Is Becoming France the Answer to Medicare's Biggest Problem?

France has found an interesting way to save money on health care expenses. Read below for more.

Jul 13, 2014 at 1:35PM

News from France was a bit mixed for Roche (NASDAQOTH:RHHBY) this week, with lawmakers voting to allow use of Roche's cancer drug Avastin as a cheaper alternative for eye treatment drug Lucentis, which is marketed by Novartis (NYSE:NVS) and...Roche (how awkward). Although Avastin is a cancer drug and not indicated for age-related macular degeneration (AMD), which Lucentis is indicated for, lawmakers want to encourage doctors to prescribe Avastin off-label for the eye condition as the drugs work in a similar fashion.

Now, how much money are we talking about saving in France? About $273 million -- really not that much considering that Lucentis revenue for Novartis (which markets the drug outside the U.S.) was $2.4 billion. But in price-conscious Europe, the concern is that more countries could do something similar, potentially harming revenue in one of the world's largest drug markets. Other countries in Europe are already taking their own action -- Italy, for example, has sought $1.6 billion in damages relating to an alleged collusion between Novartis and Roche to prevent Avastin from being used as an AMD therapy.

That's nice, but what does this have to do with Medicare?
A study in Health Affairs indicates that switching patients from Lucentis to Avastin would save Medicare $3 billion. That's a nice chunk of change, and with the federal government and insurers struggling to bend the cost curve and contain health care spending, it could be an intriguing opportunity for Medicare to copy France and save a bundle of money.

In the video below, Motley Fool health care analysts Michael Douglass and David Williamson discuss this cost-savings fight and what it could mean for Roche, Novartis, and their competitors.

Cost-savings is yesterday's news. This could be tomorrow's.
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David Williamson owns shares of Novartis. Michael Douglass has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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