Drug Arbitrage

In December, the Food and Drug Administration began the controversial process of rescinding approval of Avastin for the treatment of metastatic breast cancer (see previous coverage here and here).

The ophthalmology drug Lucentis is made by the same company as Avastin and is basically the same drug. However, Lucentis is approved for treatment of wet age-related macular degeneration rather than for cancer.  At a cost of about $2,000 per injection, Lucentis is far more expensive per volume of drug than Avastin. In addition, the dose required for an eye treatment is much smaller than would be required for cancer treatment.

Some enterprising ophthalmologists soon realized they could purchase (larger) doses of Avastin — intended for cancer treatment — and split them into many smaller (less expensive) doses to treat the eye disorder. By using Avastin off-label instead of Lucentis, the cost per treatment for macular degeneration fell to a range of $20 to $100 from the previous level of $2,000.

Hat tip: David Williams at the Health Business Blog

Comments (7)

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  1. Mark says:

    More evidence that markets work.

  2. Ken says:

    I wonder how many opportunities there are to do this with other drug?

  3. Devon Herrick says:

    In David William’s original post, he discussed the positive and the negative benefits in this case. Arbitrage is good for consumers (and insurers) who need Lucentis and would otherwise have to pay $2,000 per treatment. It’s bad for future patients from the standpoint that other drug makers have few incentives to develop competing (possibly better) drugs because there would be little, if any, profit in doing so (i.e. $1 billion to develop a drug, which faces a competing therapy that costs $20 per dose).

  4. Tom H. says:

    I think this is nifty.

  5. Neil H. says:

    How do we encourage more of this?

  6. Brian Williams. says:

    No doubt, the government will solve this problem by taxing Avastin. It isn’t fair that it costs so much less than Lucentis.

  7. Virginia says:

    I love hearing stories about arbitrage! It’s the most interesting of financial transactions!