Cancer drug price hike causes criticism from providers

Hospitals claim that price hike will cost millions in annual drug spending.

Modern health care providers are faced with numerous challenges: Shrinking reimbursement, a shift towards specialized care, increased government regulation and mandatory technology investments have combined to change the industry landscape. The majority of industry stakeholders weathered these changes with little complaint, as the goal of these initiatives was improved and more cost-effective care. However, one recent announcement has drawn intense criticism from many providers. 

Genentech, a San Francisco-based biotech firm, recently raised its prices on three key cancer fighting drugs, Avastin, Herceptin and Rituxan. These three represent some of the most heavily-relied upon treatments by oncologists, and the announcement came with little forewarning. 

Genentech told its customers that on October 1, they would no longer be able to purchase the drugs from their normal suppliers. Instead, they could only be obtained through specialty distributors, which according to Time Magazine, means Genetech will pocket any industry discounts providers were receiving before. 

"Our blunt estimate: It will cost $300 million more in the U.S. overnight in what folks are paying for these lifesaving drugs," Pete Allen, group senior vice president for Novation, a health care services company that negotiates drug contracts, told the source. Allen estimated that many hospitals will suffer losses in excess of $50 million under the new pricing structure. 

Now, industry stakeholders and providers alike are voicing their disapproval of the decision, claiming it will negatively affect the well being of cancer patients nationwide, most of whom were already struggling with the cost of care. According to the source Genentech attempted a similar price hike in 2006, but was rebuffed by the industry's response. 

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