Off-label Drugs: Same Treatment, Different Costs

Depending on a doctor's decision, patients with a serious eye condition can be treated successfully with one of two equivalent drugs from the same manufacturer--yet one treatment costs 13 times more. The difference depends on whether the doctor prescribes the less expensive, off-label version.

For the eye condition known as wet AMD, off-label Avastin is just as effective as FDA-approved Lucentis, and much cheaper. Numerous market factors and obstacles explain why high-priced versions persist. This case study traces the path to market of Lucentis and Avastin to explore the many factors that influence the cost and accessibility of an important drug.

Condition: Wet AMD

Age-related macular degeneration is an eye disease that can result in blurry vision. Wet AMD, a serious form of the ailment, can lead to blindness. Of nearly 20 million adults over age 40 who have AMD, 1.5 million have vision-threatening AMD, a progression of the disease that begins to spike in people over age 75.[1]

Treatment: Lucentis & Avastin

Drugmaker Genentech developed Lucentis and received FDA approval to market it for treatment of wet AMD. The company also developed Avastin to treat colon cancer. Both Lucentis and Avastin seek out and block a specific harmful protein, vascular endothelial growth factor (VEGF), which is responsible for wet AMD.[2,3] There’s one big difference: the price. Lucentis is much more expensive.

What is "Off-label" Usage?

When a drug approved to treat one condition is used by doctors on a different condition for which that drug is not specifically approved, that is “off-label” use.[4]  This practice is permitted by the FDA and is commonly used.[5] Health care providers weigh a host of factors to decide what to prescribe, and while cost could be an important part of the discussion, often it isn’t.

Imagine you are prescribing a drug for wet AMD. Which would you choose?

Illustration of a syringe and vial of Lucentis, a drug used to treat the eye condition, wet age-related macular degeneration, as an example of an on-label prescription. Illustration of a syringe and vial of Avastin, a drug used to treat the eye condition, wet age-related macular degeneration, as an example of an off-label prescription.
Prescribe for wet AMD

From Production to Patient

Two equally effective drugs came to market at different prices, and underlying incentives and obstacles contribute to the use of higher-cost Lucentis when a comparable lower-cost option is available.

Learn about the key factors in production that influence a drug's price:


Research & Development

Genentech Sticks with Lucentis Over Avastin

Drugmaker Genentech developed and received FDA approval for Lucentis to treat wet AMD. Genentech also developed Avastin to treat colon cancer.[6] Despite learning early on that Avastin may show promise against wet AMD, Genentech never formally submitted Avastin to the FDA for formal approval, leaving it up to ophthalmologists and researchers to recognize the similarity and benefit of switching to off-label Avastin.

Research & Development

Little Incentive to Develop an “Off-Label” Drug

Why didn’t Genentech pursue FDA approval for Avastin? Genentech had little incentive to pursue FDA approval. Given the resources that go into developing a new drug, it’s reasonable to assume Genentech was heavily invested in the continued success of higher-priced Lucentis.[7] Additionally, there may have been regulatory and market forces encouraging Genentech’s position. Lucentis had FDA approval, which meant it could be marketed as having passed the highest standard of evidence for its use. The unique dynamics of the coverage and reimbursement systems in the U.S. meant the drug would find a large market.



Research Comparing Off-Label to On-Label Drugs is Rare

Before prescribing any drug off-label, doctors review the evidence to assess effectiveness. Yet comparative effectiveness research in the U.S. is rarely conducted, and when it is, statute limits the ways in which payers, including Medicare, can use that research in making coverage decisions.[8] But one of the most influential comparative effectiveness studies ever conducted in the U.S. found that these two treatments have equivalent effects on visual acuity improvements when prescribed on the same schedule, without marked differences in adverse clinical events.[9]


Higher-Cost Drugs Net Bigger Payments

In most cases, Medicare pays providers directly and physicians receive 106% of the average sale price for Medicare Part B drugs. This means higher-cost drugs generate more revenue. Other factors also influence doctors’ decisions, including training, clinical preference, academic literature, and the marketing efforts of drug companies. Clinicians ultimately must balance all of these elements and prescribe the drug they feel is best suited to treat their patients.[10] Given the alignment between a higher reimbursement potential and FDA approval, it is not surprising many doctors prefer Lucentis.

Market Share

Avastin Has Less than Half the Wet AMD Market

Numerous other drugs for wet AMD, such as Eylea, have come to market over the past 15 years, creating competition for Lucentis.[11 12] Despite Avastin’s cost advantage, Eylea had the highest market share (43.3%), according to one estimate. Avastin was second (36.4%) followed by Lucentis (20%).[13]

Patient Access


Financial Impact is Evident

At present, Lucentis costs Medicare approximately 13 times more per year.[14] The higher price of FDA-approved drugs to treat wet AMD reverberates through the healthcare system, costing patients and taxpayers millions of dollars. This limits the ability of the health care system to leverage Avastin’s substantially lower price.


Encouraging Doctors to Switch

What might influence doctors to prescribe Avastin? One scenario would be participation in risk-bearing payment models where payments are capped or tied to the use of highly effective but less costly therapies.[15] Research shows that if Medicare increased the reimbursement amount for Avastin it could increase usage and save patients millions in copayments, thus expanding access.[16]

Imagining the Patient Experience

In this hypothetical situation involving a 72-year-old male patient, we see why two medical practices prescribed equivalent treatments, yet one cost the patient more than $2,500 and the other only $361. The price tag is largely shaped by the prescribing provider’s reimbursement structure and incentives.

See how the same patient in two scenarios can end up with very different costs.

Note: Patient scenarios are meant to be illustrative only. Prices are based on publicly available information when available and good-faith estimates when prices were not available.

Scenario 1: Traditional Payment Model

The patient seeks care from an ophthalmology practice that is not participating in value-based or at-risk payment models. The ophthalmologist prescribes Lucentis, which has a higher drug price and reimbursement rate at ASP +6% (106% of drug cost). 

  • The Medicare reimbursement to providers for Lucentis is an estimated $11,860 for a year of treatment.[17]
  • The patient’s out-of-pocket cost is $2,553.
Illustration of a hypothetical patient, an older man, in a scenario where the patient sees a physician who works at an ophthalmology practice recently acquired by a private-equity firm. This patient pays more for on-label prescription.

Scenario 2: Alternative Payment Model

Our patient’s ophthalmologist is employed by a large health system that participates in Medicare’s Accountable Care Organization (ACO). If the ACO meets quality standards while also lowering health care spending, it qualifies to keep a portion of savings generated. With equal efficacy, the decision to prescribe the lower-cost Avastin over Lucentis is an organizational priority.

  • The Medicare reimbursement to providers for Avastin is $900 for a year of treatment.
  • The patient’s out-of-pocket cost is $361.
Illustration of a hypothetical patient, an older man, in a scenario where the patient sees a physician employed by a large health system. This patient pays less for an off-label prescription.

Off-Label AMD Treatment Fails to Significantly Impact Costs

Two options are equally effective to treat wet AMD. Yet the availability of Avastin, the lower-cost alternative, hasn’t significantly impacted the price of Lucentis, nor has it diminished demand. Why?

One Company Owns Both Drugs

The unique scenario of Avastin, the off-label treatment, produced by the same manufacturer as Lucentis, creates an advantage for Genentech.

Reimbursement System Influences Doctors

Payment incentives embedded within the health care system reimburse providers at higher rates when more expensive drugs are administered.

For More Information

To learn more about the impact of off-label drugs on healthcare costs, read the full playbook.