Pharmacy Operations Can Enhance Reimbursement Picture for Oncology Drugs

Oncology Live®Vol. 21/No. 11
Volume 21
Issue 11

Pharmacists can play a role in the drug reimbursement process for oncology products, which are among the most expensive of all pharmaceuticals.

Scott A. Soefje, PharmD, MBA, BCOP

Scott A. Soefje, PharmD, MBA, BCOP

Scott A. Soefje, PharmD, MBA, BCOP

Pharmacists can play a role in the drug reimbursement process for oncology products, which are among the most expensive of all pharmaceuticals. Pharmacy leaders who spoke with OncologyLive® said they can assist with revenue cycle management process, working with the billing and finance teams if any payment is denied and ensuring therapies have prior authorization from private payers.

Reimbursement for drugs has historically been determined with the average wholesale price, which was set by manufacturers. But the average annual cost of new cancer drugs continues to trend upward, although the median cost dropped by $13,000 in 2018 to $149,000, and the cost per product ranged between $90,000 and over $300,000 (Figure).1

As the net cost of cancer drugs is anticipated to continue to increase, policy has been set such that costs are determined using the average selling price (ASP), which is calculated by dividing the manufacturer’s total revenue for a particular drug by the number of units sold (excluding particular sales, including those to the government).

For Medicare Part B drugs, the Centers for Medicare & Medicaid Services reimburses based on the ASP + 6% (4.3% due to sequestration),2 and there is also a difference if an infusion center is a hospital-based outpatient department. In this case, the Outpatient Prospective Payment System bundles drugs that cost less than a predetermined threshold. Private insurance generally reimburses a negotiated percentage of the charges.

“Information such as site of care and the payer mix play a particularly significant role [in determining reimbursement],” explained Scott A. Soefje, PharmD, MBA, director of Pharmacy Cancer Care Services at the Mayo Clinic in Rochester, Minnesota.

Often institutions will implement a chargemaster, which lists individual costs for each drug. The role of the pharmacy in this process varies by institution. Drug markups are determined by institutions, with a recent report of a median of 2.4 (range, 1.8-3.0) for cancer drugs.3 In this study, a markup ratio of 3.5 means that for every $100 that Medicare pays, the hospital charged $350, or $250 in excess charges. This report also found higher markups for medical oncology services were associated with for-profit status.

Institutions must determine which price to use as the baseline value for the markup among average wholesale price, ASP, wholesale acquisition cost, and actual acquisition cost. Although pharmacy operations may have input on this process, it may be determined based on what can easily be integrated with the electronic health record and billing system to generate charges.

“The final area that pharmacy can affect is the cost of the drug,” Soefje explained. “Through contracting, the department can negotiate discounted prices. If the charges are set on something other than acquisition cost, then the difference between the charge and cost widen and revenue increases. Those institutions that choose to use acquisition cost feel it is important to pass on the savings from negotiations to the customer.”

Community practices have benefited by having pharmacists on staff. They can help manage drug inventory, ensure safe prescribing practices, keep up with current guidelines, improve outcomes, educate patients, and assist the billing department to ensure reimbursement.4-6

According to Ryan Haumschild, PharmD, MS, MBA, director of Pharmacy Services at Emory Healthcare in Atlanta, Georgia, working with payers can be difficult due to the preferred formulary and preferred products, particularly when trying to provide optimal care for patients.

“Initially, a prescriber may choose a medication that he or she feels is most appropriate for the patient, but due to payer restrictions and preferred products, oftentimes it requires a lot of additional communication and coordination to make sure that we’re dispensing the right product for the patient when they show up,” Haumschild said. “It requires a lot more coordination and operational burden, and it requires us to have multiple sites and carry multiple products based on payer preferences.”

Specifically, challenges arise with patients who have cancer because providers want to treat them as soon as possible. Delays in preauthorizations from the payer can make the process more complex in that pharmacists must ensure that the operations of switching out drugs occur safely and that the dosing and frequency are considered at the time the patient needs to be treated.

Other challenges arise after reviewing denied claims when no preauthorizations are required. Haumschild also emphasized the importance of building in feedback from highcost drugs to be sure enough information is supplied to help ensure reimbursement.

The Pharmacist's Role

According to Haumschild, pharmacists can aid prescribers with therapy choices to ensure that drugs are FDA approved, included in the National Comprehensive Cancer Network guidelines, and will be reimbursed. Pharmacists also help with drug information in the electronic health records. Pharmacists who are having the medications compounded and dispensed must choose the correct medications, the correct National Drug Code, and ensure the charge is captured appropriately when it is administered.

According to Soefje, a drug is not likely to be reimbursed if it is not in the compendia at the required level for the use proposed. In this case, the pharmacy can help with patient assistance programs to try to obtain the drug.

“Once a denial has occurred, pharmacy can help to ensure all the appropriate coding has been done to ensure the claim is accurate,” Soefje said. “Often, a pharmacist can help clarify the coding or knows something about the patient that the coders missed that help the claim. Pharmacists are also involved when the denial is going to appeal and requires a letter of medical necessity and/or literature support.”

The Future of Drug Reimbursement

“I see a lot of changes coming,” Haumschild explained. “As we see less revenue coming in based on hospital-based reimbursement, we’ve got to figure out another way to still be able to provide care. With reimbursement shifts in site of care, it also takes the care away from the hospital or the clinic, which creates additional strategies on how to ensure our patients are getting the best treatment possible.” Haumschild also noted that more drugs will migrate into the ambulatory care and outpatient setting and more scrutiny over drug expenses may potentially reduce the amount of reimbursement.

According to Soefje, the biggest shift will be toward value-based payments where reimbursement will be tied to episodes of care and the outpatient focus will shift from revenue to cost. “The goal of the pharmacy will be to minimize cost while maximizing value,” Soefje explained. “The institution will receive bonus payments for high-quality care, and the focus will shift to outcomes and patient experiences. In the next 3 to 5 years, more than half of all payments will be in some form of value-based payments.”

Soefje also explained that institutions must shift to consider the total cost of care rather than individual drug costs, and the costs of drugs will be evaluated based on the associated patient outcomes. “The cheapest drug may not always be the best and we must always remember that the drug that does not work or is not taken is the most expensive drug,” Soefje said.

Tips for Moving Forward

Haumschild suggests creating a tip sheet detailing the largest payers and their preferred oncology agents. He also explained that it is important to create a secondary process so that if the provider receives an insurance denial, there is an efficient method for swapping medication decisions and updating clinical data in real time to keep safety as a primary factor for all decisions. He also highlighted the importance of creating strategies to maintain financial sustainability.

Click to Enlarge

Outpatient infusion center pharmacies must prepare for the shift from a revenue focus to a cost-outcomes focus,” Soefje noted. “We also have to think in a big picture mode, in that it might be appropriate to spend more on a drug if it prevents a hospitalization or an emergency department visit. Value will be the key. Everything that an institution does will need to be valuable to someone, and that value needs to be measured and reported.”

Haumschild also highlighted the importance of assessing outcomes. “If we are going to operate with the best care for our patients and the best outcome, we can’t just talk about the models and explain them, but we actually have to show the outcomes and show how the outcomes are better,” Haumschild explained. “And I think that’s really where the value proposition will be at the forefront of the patient and the practice.”

“It will be a difficult balance to improve throughput in the clinic, while at the same time assuring the patient feels they have received the care they want,” Soefje said. “Value cannot be reiterated enough. We have to eliminate the waste in health care and ensure that the outcomes are maximized while we reduce the total cost of care.”

“I would also say that with specialty pharmacy, you need to make sure that your health system specialty pharmacy has access to limited distribution medications because there are data out there that show that health systems and specialty pharmacies provide a higher touch of care, they provide more integrated care, and they can come up with better outcomes for those patients,” Haumschild said.


  1. IQVIA Institute. Global oncology trends 2019: therapeutics, clinical development, and health system implications. Published May 30, 2019. Accessed April 15, 2020.
  2. Gordan L, Schaedig C, Weidner S. The financial impact of the sequester cut to Medicare Part B drug reimbursement in community oncology. Am J Manag Care. Published August 29, 2018. Accessed April 15, 2020.
  3. Park A, Xu T, Poku M, Taylor J, Makary MA. Variation in markups on outpatient oncology services in the United States. Am J Manag Care. Published February 2018. Accessed April 15, 2020. 24(2):e59-e60.
  4. Gatwood, J, Gatwood, K, Gabre E, Alexander M. Impact of clinical pharmacists in outpatient oncology practices: a review. Am J Health-Syst Pharm. 2017;74(19): 1549-1557.
  5. Clinical Pharmacists in Oncology Practice. J Oncol Pract. 2008;4(4):172-174. doi:10.1200/JOP.0843001
  6. Ostriker S. The growing value of a pharmacist in community oncology practice. Oncol Issues. January/February 2010.
Related Videos