the following is the case and i am stuck with the following questions. can you please help me and please use marketing terminology

Dr. Clyde Reed finished reading the newspaper article his friend had sent him. His mother had recently been diagnosed with wet age-related macular degeneration (AMD). Clyde was an anesthesiologist, not an eye doctor, but he always tried to help his family with their medical concerns. His mother's doctor had recommended a drug called Lucentis, which was fully covered by government health care. He trusted his mother's doctor, but wanted to double-check her options himself, so he contacted an old friend from medical school who was now an ophthalmologist and asked about the diagnosis. Apparently there was some controversy around treatment for wet AMD, and the eye doctor had sent Dr. Reed the newspaper article to fill him in on what had been going on.

The Globe and Mail article his friend sent, "Why Is a S1575-a-Month Drug Approved and a $7 One Isn't?," I alerted Clyde to the idea that there may be more to his mother's treatment decision than he'd originally thought. The article was about Genentech, a pharmaceutical company that sold two very similar drugs for very different

Copyright C) Professor Eric Dolansky, Goodman School of Business, Brock University. This case has been prepared as a basis for classroom discussion and does not illustrate effective or ineffective business management. Reprinted With permission.

231

'Picard, A. (2011, September 26). Why is a $1575-a-month drug approved and a $7 one isn't? The Globe and Mail.

Plices (through its parent ccunpany, Roche, and its international subsidiaries, e.g., Novartis in Canada).2 One of these drugs, Lucentis, was designed to treat wet AMD; the other Avastin, was approved for use as a cancer-fighting drug but was often used to combat AMD as well. The problem arose from the diftcrence in price, alluded to in the title or the article. Avastin, which wasn't covered by government health plans nor officially approved for use in the eye, was about $7 per monthly dose. Lucentis was $1575 per month, a cost covered by government health care. In April 201 1 a report commissioned by the National Institutes of Health in the United States presented results of a year-long study indicating that the two drugs were equally effective in fighting AMD.

Clyde contemplated what might be his best course of action. He dealt with pharmaceutical companies all the time, so the high pricing didn't really surprise him. These companies invested a great deal of money in the research and development of new' drugs, many of which never see the light of day. Those drugs that do make it to market had to earn huge profits in order to fund all the new development. Clyde had also seen first-hand the strain Canada's health care system was under, so he figured $7 per month wasn't too much to pay for his mother's treatment if it meant more than 200 times as much could be used for other patients and problems. But was Avastin the right choice? Was it truly as safe as Lucentis, or was the price indicating otherwise? Clyde began researching this disease and its treatment on the web, trying to get as much information as possible to make an informed, logical decision.

AGE-RELATED MACULAR DEGENERATION

AMD is a relatively common eye disease that tends to emerge late in life. It reduces the ability to see detail, and left untreated leads to blindness. The disease affects the macula, the part of the eye responsible for seeing fine details in one's central vision. It affects about 30% of people over the age of 75 (and about 2% of middle-aged people),³ with approximately 200 ()00 new cases each year. There are two forms of AMD, wet and dry. Dry AMD accounts for 85 to 90% of all AMD cases, and tends to advance gradually. It's caused by yellowish deposits called drusen growing under the retina, which in turn causes vision to blur. A greater number of drusen, or larger drusen, lead to a breakdown of the light-sensitive cells of the retina, which causes blindness.

Wet AMD advances much more quickly. Instead of deposits, extra blood vessels grow behind the macula. These blood vessels break easily, resulting in blood leaking behind the eye, which displaces and damages the macula. Swift treatment is necessary to prevent total vision loss. Wet AMD occurs more often among those who are overweight or obese, those who smoke, and those who have a family history of the disease. Women are more

2Novartis declined the opportunity to participate in the writing of this business case.

3NationaI Eye Institute (2009, September). Facts about age-related macular degeneration. www.nei.nih.gov/health

/maculardegen/armd_facts.asp

4HaddrilI, M. (2011, May). Lucentis vs. Avastin: A macular degeneration treatment controversy. www.aIlaboutvision.C0m

SNationaI Eye Institute (2009, September). Facts about age-related macular degeneration. www.nei.nih.gov/health /maculardegen/armd_facts.asp 'Ibid.

⁷Ibid.

and

likely, to visual develop acuity AMD, test, as are and/or Caucasians.8 a tononletric The test disease (which is detected measures through the pressure a dilated in eye

a eye), and can be diagnosed through the results or these tests.9

There are three basic treatinent options for wet or dry AMD: laser surgery, phototherapy, and drug injections. Laser treatment, also called photocoagulation,

involves firing a laser into the eye to destroy the leaky blood vessels behind the macula. This treatment is rarely used because it doesn't prevent further development of the disease and the treatment itself causes damage to the eye. During the surgery the laser needs to through the retina, damaging it and creating a blind spot in the patient's central pass vision.

photodynamic therapy also involves the use of a laser into the eye, but it uses a "cool" laser and therefore doesn't damage the retina. Light-activated drugs are injected into the patient's bloodstream and collect in the new blood vessels behind the macula. When exposed to the cool laser, the drugs activate and destroy those blood vessels.12 This treatment can stabilize vision, but it often destroys only the existing blood vessels and doesn't prevent the growth of new ones.

The third treatment available for wet AMD is the injection of drugs into the eye. Earlier drugs, such as Macugen (manufactured and sold by Eyetech Inc., an independent pharmaceutical company), had been effective in inhibiting further blood vessel growth and slowing vision loss. Macugen, however, didn't destroy the existing vessels, nor did it restore lost vision. A more recent drug, Lucentis, did just that: 40% of patients reported improved vision after using Lucentis. It also prevented further vision loss in 95% of patients.13

GENENTECH AND LUCENTIS

Lucentis (which is the brand namethe generic name is Ranibizumab) was introduced in 2006 by Genentech, a San Franciscobased subsidiary of the global Roche Group of pharmaceutical companies. According to Genentech's website, ¹⁴ its positioning and role is as follows:

Considered the founder of the biotechnology industry, Genentech has been delivering on the promise of biotechnology for more than 30 years, using human genetic information to discover. develop, manufacture and commercialize medicines to treat patients with serious or life-threatening medical conditions. Today, Genentech is among the world's leading biotech companies, with multiple products on the market and a promising development pipeline.

Genentech defines its corporate mission in this way:

Our aim as a leading healthcare company is to create, produce and market innovative solutions Of high quality for unmet medical needs. Our products and services help to prevent. diagnose and

81bid. 91bid.

10

Canadian National Institute for the Blind (2009). Treatments for wet AMD. www.cnib.ca/en/your-eyes/eyeconditions {amd/treatment/treatment-wet

12Ibid. 131bid.

Cenentech (current as of 2012). Company mission and goals. www.gene.com

treat diseases, thus enhancing people's health and quality of life. We do this in a responsible and ethical manner and with a commitment to sustainable development, respecting the needs of the individual. the society and the environment.

Genentech claims three core values: integrity (defined as "being consistently open, honest, ethical and genuine"), courage (to be "entrepreneurial, and thus take risks, reach beyond boundaries and experiment"), and passion ("using drive and commitment to ener_ gize and inspire others"). Lucentis was one of a string of successful drugs that Genentech had introduced.

One benefit of Lucentis was the low incidence of side effects. Treatment using Lucentis involved injections of the drug through the white of the eye into the central cavity. Over 100 000 people in North America had been treated using Lucentis in its first five years on the market, and according to the Lucentis website, I over 90% of these patients had their vision stabilize or improve. The drug cost $1575 per month (in Canadareported costs in the United States are as high as per month), with a typical treatment period lasting two years. 16 In Canada the drug is fully covered through government-funded health care programs in every province, I and in the United States the drug is covered by Medicare (with a 20% co-payment by the patient). ¹⁸

AVASTIN

Another drug introduced by Genentech was Avastin (generic name Bevacizumab). The drug was initially approved for use for metastatic cancers (cancers that spread from one organ to another). The initial approval in 2004 was for treatment of colon cancer, with later approvals in 2()06 (lung cancer) and 2008 (breast cancer). Like Lucentis, Avastin was developed from a genetically engineered mouse antibody. Also like Lucentis, it was designed to prevent the growth of abnormal blood vessels, in this case the vessels that grew to feed blood to tumours.19

Avastin was not without controversy. Its approval for use as a breast cancer dilig was revoked in 2010 in both the United States and Canada. According to the Food and Drug Administration (FDA), although the drug was effective in fighting the tumours, there was no evidence that it extended or improved life. ⁰⁰ Because of the possibility of such side effects as hypertension (high blood pressure), hemorrhaging, and bowel perforation, the lack of clear benefits caused the drug to lose its approval. This didn't mean the drug couldn't be sold; it could be prescribed "off-label," meaning not for its initial intended use. Without an FDA approval, however, neither insurance companies nor Medicare would reimburse use of the drug in the United States: ^I In Canada the cost of the drug was no longer reimbursed for use in fighting breast cancer. - Avastin was, however, still considered

^ISCenentech (2012). About Lucentis. www.lucentis.com

¹⁶Picard, 2011. 171bid.

'BHaddrill, 2011.

2019Genentech PoIIack, A. (2012). (2011, November How Avastin 18). is FDA designed revokes to approval work. www.avastin.comof Avastin for use as a breast cancer drug. New York Times 211bid.

22The Canadian Press (2011, November 18). Avastin approval for breast cancer pulled.

and

useful for treatment of other forms of cancer, though it had fallen from a leadership position among cancer drugs, losing 15% market shate in the United States and 8% worldwide in 2010. The drug that overtook Avastin as market leader was Rituxan, also produced and distributed internationally by the Roche Group.

AVASTIN AS TREATMENT FOR WET AMD

Because of the molecular similarity between Avastin and Lucentis (the molecules were nearly identical, with those of Avastin a bit larger than those of Lucentis), some eye doctors began using Avastin to treat wet AMD as early as 2006.23 Not only was Avastin believed to be effective in treating wet AMD, it was far less expensive. One eye injection of Avastin cost $150 in the U.S. (with a $50 reimbursement from Medicare, though this was suspended briefly in 2010 and then reinstated24) and $7 in Canada.25

Use of Avastin to treat wet AMD is relatively safe. Because of the low dosages involved and because the drug was injected directly into the eye (and not into the bloodstream), chances of side effects such as hypertension and hemorrhaging are low. The biggest potential risk that Avastin poses to patients is in its handling and distribution. Because of its primary and approved use as a cancer drug, Genentech and its distributors (such as Novartis) sold Avastin only in vials of 100 to 400 milligrams, and a typical dose for eye injection was only 1.25 milligrams. This made it difficult for eye doctors to safely use Avastin. 26 When handled by compounding pharmacies, which take large quantities of a drug and parcel out dosages in a safe and sterile way, the risk of infection is sharply reduced. However, it would be unsafe for doctors or non-compounding pharmacies to divide the Avastin themselves or repeatedly inject patients from the same vial, and would increase the probability of infecting the patient's eye.

In 2007, to counter off-label use of Avastin, Genentech stopped selling it to compounding pharmacies. As a result, use of Avastin for AMD dropped, while at the same time eye infections from Avastin use rose. Ophthalmologists (eye doctors) protested this decision, and the American Academy of Ophthalmologists appealed to Genentech to reverse it. The International Academy of Compounding Pharmacists publicly doubted the reasoning behind Genentech's move, claiming that it was profit-motivated2 and not intended to ensure patients' safety.

Under pressure, Genentech did reverse its decision, and announced that Avastin would be sent to any eye doctors who wanted it as well as to compounding pharmacies. The company stood by its reasoning that safety was a concern, and that Lucentis was the proper drug to treat wet AMD. Genentech has a hardship program to help those who can't afford the drug explore other payment options. According to the company website, it had given away $2.3 billion in free medicine since 1985, offered a co-pay program for insured patients who couldn't afford their co-payments, and provided an access program for the uninsured.

22Haddrill, 2011. 241bid.

26asPicard, 2011. Ibid.

27Haddrill, 2011.

MARKET SITUATION

Off-label use of Avastin for wet AMD had continued since As ol' 201(), 220 people had wet AMD, requiring approximately 1.64 million dosages of drugs per year to fight it. In 2010, 700 000 of these doses were Lucentis and the rest were Avastin. 8 Avastin was more popular in the United States than in Canada because of the out-of-pocket costs involved (the patient paid about 20% of the cost of Lucentis, or $400, versus $1 net Avastin, both per month).29 The health-regulating bodies in Canada and the United States still hadn't approved Avastin for wet AMD use, with the exception of the provincial health agencies in British Columbia and Nova Scotia, so it was still an off-label use.

One reason why Avastin hadn't been approved for use in fighting wet AMD was that Genentech hadn't applied for approval of the drug for this purpose. Genentech maintained that use of Avastin for this disease wasn't the safest option, and continued to package Avastin in the large quantities intended for cancer treatment. While some decried the company's action as profiteering at the expense of patients and taxpayers, others, such as the Canadian Council for the Blind, supported Genentech's position.31 It was believed that if

Avastin were approved and used exclusively (with no use of Lucentis), Medicare in the United States would have saved Sl billion annually (with Canadian provincial governments collectively saving 10% of that amount).32

In April 201 1 an article published in the New England Journal of Medicine (and requested and funded by the National Institutes of Health in the United States) reported the results of a year-long study comparing the safety of Avastin and Lucentis across 1185 patients. The general conclusion was that they were equally safe and effective in treating wet AMD.³³ Incidences of death, heart attacks, and strokes were low and the same regardless of which drug was used. The only difference of note was that 24% of those patients using Avastin were hospitalized during the year, as opposed to only 19% of those given Lucentis. These hospitalizations were for several reasons, not just eye-related concerns. There was no direct evidence that this difference was due to the drug they were given.

Genentech and Roche also funded their own study. This study, which involved examining the archived records of 78 000 Medicare recipients, found that those patients who received Avastin were 1 1 % more likely to die, 57% more likely to suffer a stroke, and 80% more likely to have further eye problems.35

Toward the end of 2011, Genentech settled a lawsuit with rival Regeneron. Genentech had previously sued Regeneron for patent infringement over its eye drug Eylea, which was identical to Lucentis. Under the terms of the deal, Regeneron would pay a penalty of $60 million as a licensing fee and royalties of 4.75 to 5.5% (depending on Eylea sales volume).

281bid.

²⁹Haddrill, 2011.

³⁰Picard, 2011.

31ibid.

32 Ibid.

33National Institutes of Health News (2011, April 28). NIH study finds Avastin and Lucentis are equally effective in treating age-related macular degeneration. 341bid.

"Silverman, E. (2011, May 3). All Eyes Are on Roche, Lucentis, and Avastin. www.pharmalot.com

"Migliore, L. (2012, January 3). Regeneron Reaches Partial Deal with Roche, Firm to Pay Rival Royalties on U.S sales Of Eylea. Toronto Star.

and

TREATMENT DECISION

Clyde had now read all the information he could obtain from the internet on the topics of AMD, Genentech and its drugs, and the history of this situation. One comment from one of the articles stood out:

"Is it fair that Genentech should lose out? What of the patients (or countries) who cannot afford Lucentis? Is it fair that treatment be available only to those who are wealthy?"37

These questions were posed by British researchers in an article in a prominent ophthalmology journal. For Clyde, they underscored the two sides of this concern. In a sense, Genentech did what a business is supposed to domaximize profit. For a pharmaceutical company, this also meant it could have the funds necessary to research new treatments for different problems. On the other hand, there was something about this that didn't seem proper, and Clyde wasn't sure he wanted to support Genentech and its associated companies by making the government pay a much higher price for his mother's treatment.

here are the questions

1. Did Genentech or any of its partners (such as Roche or Novartis) do anything wrong in this situation?

2. Who were the relevant stakeholders for this action? What was their position with regard to question one?

3. How much should Avastin and Lucentis cost? Why are they different prices?

4. Who has final say as to question three?

5. Why did the two research reports have such different results?

6. Would this situation have been different if the product involved was not a pharmaceutical?

7. What should the various stakeholders do now?

can you please answer it with marketing terminology

thankyou