The Impact of Roche’s Price Increases for Avastin on Pharmaceutical Innovation
Avastin’s price increased nearly 50 percent from 2011 to 2019, and is still above its 2011 price despite the launch of biosimilars for the cancer drug.
The pharmaceutical industry has long argued that high drug prices are a good thing because the profits from these price hikes allow companies to spend more on research and development to discover and launch the cures of the future.
To test the claim that higher drug prices drive innovation, we gathered data from the industry, individual companies, and the FDA to conduct a counterfactual analysis: what would happen at some of the largest pharmaceutical companies in the world if prices on certain blockbuster drugs had remained constant over the last 10 years?
The following case study examines drug pricing at Roche, a multinational pharmaceutical conglomerate with a diverse portfolio of treatments in oncology, immunology, neurology, and blood disorders, as well as a thriving medical diagnostics division. This analysis is part of a larger study on the impact of pharmaceutical price increases on medical innovation. To read the full study, click here.
Roche Case Study
- Headquarters: Basel, Switzerland
- Drug Analyzed: Avastin (bevacizumab)
- 2021 Company Revenue: $49.3 billion
- 2021 R&D Spending: $14.2 billion
- Other Key Products: Perjeta (pertuzumab), Tecentriq (atezolizumab), Actemra (tocilizumab), Ocrevus (ocrelizumab), Hemlibra (emicizumab)
Prior to the pandemic, Roche held the top spot worldwide among companies based on pharmaceutical sales. However, with Pfizer’s surge with COVID-19 therapeutics and biosimilar competition to Roche’s cancer drug triumverant of Rituxan, Avastin, and Herceptin, Roche is at a crossroads. That said, the company is has a diverse product portfolio and invests heavily in R&D (24.4 percent of gross revenues since 2012).
We analyzed Roche’s pricing behavior for Avastin since 2011. Despite price increases price increases since its launch in 2004, the drug’s price continued to climb nearly 50 percent from its 2011 price until biosimilars entered the market in 2019. Even by 2021, the drug was still priced above its 2011 level.
Since the introduction of the first bevacizumab biosimilar in the United States, Avastin’s prescribing volume has declined. Still, Roche was able to keep Avastin’s revenue high through price increases throughout the last decade. Because of these price increases, Roche was able to maintain roughly the same net revenue on U.S. sales through the decade. When isolating revenue derived from price increases, Roche earned $4.9 billion over the last 10 years.
If the price of Avastin remained flat since 2011, the loss of $4.9 billion in revenue would have resulted in $1.2 billion less in R&D spending. We estimate that, based on the drug development scenarios used in our analysis, Roche spends $10.0 billion (IQR: $8.1-$11.7 billion) per new drug developed. The decrease in R&D activity would lead to a muted impact to new drug development, with 0.12 fewer drugs developed.
The results are further evidence that profit growth driven by price hikes on older, branded, monopoly drugs like Avastin rarely leads to the development of innovative new medicines.
