Soaring Prices for Oncolytics Prompt Payer Pushback

Oncology Business News®July 2015
Volume 4
Issue 6

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.

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

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.

Key Drugs Are Not Included

Exchange plans that came about as a result of the Affordable Care Act have been found in some cases to exclude key drugs, or place them on the highest cost-sharing tiers, and to have poor disclosure, such that it is difficult or impossible for consumers to compare one plan with another.3 It is another instance of consumers getting a poor deal as payers compete to get and retain business and to avoid expense wherever possible, say advocates and doctors.

Under the ACA you cannot be denied coverage because of a preexisting condition, notes Eric Hargis, CEO of the Colon Cancer Alliance; “However, if a plan puts all the cancer drugs on the highest and virtually unaffordable co-pay, then they are accomplishing the same thing—saying ‘Patients with cancer need not apply.’”

Hargis says this type of abuse of the ACA can often be predicted by the way pathway plans are designed, though he adds that pathways can serve a good end by steering doctors toward sensible treatments that are reasonable in cost and efficacious. “Pathways can help to improve clinical outcomes by making sure that across the board, particularly in an oncology community where you have a doctor who is treating—obviously—many different forms of cancer, the doctor is completely up to speed on the most recent advances and treatment.”

Malin says this is exactly what Anthem’s pathways program accomplishes. She cites a total of 64 different regimens for lung cancer that meet National Comprehensive Cancer Network (NCCN) guidelines. Those regimens range from $450 to $65,000 for three months of therapy, “with really no difference in outcomes.” Anthem took 8 of those 64 regimens and created a pathway with costs ranging from $450 to $34,000 for three months. “There is still a wide range in order to accommodate patient preferences and if a physician feels that one option might be better for one patient than another, but on average it is much more cost-effective than using the whole range of therapies, including those that are very expensive with no real difference in toxicity or efficacy.”

Jennifer Malin, MD

Physicians are not forced to abandon their preferences for treatment if they are not included in the pathway, Malin says. Coverage payments simply won’t be as favorable. “Generally speaking, the community believes that it is probably appropriate to be on a pathway around 85% of the time, so we are not restricting use of any of those regimens.”

Pathway plans and the advent of guidelines from NCCN and ASCO have resulted in a huge reduction in variations of care that did not make perfect clinical or economic sense, says Malin, but she notes that even now there is still a huge variation in physician choices that leads to differences in quality of care and cost.

Some Waste Cannot Be Avoided

Such plans do cut down on waste in cancer treatment, though some professionals interviewed for this article described cancer treatment as inherently wasteful because there are always patients who do not respond to care. “With genomics-targeted testing, there is a lot of effort required to try to identify people who will respond. It’s one of the major areas for improving the efficiency for how to prescribe things, but it has not been realized yet,” says Ramsey.

Coverage changes are not the only method by which payers are pushing back against rising costs, says Mike Neuss, MD, chief medical officer for the Vanderbilt-Ingram Cancer Center. He contends that the often frustratingly difficult approvals processes almost seems designed to make all but the most determined of physicians give up short of the goal of obtaining the optimal approvals for the patients in their charge.

“I think the payers put a variety of impediments in the way to see if you’re really committed to doing or prescribing something,” he says. “And I think they do that through the pre-certification or clinical guidelines process. They’ll inconvenience you ridiculously by it.” Some doctors will put up with being placed on hold for a long period of time. It sometimes takes more than that to get an approval, though. Knowledge and influence also count, says Neuss.

When giving out approvals for the newer class of immunotherapy drugs, payers are often less flexible about coverage, says Neuss. “I think the more expensive the intervention, the more ‘proper’ they are in following the indication. And these are expensive treatments, so I believe the payers will make sure that they’re used according to FDA indication and not according to physician or patient whim.”

Ramsey thinks manufacturer pricing is part of the problem. “Taking [the payers’] perspective, they’re seeing their spend for oncology related care expand rapidly as the cost of new drugs and drug combinations goes through the roof, and they’re under extraordinary pressure to keep the premium costs down, so they’re in a difficult situation right now.”

The way Malin sees it, the frustrations of the prior authorizations process are largely due to the wide variety of plans available in the marketplace, which means that physicians have to work through different platforms and adhere to different requirements in order to obtain the treatment approvals they believe are most suitable. “Trying to keep up with what the different processes are for all of them can be a challenge,” she says. The Cancer Care Quality Program has a Web portal that can be used to access approvals data, which she says has gotten good reviews from oncology practices. Sometimes it will take a third of a day to get an approval; sometimes it will happen within a few minutes, “if practices are able to enter the information directly into the Web portal and don’t have any questions about what information is required.”

Nevertheless, the rise of financial toxicity as it relates to patients’ inability to pay for care is a sign that the medical coverage system in this country is in a state of crisis, say the medical professionals interviewed for this article.

More and more often, pharmaceutical products are being priced in such a way that the patient has a higher percentage of the healthcare bill, says Hargis. “The number 1 reason people call our organization right now is for financial assistance. There are many programs out there and we provide some grants, but—let’s be honest—cost is still one of the greatest barriers for patients today.”

The alliance is currently backing legislation that would require Medicare coverage of polyp removals that follow from preventative colon cancer screenings allowed under ACA. “We’ve actually had calls from patients saying, ‘I told my doctor if they do a colonoscopy, not to remove the polyp, because I can’t afford it,’” Hargis says.

Ramsey believes advocacy groups in general are going after payers on issues like these but need to direct an equal amount of attention to drug manufacturers, whom he says play a major role in the problem of financial toxicity. “There needs to be pressure on the manufacturers to be more considerate in their pricing.

Michael Neuss, MD

“Right now, the extraordinary rise in cancer drug pricing is creating a real problem, and patients are the ones who are suffering. Insurers are caught in a web of regulations that really tie their hands about coverage, and as a result pass more cost onto patients. Pharma is taking advantage of market distortions and mandatory coverage laws in their pricing decisions.,” says Ramsey.

Neuss contends that the problem is more universal, and that price should not be a barrier to treatment under any circumstances. “I think we regard healthcare as a free market service, and it’s really more like a utility, like a public utility,” he says. “Just being outraged at the drug price is different from saying, ‘Well, the real problem is something else.’ It’s easy to be outraged. It’s much more difficult to talk about what the real problem is, which is the free market pricing model.”


  1. Yabroff KR, Lund J, Kepka D, Mariotto A. Economic burden of cancer in the US: estimates, projections and future research. Cancer Epidemiol Biomarkers Prev. 2011;20(10):2006-2014. Accessed June 22, 2015.
  2. Newcomer LN, Gould B, Page RD, Donelan SA, Perkins M. Changing physician incentives for affordable, quality cancer care: results of an episode payment model. J Oncol Pract. 2014. Accessed June 20, 2015. doi:10.1200/JOP.2014.001488.
  3. Cancer Action Network. Cancer drug coverage in health insurance marketplace plans. 2014. Accessed June 20, 2015.

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