The Pace of Change in Oncology Management Greater than the Sum of Its Parts

Lee Goldberg

December 2011, Vol 2, No 7 - Oncology


Innovative medications target the molecular structure of cancer cells with increasing precision, resulting in reduced adverse effects. Novel therapies enlist the patients’ own immune systems to defeat cancer. At the same time, as personalized medicine comes of age, improved diagnostic tests match the right patients to these new treatments. The accelerating pace of these developments is improving expectations of patient survivability and the total number of survivors.

This excitement, however, needs to be tempered by the recognition that these advances come at a steep price. According to Medco Health Solutions, the net cost in the category of oncology drugs for 2010 has increased by 21.2%, fueled by a 13.7% rise in unit cost daily. This is more than the growth in rheumatoid arthritis and multiple sclerosis drugs (Medco 2011 Drug Trend Report). Not only do payers struggle to balance costs with access, physicians, patients, government agencies, and manufacturers also face difficult cost-of-care decisions.

The Zitter Group’s recently released, “Managed Care Oncology Index: Summer 2011” (www.zitter.com)—a seminal survey of 100 oncologists, 100 payers, and 100 oncology practice managers—identified 3 evolving issues that stand to have a significant impact on the cost–access dynamics within the oncology therapy landscape over the next 6 to 12 months:

  • Practice consolidation
  • Routes of administration
  • Competing treatment options.

Individually, each of these factors is changing at a measured pace. But their confluence portends an accelerating pace of change in the access environment for patients.

Figure 1
Impact of Payer Management on Practice Consolidation
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What Is the Scope of Practice Consolidation?
Oncologists expect the financial viability of their practices to decrease over the next 2 years. Efforts of government agencies and payers to control costs cast a pall over oncologists’ financial outlook. Practices of all sizes face reduced drug reimbursement combined with prospective steep cuts in Medicare reimbursement. Increasing administrative requirements of payers command a dedicated staff to process the paperwork (Figure 1).

It is not surprising that roughly 80% of both oncologists and practice managers believe that tighter oncology management by payers will force smaller practices to consolidate into larger ones. The question that remains is, not if, but when?

Despite marginally increasing commercial buy-and-bill reimbursement rates (likely because of the influence of generic contracts), 57% of oncologists, a 36% increase in the past 6 months, report a decline in revenue as a direct result of the average sales price (ASP) reimbursement. A majority of oncologists’ revenue declined in the range of 10% to 20%. A majority of practice managers also report a decline in revenue as a direct result of the ASP reimbursement over the past 6 to 12 months. In fact, roughly one third of oncologists and practice managers have encountered commercial payer reimbursements lower than their acquisition costs for oncology products when utilizing buy-and-bill distribution.

Nonetheless, because they express greater comfort with their current financial situation than 6 months ago, the majority of oncologists, and 41% of practice managers, have not been approached, or approached another party themselves, regarding consolidation. Neither are accountable care organizations (ACOs) spurring action.

Only 4% of oncologists have joined an ACO by the time of this survey, while the majority remains undecided. Finally, from the payers’ perspective, actual consolidation in the market is also far too limited. All parties see the process as being driven by the hospitals or healthcare systems themselves.

Routes of Administration
Since the summer of 2010, twothirds of payers have consistently expressed a strong preference that patients use oral agents rather than intravenous (IV) therapies, given comparable safety and efficacy profiles. A majority of oncologists and practice managers report that patient preference runs in the same direction, preferring oral medications for therapeutic and supportive treatments. Both groups cite ease of route of administration as the main reason for patients’ preferences.

Data show that payers’ preference is driven by ease of management. Fewer than half of payers believe strict management of pharmacy benefit medications encourages patients to use medications covered under the medical benefit. Given what oncologists and practice managers report of patients’ preference for oral agents (pharmacy benefit drugs), payers may indeed be right.

Figure 2
Impact of Payer Management on Practice Consolidation
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However, oral medications face greater numbers of prior authorizations. For the patient, oral agents also come with higher price tags. Patients now face an average $30 copayment for second-tier drugs (up from $25 last year) and 26% of payers use a fourth tier in their most representative costsharing design, likely adjudicating at a 20% coinsurance rate. Contrast this to payer policies that use medical benefit agents. Only 50% of plans require patient cost-sharing at all; patients covered by the other 50% of payers pay nothing directly for their infused medication (Figure 2). The cost advantage to patients of using an IV agent is only partially offset by the cost of the visit to the site for the infusion that is still required by only 67% of plans.

The evolution in route of administration is tied to physician reimbursement and practice viability. Oral agents eliminate the buy-and-bill dynamic from physicians’ balance sheets. For in – fusible drugs, payers expect officeadministered, infusible-therapy volume to shift away from buy-and-bill in favor of specialty pharmacies over the next 12 months, with 52% of payers preferring the latter channel. Practice managers do not expect such a large shift, but the continual reduction in infusion revenue makes oral agents twice as attractive to payers.

How Might Comparable Products Influence Utilization Management?
When considering future management over the next 18 months, a majority of payers intend to expand the scope of their current management interventions, particularly quantity limits, even among payers that do not currently use them. More than 50% of payers intend to introduce clinical pathways. Oncologists believe that payers are most likely to expand linking diagnostic tests to drug approval, whereas practice managers expect payers to expand their use of prior authorizations.

Recent drug approvals for chronic myeloid leukemia, colorectal, non– small-cell lung, and prostate cancer add a new wrinkle to oncology utilization management—agents with similar mechanisms of action for use for the same type of cancer.

Figure 3
Patient Cost-Sharing: Medical Benefit Therapies
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Currently, a majority of oncologists expressed a treatment preference of one agent over another in these categories, whereas a majority of payers hold no preference. However, grouping subtypes by their management priority data shows that decreasing payer perceptions of unmet need correlates to incrementally higher priority (Figure 3). If the physicianprescribing behavior evolves into codified best practice via compendia listings, payer history indicates that their management policies will follow suit: as we can see, they are already paying attention.

Implications
Taken together, ACOs, healthcare systems, payer expansion, and physician aggregation, point toward fewer players controlling more treatment decisions. With the government encouraging creative reorganization, and payer reimbursement impacting practice viability, payers, healthcare systems, and oncologists may find themselves in closer partnerships than ever before—and leaving patients with fewer choices.