Oncology Drugs and the Coming Policies That May Redefine Their Use

Specialty Pharmacy TimesMay/June 2015
Volume 6
Issue 3

Cost containment of medications for the treatment of cancer is an area of increasing concern for specialty pharmacy stakeholders.

Cost containment of medications for the treatment of cancer is an area of increasing concern for specialty pharmacy stakeholders.

It is no secret that prescription drug prices are on the rise. Although there are many policy arguments that attempt to explain today’s premium pricing, the bottom line is that many Americans who need prescriptions to prevent their illnesses from evolving into something worse are having difficulty affording expensive medications. This is of particular concern with more serious illnesses, such as cancer, for which it is estimated there will be more than 1.6 million new cases diagnosed in the United States alone this year.1

According to the results of a recent study coauthored by a Massachusetts Institute of Technology economist, “Since 1995, a group of 58 leading cancer drugs has increased in price by 10% annually, even when adjusted for inflation and incremental health benefits… More specifically, in 1995, cancer drugs in this group cost about $54,100 for each year of life they were estimated to add; by 2013, such drugs cost about $207,000 per each additional year of life.”2 With statistics like these, one cannot help but wonder whether extrinsic forces will attempt to lower oncology costs through aggressive policy implementation.

Late last year witnessed the Medicare Payment Advisory Commission (MedPAC) becoming more vocal in its concerns surrounding physician reimbursement for oncology drugs. MedPAC is a nonpartisan legislative branch agency that provides Congress with analysis and policy advice on Medicare. Since oncology drugs have played a significant role in rapidly rising specialty drug costs, MedPAC has debated whether the Centers for Medicare & Medicaid Services’ (CMS’) current Part B reimbursement model of average sales price (ASP) plus 6% incentivizes physicians to prescribe more expensive office-administered drugs. For example, under CMS’ model, if the ASP of a Medicare Part D drug is $100, a physician will receive $106 due to the plus-6% metric, regardless of how much he or she pays for the drug. If, however, another drug with no clinical distinction has an ASP of $200, then the physician would receive $212. Hence, the concern of MedPAC policy makers is that physicians could make more money by administering the more expensive product that may or may not have an improved effect on the patient’s outcome over the lower-priced drug. Although the matter has not yet been settled, MedPAC Commissioners are examining whether consolidating payment codes for Part B drugs, reimbursing physicians with a flat fee for Part B medication, or utilizing alternative payment models (such as accountable care organizations would be better policy solutions in curtailing rising costs).

CMS has weighed in on the cost containment issue as well. On February 12, 2015, the US Department of Health and Human Services announced a new payment and service delivery model whose goal is to reduce specialty drug costs while seeking to improve a patient’s quality of care. Developed by the CMS Innovation Center added by the Affordable Care Act, the Oncology Care Model (OCM) is a 5-year model commencing spring 2016 that will invest in physician-led practices to foster greater innovation. According to CMS, the OCM “encourages participating practices to improve care and lower costs through episode-based, performance-based payments that financially incentivize high-quality, coordinated care. Participating practices will also receive monthly care management payments for each Medicare fee-for-service beneficiary during an episode to support oncology practice transformation, including the provision of comprehensive, coordinated patient care.”3 Thus, CMS believes that its policy of incentivizing physicians who care for patients receiving chemotherapy will improve patient outcomes and lower overall costs.

President Obama’s Precision Medicine Initiative, announced during the 2015 State of the Union Address, demonstrates another example of government’s recent push to improve health outcomes and reduce spending where cancer and other serious illnesses are involved. With the program seeking $215 million within the President’s 2016 budget proposal, the initiative “will pioneer a new model of patient-powered research that promises to accelerate biomedical discoveries and provide clinicians with new tools, knowledge, and therapies to select which treatments will work best for which patients.”4 For example, under traditional medical treatments, an oncology patient may be treated with medicines that may or may not work. The Precision Medicine Initiative seeks to provide a “smarter” approach by having a treatment regimen take into account a patient’s genetics, lifestyle, and environment to see if that patient’s outcome can be improved with a more targeted, personalized approach. According to the White House; the initiative will seek to achieve the following objectives:

  • The National Cancer Institute will “accelerate the design and testing of effective, tailored treatments for cancer by expanding genetically based clinical trials, exploring fundamental aspects of cancer biology, and establishing a ‘cancer knowledge network’ that will generate and share new knowledge to fuel scientific discovery and guide treatment decisions.”
  • The National Institutes of Health (NIH) will work collaboratively to launch “a national, patient-powered research cohort of 1 million or more Americans who volunteer to participate in research. Participants will be involved in the design of the initiative and will have the opportunity to contribute diverse sources of data including medical records; profiles of the patient’s genes, metabolites (chemical makeup), and microorganisms in and on the body; environmental and lifestyle data; patient-generated information; and personal device and sensor data. Privacy will be rigorously protected.”
  • The initiative “will include reviewing the current regulatory landscape to determine whether changes are needed to support the development of this new research and care model, including its critical privacy and participant protection framework.”
  • The Obama administration “will forge strong partnerships with existing research cohorts, patient groups, and the private sector to develop the infrastructure that will be needed to expand cancer genomics, and to launch a voluntary million-person cohort.”4

Last spring, Congress began to investigate ways to modernize our health care system to get life-saving products into the marketplace faster. This inquiry led to the creation of the 21st Century CURES Initiative, which is being spearheaded by Congressman Fred Upton (R, Michigan) and Congresswoman Diana DeGette (D, Colorado) of the US House of Representatives Energy and Commerce Committee. This initiative aims to accelerate the pace of cures and medical breakthroughs in the United States by examining the full arc from discovery to development to delivery to understand how Congress can ensure the country maintains its innovative edge in science and technology.

Following months of hearings, roundtables, and comments from industry stakeholders, the Energy and Commerce Committee has released a discussion draft that touches a wide range of topics such as vaccines and antibiotics, telemedicine, health information technology interoperability, NIH funding, biomarker usage, and the modernization of clinical trial processes.5 Perhaps we will see tools emerge from this initiative that will have a positive effect on oncology.

While these policies are encouraging, what is the payer community doing to control oncology spending, especially with annual cancer costs projected by the National Cancer Institute to be $207 billion by 2020? MedPAC and others have been citing the results of a UnitedHealthcare pilot program that studied 810 patients with breast, colon, and lung cancer, among the most common cancers in the United States. According to UnitedHealthcare, the study, Changing Physician Incentives for Affordable, Quality Cancer Care: Results of an Episode Payment Model, published in the Journal of Oncology Practice, touts a 34% reduction in medical costs achieved by incentivizing physicians for improved health outcomes rather than number of prescribed medications.6

According to UnitedHealthcare, “Participating medical oncologists were reimbursed upfront for an entire cancer treatment program, marking a shift away from the current ‘fee-for-service’ approach, which may reward volume or high-cost procedures regardless of health outcomes. This new ‘bundled payment,’ or ‘episode payment,’ model was based on the expected cost of a standard treatment regimen for a specific condition, as predetermined by the doctor. The oncologists were paid the same fee regardless of the drugs administered to the patient—in effect separating the oncologist’s income from drug sales while preserving the ability to maintain a regular visit schedule with the patient. Patient visits were reimbursed as usual using the fee-for-service contract rates, and chemotherapy medications were reimbursed based on the average sales price.”6 Whereas the study showed success removing the link between drug selection and outcomes via incentives, drug costs remained higher. It will be interesting to see how the discussion of ways to close the gap of higher drug costs in the midst of these new incentive methods evolves. I have no doubt that other insurers will attempt pilot projects like this in the very near future to find ways to lower oncology costs.

Since many policy makers in the government and private sector predict oncology to be a major contributing factor in rising future specialty costs, there seems to be no shortage of innovative solutions. I always advocate that no matter what, policymakers must not lose sight of ensuring that providers not only focus on improving patient outcomes, but also remember to make sure that the patient has several ways to access these often high-priced medications. Specialty pharmacy can use the aforementioned information in thinking about how to evolve pharmacy practices for a cost-conscious marketplace while still providing optimal services to patients. SPT


  • American Cancer Society. Cancer Facts & Figures 2015. Atlanta, GA: American Cancer Society; 2015. www.cancer.org/acs/groups/content/@editorial/documents/document/acspc-044552.pdf.
  • Dizikes M. Study: prices of anticancer drugs have soared since 1995. MIT News. March 18, 2015. http://newsoffice.mit.edu/2015/cancer-drug-prices-rise-10-percent-annually-0318.
  • New affordable care act initiative to encourage better oncology care [press release]. Baltimore, MD: Centers for Medicare & Medicaid Services. February 12, 2015. www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2015-Press-releases-items/2015-02-12.html.
  • Fact sheet: President Obama’s precision medicine initiative [press release]. Washington, DC: The White House Office of the Press Secretary. January 30, 2015. www.whitehouse.gov/the-press-office/2015/01/30/fact-sheet-president-obama-s-precision-medicine-initiative.
  • 21st Century Cures Discussion Draft. Washington, DC: Energy and Commerce Committee. April 29, 2015. http://energycommerce.house.gov/sites/republicans.energycommerce.house.gov/files/114/20150429DiscussionDraftSectionbySection.pdf.
  • Study: new cancer care payment model reduced health care costs, maintained outcomes [press release]. Minnetonka, MN: UnitedHealth Group. July 8, 2014. www.unitedhealthgroup.com/newsroom/articles/feed/unitedhealthcare/2014/0708cancercarepaymentstudy.aspx.

About the Author

Ron Lanton III, Esq, is president of True North Political Solutions, LLC. He has over 20 combined years of government affairs and legal experience. This includes activities on the municipal, state, and federal levels of government. Most recently, he worked for a pharmaceutical wholesaler where he created and oversaw the company’s government affairs department, served as their exclusive lobbyist, and advocated for the company’s various health care customers. Prior to that, Ron worked at a government affairs consulting firm in Arlington, Virginia, where he focused on health care, energy, commerce, and transportation issues. He has also clerked for a federal magistrate, was appointed as a municipal commissioner on environmental issues, and has served as consultant to Wall Street firms on financial issues. He has been a featured industry speaker on issues such as pharmaceutical safety and health care cost containment. Ron earned a juris doctor from The Ohio State University Moritz College of Law and a bachelor of arts from Miami University of Ohio. He is also a “40 Under 40” award recipient. He is admitted to practice law in New York, Illinois, and the District of Columbia.

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