When worlds collide: Grappling with the rising therapeutic value--and rising cost--of cancer drugs

Pharmaceutical CommercePharmaceutical Commerce - May/June 2015

As new cancer drugs with promising efficacy but brutal costs enter the market, providers, payers and manufacturers are strategizing new payment approaches

Fig 1. MCOs most frequently make use of prior authorization protocols to control drug costs; note also the relatively high effectiveness rating of limited-distribution specialty pharmacy networks. Credit: Genentech

Year by year, as the number of cancer patients rises, the number of survivors living longer grows and the cost of care climbs, the drumbeat to do something dramatic is increasing. On the medical science front, new ways to conduct trials while identifying the most likely patients to respond to therapy show promise. On the payer side, a variety of approaches to bundling drug costs with care are being explored. Among manufacturers, the attractiveness of the oncology market—and the possibility that one drug might work well across a range of cancer types—brings more and more companies into the fray.

Caught in the middle of all this, however, are the patients who are dealing with backbreaking costs for treatment. Rising out-of-pocket costs—even for those with fairly generous healthcare coverage—are leading commentators to bemoan the “toxic side effects” of cancer care to patients’ finances.

The biopharma industry is being excoriated in the public arena for the high costs of newly approved drugs, and the sizable cost inflation of drugs already on the market. At the same time, the industry is making more effort to support patient care through patient assistance programs, and supplementing doctors’ care with patient support services. Drug distributors (among others) are trying to position themselves more favorably in the market by advancing the principles of clinical pathways—protocols to define more precisely how patients’ care should progress.

The market drivers, combined with the new science around oncology development, are drawing more interest from pharma. An oncology product, Imbruvica (ibrutinib, for blood cancers), was the sole justification for AbbVie paying $21 billion to acquire Pharmacyclics, announced in early March. Valeant Pharma bid $296 million to acquire the assets of now-bankrupt Dendreon, maker of a prostate-cancer therapy, because “We believe that oncology has similar characteristics to our current therapeutic portfolios, such as strong growth, high durability, strong patient and physician loyalty, and a terrific reimbursement regime,” according to a statement by J. Michael Pearson, chairman and CEO. “We have not previously found an economic way to enter this market, but with the unique dynamics of this situation, we believe that this transaction will create significant shareholder value.”

Pharma giant Pfizer has double downed in oncology: “What we’ve done [is] to create a presence in oncology and immuno-oncology,” said Ian Read, Pfizer CEO, at a recent investor conference. “We may not have been first; we may have been behind on PD-1 and PD-L1. But I think the assets that we’ve now put together will give us a leadership position over the next five years in oncology.” (PD-1 and PD-L1 are two types of new modes of action against cancer with strong potential. Merck’s Keytruda [pembrolizumab] and BMS’ Opdivo [nivolumab], both PD-1 inhibitors that were approved last year are the first to market.)

Biomarker-driven oncology

In recent years, ongoing discoveries about the role that certain genetic mutations can play in drug development efforts have changed the face of oncology. Whereas traditional cytotoxic chemotherapy agents act against rapidly dividing cells (including healthy ones), today’s newer targeted therapies are explicitly designed to interfere with specific molecular targets that are involved in cancer cell growth or progression. According to IMS Health, the role of targeted therapies in oncology treatment has grown from 11% in 2003 to 46% in 2013.

When the biomarker is used as the gateway to treatment, patients experience higher response rates, fewer toxicity-related side effects and adverse events, and improved outcomes—improvements that can help to reduce the cost and duration of clinical trials, support favorable reimbursement decisions, and improve patient outcomes. “When you can limit the patient cohort in this way, you get a higher proportion of patients who are likely to benefit and there is less cost wasted on futile therapy,” says Debbie Warner, VP, oncology commercial strategies, Kantar Health (New York).

“Since chemotherapy drugs tend to be among the most expensive specialty drugs, the ability to avoid the unnecessary administration of toxic therapies that will provide no positive outcome for the patient provides both clinical improvements (in terms of side effects and toxicity) and financial advantages for both patients and payers,” says Lindsay Conway, a managing director at the consultancy The Advisory Board Co. (Washington, DC).

To help manage the high cost of biomarker-indicated therapies (and their companion diagnostic tests), it has become increasingly common for payers to write very specific prior authorization (PA) criteria to ensure appropriate use,” says Warner of Kantar Health. In fact, 68% of managed care organizations (MCO) now require PAs for specific molecular or biomarker tests, and 46% of oncologists reported “frequently” encountering payer restrictions related to genomic testing or pathology in 2013—up from 37% in 2012, according to the 2014 Genentech Oncology Trend Report. [1]

In recent years, the discovery of useful recognized genetic mutations has led to the commercialization of biomarker-targeted oncology agents and the pursuit of others, including:

  • The BRAF V600E in melanoma, colon cancer and lung cancers
  • The KRAS mutation in colorectal and lung cancers
  • The HER2+/neu amplification in breast cancer
  • The ALK+ mutation in non-small-cell lung cancer, lymphoma, neuroblastomas and a rare form of sarcoma
  • EGFR-mutant non-small-cell lung cancer (NSCLC)
  • The BRCA mutation in ovarian cancer

“To support further advances, greater effort is needed to develop the technology needed to obtain tumor tissue and rapidly identify molecular or proteomic aberrations in order to inform treatment decisions,” says Stephanie Hawthorne, PhD, senior director at Kantar Health. “Next-generation sequencing (NGS) is one approach that has been receiving a lot of attention lately for its ability to provide a readout on a tumor’s full genomic sequence and all possible aberrations.”

“There has been explosive growth in the uptake of NGS technology over the past five years, and today, NGS is really becoming more of a part of oncology care,” says Jennifer Levin Carter, MD, MPH, chief medicine officer and founder of N-of-One (Lexington, MA), which has developed domain expertise for the clinical interpretation of NGS and other molecular tests. “With this changing paradigm comes better response rates using today’s newer, targeted therapies.”

NGS and biomarkers, together, are pointing toward another exciting cancer-fighting opportunity: the fact that certain genetic mutations are common to several types of cancer, which leads to the potential that one drug can be useful for multiple cancers. “The biomarker HER2 is an example of this,” says Carter. “The identification of HER2 amplifications in breast cancer have been a game changer, and now we are seeing different types of cancer such as gastric cancer with alternations in HER2 that also respond to HER2 inhibitors,” says Carter.

This development has multiple implications for drug pricing. Originally, biomarkers could separate patients who would respond to certain therapies from those who would not, thus constraining the patient population and, in turn, justifying higher pricing for a drug with limited commercial potential. Conversely, if the same drug can be shown to be efficacious for multiple cancers, there is justification for a lower price. Examples where a manufacturer has lowered its pricing as more indications are approved by FDA, however, are hard to find.

Fig. 2 Outpatient drug costs can be as much as 259% over the same drug in an office setting. Source: IMS Health

Fig. 3. Per an annual survey of community oncologists, Kantar Health finds that carrying costs (bad debt risk, reimbursement levels, patient affordability) outweigh medical factors as a reason to refer patients out of the practice. Credit: Kantar Health

Clinical pathways

As more and more oncology practices (both private and hospital-based) adopt published clinical guidelines from the National Comprehensive Cancer Network (NCCN; Fort Washington, PA), ASCO, and the NCI, and published clinical pathways from private companies such as Via Oncology (Pittsburgh, PA), the P4 unit of Cardinal Specialty Solutions (Dublin, OH), the Innovent/US Oncology unit of McKesson (Woodlands, TX), eviti (Philadelphia, PA) and New Century Health (Wellesley, MA), the oncology community signals its support for greater “standardization of care.” Broadly speaking, both guidelines and pathways provide decision-making assistance to oncologists, based on clinical evidence; pathways tend to have an added focus on cost of care. Today, roughly three-quarters of MCOs are currently following cancer treatment pathways, according to the Genentech Trend Report. Among oncologists surveyed by Genentech, 63% use treatment guidelines and half use pathways. Nearly half of these oncologists are measuring the impact of guidelines on the quality of care and nearly a third report doing so with pathways.

In some cases, the use of guidelines or pathways is voluntary; in others, adoption is driven by employer or payer mandates, or incentives such as reduced prior authorization (PA) or precertification requirements, higher reimbursements for drugs and others. For example, one of the requirements for participants in The Aetna Medical Home Model is that they adopt national clinical pathways (choosing from among three options—Via Oncology, New Century Health or McKesson). Last year, insurer Anthem (Indianapolis, IN; formerly Wellpoint) announced a pathways program combined with incentives to providers, in part, “to offset the lower fees they receive when prescribing less expensive drugs,” according to a company statement.

Among employers surveyed by Genentech, nearly 40% reported that tying provider reimbursement to compliance with evidence-based cancer treatment guidelines is the leading change to be implemented in the next 2—3 years.

So how does this sustained interest in standardization of care comport with the equally important push to embrace biomarker-directed drug-treatment protocols? “It might seem at the surface that there is a real contradiction between the push for standardization through pathways and the push for precision through personalized medicine in oncology—but when you dig into the details they are actually well aligned,” says Conway of The Advisory Board. “The goal of clinical pathways is to ensure that every patient receives cancer treatment that is based on the latest, most rigorous evidence through the consistent use of evidence-based care protocols.” Experts assert that to the extent that pathways and guidelines can continue to evolve to capture the growing body of evidence, then the two objectives can indeed remain compatible.

The Via Oncology Pathways presents a series of critical questions in the right order to help oncologists order the right diagnostic tests up front, and perform lab work at critical points in the treatment and analyze the results properly in order to choose the most appropriate therapy. Links and support materials are embedded along the way to provide relevant clinical information.

“We already see this in our pathways—there is a growing body of evidence-based, biomarker-related treatment protocols in each successive update of the pathways,” says Kathy Lokay, CEO of Via Oncology Pathways (Pittsburgh, PA). “The constantly refined pathways incorporate the most up-to-date data and update the decision-support tools to help providers turn the new developments into actionable clinical recommendations.”

Rise of oral oncology agents

Over the past five years, roughly 50 new oral oncolytic agents have been approved (as new agents or label extensions on existing orals), and today, oral oncolytics represent an estimated 25—35% of the oncology drug pipeline. Interest in taking chemotherapy treatments in pill or capsule form is strong among both patients and prescribers; however, this new paradigm creates challenges, in terms of clinical, safety and financial issues that arise for both prescribers and patients.

The ability to allow cancer patients to receive their drug therapy at home as an oral medication is an attractive option for many, in terms of reducing the logistical and emotional burden of traveling for daily or weekly intravenous drip sessions at the physician’s office or hospital. However, not surprisingly, at-home administration leads to serious adherence problems related to oral oncolytics due to the inability or unwillingness of many patients (particularly sick and elderly ones) to take their medications as prescribed, especially since oral oncolytics often have complicated dosing requirements, potentially debilitating side effects, and high out-of-pocket expenses for the patient.

A three-year study by The Community Oncology Alliance (COA), in cooperation with Avalere Health (Washington, DC), confirms that a higher cost-share burden is a key factor related to the abandonment of oral oncolytics by one in ten patients. And those patients with multiple prescription claims had an even higher rate of abandoning their oral oncolytic, according to the COA/Avalere study.

Meanwhile, roughly half of all US cancer patients today are Medicare beneficiaries, and according to the COA/Avalere study, these parties have a rate of drug abandonment related to out-of-pocket expenses that is twice that of commercially insured beneficiaries—16% as opposed to 9%.

According to a recent ExpressScripts study, more than 40% of patients taking oral oncology agents are not fully adherent to their prescribed regimens. Failure to remain on therapy not only incurs wasted drug expenditures for both patients and payers but it also allows for ongoing progression of the malignancy, raises the risk drug-resistance issues developing, and increases hospitalization and more, increasing overall healthcare costs. Meanwhile, poor clinical performance in the marketplace creates problems for the brand, in terms of depressed or diluted pharmacoeconomic data, negative perception among oncologists, and greater challenges in achieving optimal formulary placement and reimbursement status, and more.

Perhaps the most troubling aspect of today’s oral oncology agents is that despite certain clinical advantages and greater patient convenience, the decision to prescribe them creates distinct financial penalties, for both prescribers and physicians—due to the complex, inconsistent reimbursement dynamics that are in play today.

IV chemotherapy that is infused in a hospital setting is covered under the patient’s medical benefit. In this scenario, drug costs are typically lumped in with costs of hospital care, physician services, drug administration and ancillary services, so patients typically have no direct cost-sharing burden for such medications. By stark contrast, chemotherapy that is taken at home in pill form is covered under the patient’s pharmacy benefit. Like any other expensive specialty drug, oral oncology products typically have significantly higher out-of-pocket (OOP) cost-sharing burdens for the patient, in the form of higher co-pay and co-insurance requirements and annual drug-spend limits. By most industry estimates, the average oral oncology medication costs between $10,000 and $12,000 per month, and based on those prices, any cost-sharing obligations can quickly add up for the patient (and cancer patients rarely take just one specialty drug).

“For patients taking oral oncolytics claims with patient cost-sharing greater than $500 were four times more likely to be abandoned than claims with cost-sharing of $100 or less. As a result, a serious adherence impact transpires as cancer patients avoid needed prescriptions due to cost, potentially resulting in adherence-related readmissions,” says Michael Eaddy, PharmD, PhD, vice president, leading Xcenda’s Applied Data Analytics consulting practice.

“Most patients are totally unprepared for these types of expenses and many cannot afford them, and because of the complexity of individual patients’ pharmacy benefits design, the prescribing physician is ill-equipped to prepare the patient,” notes Michael Kolodziej, MD, FACP, national medical director of Oncology Solutions, Aetna (Hartford, CT). “In fact, medical costs are now the most common cause of personal bankruptcy, and growing evidence (and common sense) suggests that concerns regarding cost of care have a significant impact on patient quality of life.”

In fact, the 2014 Genentech Oncology Trend Report found that 36% of all oncology patients are eligible for Patient Assistance Program (PAP) support to receive free or deeply discounted medications from drug makers or charitable foundations—up from 27% in 2012.

Meanwhile, as the cost of today’s specialty medications continue to skyrocket, the need for more comprehensive care-management services to help maximize adherence has also grown in importance, says Doug Neely, CMPE, MHA, senior director at Xcenda. Today, “the ability for drug manufacturers to provide a range of services that directly support adherence to products can help manufacturers demonstrate the full value of the therapy, and thus advocate for strong reimbursement and coverage,” he says.

As a practical matter, if the choice to prescribe this newer form of oral oncology therapies over an infused alternative always engenders a disproportionately higher cost-sharing burden for patients and the loss of revenue for the practice, something’s got to give.

Payer reform initiatives

Throughout oncology, a variety of payer-reform initiatives have been proposed that would help to both reign in the runaway costs, streamline and simplify the administrative and clinical processes for care providers, and in particular, to provide some financial scaffolding to beleaguered private oncology practices that are finding it harder and harder to remain viable in the face of the significant competitive advantages that larger hospital-based oncology care settings benefit from, thanks to 340B discount drug pricing and economies of scale.

Last August, the Centers for Medicare & Medicaid Services (CMS), through its Center for Medicare and Medicaid Innovation (CMMI), proposed a preliminary design for a new payment methodology called Oncology Care Model (OCM). The OCM is a multi-payer model (available for both Medicare and Medicaid, and any commercial insurance plans) that advocates for a transformation from the traditional fee-for-service approach to alternate payment methodologies.

According to CMS, through the voluntary, five-year OCM (which will begin in spring 2016), practices would enter into payment arrangements with multiple payers) that spell out financial and performance accountability for “six-month episodes of care” involving chemotherapy administration to cancer patients.

“OCM intends to create increased performance-based financial incentives for doctors who prescribe chemotherapy and are able to fulfill the many program requirements, including adherence to clinical guidelines and provision of out-of-pocket cost estimates to patients up front,” says Conway of The Advisory Board. [2]

Meanwhile, in May 2014, ASCO has released its own patient-focused, payment-reform model, called Consolidated Payments for Oncology Care (CPOC). ASCO’s comprehensive plan, which would be available for both Medicare and private insurers to adopt, is said to better match payments to practices to the actual work activities performed by oncologists and their care teams.

ASCO’s goal is to provide greater financial scaffolding in the form of regular, monthly bundled payments, factoring in patient-care services that currently go unreimbursed by most payers under the current system, which is built around seeing a patient and giving a patient drug infusions, says Jeffery Ward, MD, Chair ASCO Payment Reform Workgroup.

For instance, under ASCO’s proposed CPOC plan, practices would receive five types of flexible, bundled payments (roughly on a monthly basis) designed to cover many services that are currently reimbursed and many that are not. These include payments related to:

  • New patients
  • Treatment month payments (four levels)
  • Active monitoring payments
  • Transition of care payments
  • Clinical trial payments.

The current system of reimbursement in oncology is built around 58 separate procedural codes to reimburse for everything related to office visits and infusion services; the proposed ASCO plan streamlines this to 11 codes to simplify billing to reduce cost and administrative burden for practices. And it would help to compensate the many activities that are typically carried out but not reimbursed—among them, managing the complex PA requirements associated with using today’s biomarker-directed therapies and related diagnostic testing procedures. Such payer-reform improvements would help to level the playing field for oral oncology medications, allowing the ultimate prescribing decision to always be driven by clinical considerations, not financial ones.

Meanwhile, roughly half of all cancer patients in the US are Medicare beneficiaries, so perhaps not surprisingly, CMS has also recently announced its own proposed payment-reform methodology—the Payment Taxonomy Framework—to move from a volume-based to a value-based approach to reimbursement. According to the agency, Medicare has set a goal to have 30% of Medicare payments in alternative “value- or quality-based” payment models (instead of the current fee-for-service model) by the end of 2016, and 50% by the end of 2018).

Community oncology—still under siege

Over the past eight years, 313 independent cancer-treatment facilities have closed and 544 community cancer practices have become acquired by or affiliated with hospitals, while another 149 private practices merged or were acquired by another corporate entity other than a hospital, according to data released by the Community Oncology Alliance (COA; Washington, D.C.) in October 2014. This constitutes an 82% increase in cancer clinic closings and a 143% increase in consolidation into hospitals since the COA’s first report in 2010, which reported on activity from 2008 to 2010. Over the past two years, nearly 75% of the acquisitions of private oncology practices were by hospitals that enjoy 340B drug pricing, says COA.

Complex financial drivers, grossly exacerbated by the government’s 340B Discount Drug Pricing Plan, are directly to blame. 340B drug pricing allows specific hospitals and their oncology clinics to purchase branded drugs at deeply discounted prices (often 25—50% below wholesale prices that private oncology practices pay), and then upon drug administration, collect reimbursement (at market rates) through the patient’s private insurance, Medicare or Medicaid benefits. The de facto profit margin that results creates both a predictable revenue stream and helps to ensure a lucrative profit margin for hospital systems—financial benefits that are simply not available to oncologists in private practice. And, this profit margin helps these institutions to offset the burden of uncompensated or undercompensated aspects of care, a luxury not available to community oncologists.

Despite the original intent of the 340B program—which was to ensure that poor and uninsured patients could gain access to costly treatment therapies in a hospital setting—critics agree that today, the 340B program has run amok and today it creates a false narrative throughout every aspect of oncology, benefitting only impacted hospitals, but leaving all other stakeholders in healthcare to subsidize the lucrative profit margins that these hospitals routinely enjoy.

According to internal United Healthcare data, average spending on cancer care in community-based oncology practices is 22% higher than the Medicare rate—but it is 146% higher than the Medicare rate in outpatient hospital facilities.

“Oncologists themselves are split on this issue,” says Warner of Kantar Health. “On the one hand, smaller, unaffiliated practices are feeling quite threatened by the continued growth of mega-practices and oncology integrated delivery networks (IDNs) and feel they are siphoning off patients.” However, she notes that those who have become part of a larger organization generally feel that there are benefits to the economies of scale, “and they appreciate being able to practice medicine without having to worry about so many of the business-management issues.”

And many stakeholders in oncology are mourning the loss of access to local cancer-care options in the community. Calling community-based oncology practices “the mainstay of chemotherapy delivery,” Barry Fortner, PhD, president, ION Solutions/AmerisourceBergen Specialty Group says that despite its inherent financial challenges, “this model has proven to be quite robust and resilient because like all privately held small businesses, these practices are highly motivated to operate very efficiently in order to keep costs down. Community oncology provides an undeniable point of value.”

1. (http://www.genentech-forum.com/annual-genentech-oncology-trend-report) 2. (http://blog.communityoncology.org/userfiles/76/CMMI_OncologyModel_FactSheet.pdf) 3. (Newcomer LN. Myths And Realities In Cancer Care: Another Point Of View. Health Affairs, 33, no.10 (2014):1805-1807).

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