Oncology Pipeline Bustling, But Value Concerns Lead to Increased Payer Scrutiny

August 2014, Vol 5, No 6

Los Angeles, CA—Targeted therapies have dramatically increased their share of global oncology sales over the past decade. But concerns over value have led to more payer scrutiny of targeted therapies and other oncology drugs, suggested Doug Long, Vice President, Industry Relations, IMS Health, at the Fourth Annual Conference of the Association for Value-Based Cancer Care.

These data come from the IMS Institute study on cancer care between 2003 and 2013. For most cancers, “the survival rate is improving as detection and treatment improve,” said Mr Long. But many of the improved outcomes come from a variety of things. “In our study, 23% of the improvement was attributed to behavioral changes, 35% is due to screening, 20% to advances in treatment, and the remaining 22% to other factors,” he said.

Oncology Drug Spending
“Oncology is what we spend the most on in the United States,” said Mr Long. Global spending on oncology drugs has increased from approximately $40 billion in 2003 to approximately $90 billion in 2013. So the spending on oncology drugs has more than doubled in 10 years. Spending on cancer drugs in the United States is projected to reach $74 billion to $84 billion in 2017.

Global spending in oncology therapies has grown much faster than that for other therapeutic categories, but global growth for oncology spending has slowed since 2008, to <10% annually. In the United States, the annual growth rate in oncology drug spending has been 3.5% over the past 5 years, reaching $37 billion in 2013.

Approximately 41% of the global oncology spending was in the United States in 2013 compared with 43% in 2008. The global oncology business in Europe declined from 27% to 24% over this same time, which Mr Long attributes to a lower likelihood to approve new cancer drugs, because government bodies there rely more on comparative effectiveness research and real-world evidence.

The Oncology Pipeline
The IMS data document that the share of targeted therapies in oncology has quadrupled in the past 10 years, from 11% in 2003 to 46% in 2013.

“Oncology is the biggest area for development,” Mr Long said. Of the 6234 drugs in the pipeline, approximately 33% of them are cancer therapies, and more drugs are currently being developed for cancer than for other clinical categories.

“The majority of the new molecular entities approved for cancer over the past decade has been nonbiologics,” he said. We are going to see more nonbiologics coming to market in the future. Although many pharmaceutical companies are seeking approval for their drugs using the breakthrough therapy designation, the FDA has granted approval to only 26% of them, and an additional 18% of drugs are awaiting a decision. Of these drugs, 34% are in oncology.

Drugs for lung cancer are “far and away” the largest oncology category in phase 2 clinical trials. There are limited alternatives and high unmet needs for agents to treat bladder cancer, ovarian cancer, and melanoma, although the latter category has gotten more crowded with immune therapies recently.

Focus on Value Increases Cost Concerns
Changes in the structure of the US healthcare delivery are having an impact on cancer treatment site of care, reimbursement, and patient out-of-pocket costs. Physician practices are becoming larger. Care covered by the 340B Drug Pricing Program has expanded its presence in oncology, resulting in a shift in patient care from physician offices to hospital outpatient facilities.

“The number of oncologists in the US through 2012, particularly medical oncologists, continues to rise.” However, the rest of oncology, “radiology oncologists, pediatric oncologists, gynecological oncologists, surgical oncologists, those numbers are relatively flat,” according to Mr Long, and this will affect value.

The higher infrastructure costs and overhead for the delivery of care incurred by hospitals means that their reimbursement levels for the administration of drugs are higher than the levels for physician offices.

For infused or injected targeted therapies, reimbursed costs for hospitals are at least double those for physician offices and have brought sharply higher costs to payers over the past 2 years. These higher costs are associated with greater out-of-pocket costs for patients. The higher copays decrease therapeutic adherence, driving up the total cost of care, he said.

Payers have intensified the scrutiny of the value of cancer medications versus their incremental benefits, largely because the average cost for a branded cancer drug is now approximately $10,000 monthly. The additional value of targeted treatments for individual patients is difficult to judge, because of a high variability in patient response, frequent changes in protocol, and variability in patient care.

Newly launched treatments are typically associated with 2 to 6 months of incremental overall survival. In the European Union, the trend is toward lower list prices at the time of launch compared with US list pricing, and European markets have other discount mechanisms.

“The ironic thing is that most of these drugs are developed here, and they’re more expensive here than they are in other places,” Mr Long said. “It’s because the other places use a lot of different techniques to contain or evaluate these drugs.”

Biosimilars The impact of biosimilars and “nonoriginal” biologics is growing, as patent protection is expiring. In developed countries, however, the potential role of biosimilars will be limited by the expected introduction of patent-protected innovative drugs that will displace older, off-patent drugs. By 2020, biosimilars are expected to generate $6 billion to $12 billion in oncology sales globally.

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