patients with these cancers live longer.

Survival Not Significantly Improved

In making its recommendation, the advisory panel reviewed the results of a clinical trial involving 722 women with breast cancer that had returned after initial treatment or that had spread to other parts of their body. The women were randomly assigned to receive either Avastin plus the chemotherapy drug paclitaxel, or paclitaxel alone.

Adding Avastin to paclitaxel kept the cancer from growing for an average of 11.3 months, compared to 5.8 months for the women getting paclitaxel alone.

But overall survival was not significantly better, and women who received Avastin had more serious side effects compared to those who got paclitaxel alone. Those included high blood pressure, blood clots, heart problems, holes forming in the colon (bowel perforation) and high levels of protein in the urine, which is a sign of kidney damage. These are all known side effects of Avastin.

In a report prepared for the panel, the FDA also said Avastin treatment may have caused as many as 6 deaths.

2008 Mar 26 10:36 PM

[DrAlexUNC]

Pharma - What is your point? Do you have a true understanding of the data, or do you rely on media blurbs to get your facts. If you understand the nature of the treatment of metastatic breast cancer, you would understand that PFS is a very viable endpoint. Never has a drug added 5.5 months on to the PFS endpoint vs. standard of care. The 2nd point is that in today's environment, women can receive multiple lines of therapy post progression. This hinders being able to capture OS data. In fact ECOG, when designing the trial took this point into account, and designed the trial based on historical endpoints in this population, and knowing that OS has not been the endpoint the FDA used in this population.

The 20% side effect increase associated with the addition of Avastin to paclitaxel was mostly from hypertension - of which only 1 patient had to be withdrawn due to uncontrolled hypertension, neuropathy which is associated with cumulative dose of paclitaxel - the Avastin containing arm averaged 4 more cycles of therapy than the control arm, thus allowing more drug to accumulate, and 3rd, fatigue, which is also associated with more cycles of therapy. Compare the 20% increase in AEs to the earlier approved Ixabepilone (approved on TTP) and it's increased rates of toxicity which included a 70% increase in neutropenia and a 50% increase in neuropathy.

The deaths in any study are a tragedy, and should not be discounted, but historically, in the MBC trials, you expect between a 1% and 3% death rate. This trial had a 2% death rate.

To answer the question of why it costs $110,000 instead of $55,000 -
for the patient, the maximum one would have to pay to get Avastin is $55,000/yr, based on the cap plan that Genentech instituted last year.

2008 Mar 27 09:47 AM

[LVmyDNA]

Manifestor- As a proud member of the Genentech team I would tell you that we have always been up front about the cost of creating drugs and charge accordingly. In addition, we have also always reached out to patients who cannot afford the life saving drugs we offer and provide them at little or no, thats right no cost.

2008 Mar 27 10:41 AM

[in my DNA]

Someone asked why not $55k per year instead of $100k+ per year. It costs Genentech between $500M and $800M to get a drug approved. Genentech then only has a limited time as patent owner before the generics can move in to make their versions. Genentech must also fund future research so they have new products. Genentech is a growth stock, not a dividend stock, and applies profits to further research.

One more thing to consider. Genentech offers assistance to patients that can not afford a Genentech product. Please check out the genentechaccessolution... website for more details.
Disclosure- Yes, I am a member of the Genentech Team and proud of it.

2008 Apr 03 01:14 AM

[scienceorart]

Avastin is not a wonder drug. It is however extending survival. It is paving the way for other companies to search for drugs that may add more value than Avastin. We are learning more each day. In Non Small Cell Lung CA, the Survival was 2 months longer than SOC. 2 months? It is median survival in a tough disease. 23% of patients in this trial made it to 2 years! Not bad you say? There has not been anything in the last 10 years for survival in this patient population. Baby steps? Maybe but it is an improvement. I applaud for Genentech for taking the risks on niche drugs. The CEO Levinson states he will continue to guide DNA to research and development drugs in areas of unmet medical needs. We do not need anymore Me2 drugs. That is what is costly.

2008 Apr 13 01:56 PM