Drug Revenues May Migrate to Specialty Pharma

Tony Hagen @oncobiz
Published: Thursday, May 14, 2015
Kevin Colgan

Kevin Colgan

The rising number of oral oncology drugs that can be supplied through pharmacy networks rather than administered in clinical settings, such as intravenous drugs, has many physicians worried that they are losing control of an important part of the therapeutic process.

The Community Oncology Alliance (COA) is stepping into the fray by forming a pharmacy association that will strive to represent the interests of oncology practices, particularly those that already have dispensaries or that intend to set them up. The number of in-house dispensary operations is growing, says Ted Okon, executive director of the COA, and at stake in this struggle are control over revenues and control over continuity of care and drug revenues.

On the revenue side of the equation, more and more oncology drugs are orals, which can be dispensed through a retail pharmacy or through a specialty pharmacy with a contract to issue a particular drug, rather than through a doctor’s office as intravenous medications are administered. Oncologists who dispense drugs are concerned about their ability to continue to fully care for their patients with infused drugs as well as by dispensing oral oncolytics, Okon says.

“Oral drugs are on the rise—25% to 30% of the drugs in the research pipeline are oral oncolytics. When you see that, that sort of catches your eye. You have to be thinking about those,” Okon says.

Drugs make up a sizeable portion of oncology practice revenues. A 2007 report in the Journal of Oncology Practice indicated that among a sampling of 164 oncology practices, drugs represented 77% of practice revenues, and drug administration amounted to 9% of revenues, while patient evaluation and management services represented 12% of revenues.2 If oral oncology drugs in the clinical testing and approvals process make up 25%-35% of all oncology drugs in the pipeline—according to a widely accepted industry estimate—a change in the point of dispensing for orals could have an impact on practice finances.

Injected and infused drugs have not presented such a problem for physicians because they are typically covered under the medical benefit and are administered in a clinical setting. Oral drugs, conversely, are covered under the pharmacy benefit and can be self-administered by patients at home. As more drugs switch over to the pharmacy benefit, quality and continuity of care could suffer if specialty pharmacies gain by attaining exclusive control over distribution rights, Okon says.

On the other side of the balance is the question of whether a patient will actually receive and properly ingest the oral medicine that has been prescribed for him, Okon says. Studies have shown that non-adherence is a significant issue, and it becomes more of an issue as drug prices creep skyward and out-of-pocket expenses rise with the higher deductibles and typical of the many cost-saver health policies in vogue.

“When a patient finds out what they have to pay, a lot of times they don’t get the medicine,” says Okon. “It becomes a problem of treating the patient. If you are dis-joining the providing of the drug from the point of care, you’re going to have all sorts of problems.” Indeed, a study sponsored by COA in conjunction with Avalere Health found that when it comes to oral oncolytics, patients with Medicare and those with lower incomes abandoned their therapies almost twice as often as their commercially insured counterparts.1 The 2010 study found that 46% of Medicare patients had cost shares in excess of $500 versus 11% of commercially insured patients, and the study also found that patients with out-of-pocket expenses in excess of $500 were four times as likely to abandon their therapy. The actual rates of abandonment were 16% for Medicare and 9% for commercially insured patients.

Ted Okon

Ted Okon

Among its tasks, the COA pharmacy association would work to establish standards for in-house dispensaries to improve safety, but representing the interests of the oncology provider community is paramount, Okon noted, citing a recent, unpublished COA survey of 500 of its members that showed that 80 practices who responded were in the process of setting up dispensaries.

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