Soaring Prices for Oncolytics Prompt Payer Pushback

Tony Hagen @oncobiz
Published: Friday, Jun 26, 2015
Scott Ramsey, MD

Scott Ramsey, MD

With the cost of newer immunotherapy drugs soaring into the tens of thousands of dollars per month, payers are under increasing pressure to control spending and are tightening the spigot in various ways, oncology professionals told OncLive in a series of interviews.

“The cost of new therapies is making them unaffordable, and the challenge for the system is, how do we distribute that cost? Is it going to be borne by higher premiums, or is there going to be more cost sharing for the individual to take the drugs?” asks Jennifer Malin, MD, a practicing oncologist and vice president of clinical strategy at Anthem Blue Cross and Blue Shield.

This month, UnitedHealthcare began requiring physicians to get prior approvals on every cancer drug they administer. The company intends to track drug outcomes by following patient progress and share that information with doctors, the New York Times reported.

Overall costs of cancer care in the United States amounted to $125 billion in 2010, and were projected to reach $172.8 billion per year in 2020, according to a 2011 report.1 More recently, at ASCO’s 2015 annual meeting in Chicago, costly immunotherapies were blasted as unsustainably pricey by Leonard Saltz, MD, chief of gastrointestinal oncology at Memorial Sloan Kettering Cancer Center.

Saltz noted that the combination of ipilimumab (Yervoy, Bristol-Myers Squibb) and nivolumab (Opdivo, Bristol-Myers Squibb) in metastatic melanoma, though yielding a progression-free survival benefit of 11.4 months, would cost in the neighborhood of $300,000, resulting in a $60,000 out-of-pocket cost for patients on Medicare.

When it comes to fighting back against the rising cost of cancer care, Anthem Blue Cross and Blue Shield likes to tout its Cancer Care Quality Program, a pathways initiative that Anthem says achieves the dual objectives of controlling costs and enhancing the quality of care.

“Somewhere in the neighborhood of 30% of what we spend in healthcare is waste,” says Malin. “So, can we make room for new, innovative therapies by trying to decrease what we spend in areas that aren’t bringing value and that really are wasteful? That’s what our program tries to do, by helping to identify those therapies that really do provide benefit and are cost-effective.”

Eric Hargis

Under the Guise of Sound and Efficient Medicine

While physicians sometimes suspect pathways programs of being efforts to reduce benefits under the guise of sound and efficient medicine, they are on the rise and are among a slate of endeavors by payers to counteract the rising cost of cancer care, says Scott Ramsey, MD, a physician, researcher, and health economist at Fred Hutchinson Cancer Research Center in Seattle, Washington.

“Global budgeting” for oncology is another method that, like pathways, has not fully caught on but is likely to gain traction, Ramsey says. UnitedHealthcare has already experimented with this structure wherein the insurer offers to pay a flat amount for the treatment of a patient with a certain stage disease. The payer will provide the drugs rather than reimburse the physician for them, and the fee for delivering the chemotherapy is included in the global budget.

UnitedHealthcare was successful with that program,2 and Ramsey believes “There is a high likelihood that those types of programs are going to spread.”

The 3-year UnitedHealthcare study, results of which were reported last year, paid oncologists the same fee regardless of the drugs that were administered to the 810 patients with breast, colon, and lung cancer involved in the pilot. The “bundled payment” plan was based on expected costs of standard treatment regimens for specific conditions, and resulted in a 34% reduction in medical costs, UnitedHealthcare reported. The goal was to separate the cost of drugs from care decisions.

A third type of payer response to higher costs is value-based pricing or value-based reimbursement, in which non-preferred therapies are allowed by payers but patients are then subject to higher out-of-pocket costs. Where this method falters is when the drugs, such as newer immunotherapies, are so expensive that a co-pay as a percentage of the overall drug cost is far beyond a patient’s ability to pay. “If you’re talking about a $15,000-a-month drug, that gets to be a massive barrier for patients,” says Ramsey (see Figure).

Figure. Monthly and Median Costs of Cancer Drugs at the Time of FDA Approval 1965 - 2015a

Figure. Monthly and Median Costs of Cancer Drugs at the Time of FDA Approval
1965 - 2015a

aData points reflect market prices in 2014 dollars upon original FDA approval. Source: Memorial Sloan Kettering Cancer Center.

Malin says that in some cases Anthem establishes an out-of-pocket maximum as a safeguard against high co-pays.

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