Given the high cost of cancer care—where individual drug therapies can cost tens of thousands of dollars per month, and many treatment plans call for combinations of agents, radiation therapy and other treatment modalities—payers, physicians, pharma manufacturers and patients have a vested interest in exploring creative ways to improve health outcomes and survival rates while reducing costs. Today, these ambitious objectives are being sought through a variety of mechanisms including:
Increased use of clinical pathways, which rely on evidence-based algorithms to guide and standardize cancer care to the greatest extent possible, focusing attention on those therapeutic options that have the most compelling evidence related to efficacy, safety profile and cost
Increased use of oral oncology agents over traditional infusion-based therapies
Alternative business models for oncology practices, with a decline in the prevalence of independent, community-based practices in favor of larger, hospital-owned practices
Increased use of biomarkers and companion diagnostic tests, to better target which subpopulations of patients are most likely to derive benefit from costly and often narrowly effective therapies.
While each of these market trends offers the potential for promising clinical and financial advantages for some stakeholders, each also presents a host of interesting challenges.
Oncology—A unique sales channel
Unlike most other disease states or drug classes, the practice of oncology relies on the so-called buy-and-bill model. Rather than having the medications they prescribe flow through retail or specialty pharmacies, oncology practices typically purchase (out-of-pocket) the vast majority of the infusion-based or injectable therapies they will administer directly from drug wholesalers or group purchasing organizations (GPOs). They store the pre-purchased drug inventory onsite, dispensing directly to patients as needed, and seek reimbursement from private and government payers and from patient copays or co-insurance. While this model has advantages in terms of operational flexibility for practitioners, it also exposes them to considerable financial risk.
For Medicare patients, IV or injectable oncology drugs are typically reimbursed at Average Sales Price (ASP) +6% (with the margin designed to cover overhead costs in the prescriber’s practice and provide some profit margin). However, Medicare may soon reduce this reimbursement rate to ASP +4%.
According to one study, nearly 80% of oncology practice revenue comes from the buying and billing of drugs (Askin et al. Key Practice Indicators in Office-Based Oncology Practices: 2007 Report on 2006 Data, Journal of Oncology Practice Benchmarking Report: 2007, Vol. 5., Issue 8).
While the administration of IV chemotherapy was historically confined to hospital settings, a variety of factors—including improved delivery methodologies for infusion, improved supportive care, and the desire for more personalized, convenient, local options for oncology care—has led to the development of a robust national network of independent, community-based oncology practices.
Today, an estimated 80% of cancer care in the US is carried out in these community-based oncology settings, says Jane Quigley, RN, senior principal at IMS Health (Plymouth Meeting, PA). “We believe that community-based oncology care is the most efficient, cost-effective way to deliver oncology care, and numerous studies of community- vs. hospital-based oncology groups have shown significant cost differences (with lower costs in the community settings) with virtually no difference in clinical outcomes,” adds Grant Bogle, SVP at McKesson Specialty Health (The Woodlands, TX).
Source: Mckesson, based on 2012 Avalere Health study
Nonetheless, the pendulum swing has begun its reverse course in this arena, and in recent years, more than 700 community practices have merged with other sites of care or closed altogether, the result of shrinking margins from insurers and government, and the rising cost of new therapies.
“Independent oncology practices have a right to make a healthy ROI while meeting important objectives related to patient care and supporting the demanding clinical trial process, yet the current reimbursement strategies imperil this,” adds Barry Fortner, Ph.D., SVP at ION Solutions, a division of AmerisourceBergen Specialty Group. While the ability for independent oncology practices to run for cover by selling themselves to larger hospital-based oncology groups may offer one solution, Fortner says that the loss of independence among oncology practices is “a disturbing trend with troubling implications for drugmakers, providers and patients.” Industry observers agree it should be cause for significant alarm—and organized advocacy—among stakeholders throughout the oncology spectrum.
“The development of a robust system of independent community oncology over the last 20 years has been fundamental to the story of success in the war on cancer, and I don’t believe the pharma industry is being outspoken enough about the pressures this sector is experiencing, and legislators and policymakers must get involved,” he adds. “There is a new fragility to community oncology that should not be taken for granted, and pharma needs to work closely with payers and CMS to reexamine pricing strategies and go-to-market strategies to remove some of the financial disincentives now facing community oncologists.” Toward that end, ION Solutions is working with a physician-led initiative called Community Counts (www.ourcommunitycounts.org
) to educate about the quality and economic aspects of community-based oncology and advocate for its ongoing survival.
340B drug pricing—unintended consequences
While hospital-based systems are expanding their geographic reach with these newly acquired community oncology practices and growing the number of prescribing oncologists who are able to benefit from preferential 340B pricing policies, “insurance companies are not happy about this trend, because there is ample published evidence that shows that the cost of care in hospital-based oncology practices tends to be much higher than it is in community-based oncology settings,” says Michael Kolodziej, MD, FACP, national medical director for oncology solutions for Aetna (Hartford, CT).
“As reimbursement rates continue to fall, new direct-to-customer strategies may begin to break into the market,” states Denise Von Dohren, a VP at Omnicare Specialty Care Group (SCG; Cincinnati, OH). “This alternative channel would allow the drug makers to contract with healthcare providers and distribute the consigned inventory of an order-to-cash third-party logistics provider, essentially creating one point of sale,” she explains.
When it comes to more-favorable drug pricing, a growing number of hospital-based oncology practices are able to benefit from provisions of the 340B Drug Pricing Plan, which allows specified hospitals (and their affiliated oncology clinics) to purchase drugs at discounted prices, regardless of the patient’s private or government insurance reimbursement. This preferential-pricing policy typically pertains to hospitals with a high population of Medicare, Medicaid and uninsured patients, as these institutions are seen as safety-net providers in healthcare.
According to a recent New York Times article (“Dispute Develops over Discount Drug Program,” Feb. 12, 2013), the program now includes one-third of the nation’s hospitals and has tripled in number since 2005. More hospitals are expected to enter the 340B program under the Affordable Care Act, as more hospitals become eligible for inclusion due to an increasing number of Medicaid patients passing through.
The 340B discount is the average manufacturer price (AMP) reduced by a minimum rebate percentage of 23.1% for most branded drugs (but experience says the discounted rate can be 20–50%). The ability to buy drugs at this discount, but to charge private insurers and CMS a market price, has turned into an attractive revenue stream for hospital systems. And 340B pricing doesn’t just negatively impact independent oncologists. Pharma manufacturers, seeing an increasing proportion of their drug sales going through the 340B program, aren’t happy with the situation either. PhRMA, the Biotechnology Industry Organization, the National Community Pharmacists Assn. and the Pharmaceutical Care Management Assn., among others, issued a white paper* highlighting the lack of HHS oversight.
“Although participation in the 340B program is technically voluntary for drug manufacturers, opting out of the program results in discontinuation of the Medicaid reimbursement for all of the manufacturer’s drugs,” explains Meadow Green, a commercial planning analyst at Kantar Health (Horsham, PA), “so manufacturers have strong financial incentives to remain in the 340B program.”
“Hospitals don’t really have any incentive to change 340B, and the program is saving money for the government so they have no incentive to change it, so it’s really up to the pharma industry to take on the issue to fight the cause,” adds Wen Shi, practice director in brand management and pricing at Campbell Alliance (New York), the consulting arm of inVentiv Health. “No one else will be fighting to improve the situation and rein in 340B.”
The rise of oral oncology agents
With infusion-based chemotherapy having long dominated cancer care, the recent rise and ongoing success of newer oral oncology agents would seem to be a slam dunk for all stakeholders in the continuum of cancer care. For patients, the ability to receive a given cancer agent in pill form provides a more-convenient, less-painful, less-invasive treatment option. “This era of oral oncolytics is certainly making it a very exciting time in oncology, but these high-priced innovations also have implications for the sales channel,” says Bogle of McKesson Specialty Health.
Meanwhile, a host of factors may be hampering the market penetration of oral oncolytics today. For instance, as noted, IV and injectable therapies are typically purchased, maintained, dispensed and reimbursed through the buy-and-bill model, and are reimbursed through the patient’s medical benefit. By comparison, oral oncolytics are typically prescribed by the oncologist but are then dispensed directly to the patient through a specialty pharmacy, and are reimbursed through the patient’s pharmacy benefit. As a result, the choice to select an oral drug over a competing IV or injected option literally represents a loss of potential revenue for private oncology practices.
“The distribution channel selected by the manufacturer has an impact on the success of a new oncology product, and the trend in oral oncology is to require limited (or in some instances, exclusive) use of a specialty pharmacy network, in an effort to maximize adherence and data availability while reducing or eliminating waste,” says Kevin Cast, MS, VP of business development for UBC, an Express Scripts Co. (Blue Bell, PA).
Similarly, most of today’s premium-priced oral oncolytics (which often call for companion diagnostic testing) require prior authorization, which represents additional—unreimbursed—administrative burden for the community oncologist. “With these two drivers in place, many community oncologists have been less willing to prescribe oral oncolytics when a suitable IV option exists,” says Kolodziej of Aetna.
Fiscal considerations notwithstanding, from the standpoint of clinical advantage, Kantar Health’s survey data shows that “Oncologists are increasingly favorable about prescribing orals because these are more convenient for patients and because specialty pharmacies relieve the practice of reimbursement risk and carrying costs,” says Green of Kantar Health.
However, the use of oral oncolytics also raises important concerns among both practitioners and payers, because when these powerful cytotoxic agents are taken at home instead of administered in the practice setting, it is clearly harder to ensure patient adherence to the regimen, and it is also harder to monitor and manage side effects that can not only hamper adherence but could lead to acute, costly interventions, such as emergency room visits and hospitalizations.
Another issue with the use of oral oncolytics is that they often incur a delay in the start of treatment, because of the time and effort required to manage the prior authorization requirements
and specialty pharmacy set-up, review and manage copay issues, and investigate PAP or charitable foundation support if needed.
To address this issue, Omnicare has been working with a variety of drugmakers to develop so-called Quick Start Trial Programs. These programs allow the drug maker to set up a trial drug shipment to get the patient started on therapy while all of these logistical and administrative issues associated with the specialty pharmacy prescription are being worked out, says Von Dohren of Omnicare SCG. She also notes that a growing number of oncology practices are implementing dispensing specialty pharmacies onsite. “When this happens, the practice retains control of dispensing oral oncolytics that would otherwise flow through outside specialty pharmacies. This added ‘control’ can assist with speed to therapy, as long as other access concerns can be addressed by the practice pharmacy.”
The promise of clinical pathways
Clinical pathways are published by independent, third-party organizations and aim to standardize cancer care across the spectrum of care settings and disease states. While competing clinical pathways exist from a variety of parties, without exception they all guarantee close adherence to the frequently updated Clinical Practice Guidelines in Oncology and Compendia from the National Comprehensive Cancer Network, a nonprofit set up by a group of leading cancer centers (NCCN; Fort Washington, PA). “The NCCN Guidelines provide comprehensive information, but they are too broad and don’t necessarily have an eye toward winnowing down the choices for oncologists,” says Kathy Lokay, CEO of Via Oncology, a D3 Oncology Solutions Co. (Pittsburgh, PA). “The idea behind specific clinical pathways is to come up with a more selective number of treatment options and scenarios, based on the latest clinical evidence, that can be demonstrated to drive consistent, standardized care and reduce costs, and will be appropriate for at least 80% of the patients in that disease class.”
“There are lots of examples in oncology where numerous treatment options for a given malignancy can provide similar clinical benefits, and when that’s the case, then the ability to take a close look at competing toxicity issues and costs can become the key decision point for the prescriber,” says Kolodziej of Aetna.
The US Oncology Network (supported by McKesson Specialty Health) has published papers that demonstrate that when patients are treated according to pathways, their mortality and survival are identical (compared to off-pathways treatment protocols), but costs fall, says McKesson Specialty Health’s Bogle. “Surprisingly, it’s not always just about reducing drug expenses—but more importantly, we consistently see reduced hospital and emergency room visits resulting from the use of well-defined clinical pathways.”
To make the decision-tree-type of information in the pathways most useful for physicians, developers have been working hard to develop decision-support tools that bring this rich information to the oncologist at the point of care. Different pathways developers have explored different options for doing this, ranging from offering Web-based capabilities and/or continuously updated software, and today, many pathways vendors are working to integrate their offerings with one or more EHR and practice management system (PMS) from competing vendors (either by becoming embedded within these systems or offering a bolt-on interface).
“It is important for these pathways to be useful at point of care, easily accessible in the doctor’s workflow, and importantly to have a mechanism that can document care plans that deviate from pathways and capture the outcomes for analysis,” says Guru Muralimohan, Ph.D., engagement manager, Corporate Development Center of Excellence, Campbell Alliance.
With such integration, clinical pathways software can automatically access relevant clinical data from the EHR or PMS to prepopulate some of the pathway’s decision-tree logic for that patient, and can report outcomes data back into the EHR and PMS. This supports ongoing efforts to analyze outcomes, and especially differences in outcomes among patient cohorts that are treated “on pathway” and those that are treated “off pathway.” Such results can also be analyzed and reported by patient category, by physician, by site, by disease type, and so forth.
“Traditional clinical research data, due to stringent regulatory requirements and other factors, does not always mirror real-world experience, as ‘real-world’ patients are often sicker, less motivated, have less psychosocial and financial support, and often have a higher mean age and more-extensive prior therapy,” says Bruce Feinberg, DO, chief medical officer, oncology, for Cardinal Health Specialty Solutions (Dublin, OH). “Understanding how medications impact tolerance and outcomes among a broader, real-world patient population, by using real claims data—the kind that is now available, thanks to clinical pathways and decision-support tools—can be very helpful to drug makers and physicians alike, and can usher in a new era of active pharma-payer engagement.”
“The ability to develop valuable, robust post-marketing data can be used not just to improve the quality of care and track adverse events, but also to support and accelerate new drug development,” adds Harish Dave, a manager at Quintiles.
For some oncologists, the jury is still out as to whether strict adherence to one set of clinical pathways or another will truly produce improved clinical outcomes and/or reduced overall treatment costs. “The promise of savings from clinical pathways may be somewhat exaggerated in the marketplace,” says Fortner of ION Solutions.
And many oncologists resent the loss of clinical decisionmaking and prescribing autonomy that results when strict adherence to one set of pathways or another is mandated by a hospital system or payers. Some critics charge that pathways are too driven by cost efficiencies. “Recent pathways requirements add an additional level of administrative, clinical and operational complexity and burden for any oncology practice—especially when you consider the many different payers,” says Von Dohren of Omnicare SCG.
“The use of pathways is likely to continue to grow in the future as more payers add pathway programs and existing ones expand to more covered lives and tumor types,” says Green of Kantar Health. Kantar Health’s 2012 survey of managed care organizations showed that 24% of payers currently had a pathway program in place, with an additional 45% considering implementing a program in the next three years. Importantly, “Respondents expected to incorporate financial and clinical outcomes data back into the pathway itself and to use this data as negotiating leverage with both providers and manufacturers.”
Today, the field has grown crowded, with more than a half dozen companies—including The US Oncology Network’s Level I Pathways, Via Oncology, Eviti, New Century Health, Cardinal Health Specialty Solutions/P4, ICORE and AmerisourceBergen/ION Solutions—publishing competing clinical pathways. Some industry observers feel that with so much parallel effort, some consolidation will be inevitable.
While all pathways remain consistent with the NCCN guidelines and the NCCN compendia, each has tried to differentiate itself in some way to gain market share. For instance, some are more restrictive or conservative than others while others purport to produce better overall cost savings or financial benefit. Others claim improved analytical or reporting capabilities.
In the early days, pathways were mainly focused on treatment protocols around medical oncology, but today, additional pathways have been developed to cover a variety of important issues in the whole continuum of care, including diagnosis and workup, radiation therapy, ongoing surveillance, and even palliative care and end-of-life support.
“Aetna currently has several pilot studies underway with different pathways vendors, to see if it can be determined that one is better than another,” says Kolodziej. “Intuitively, we knew that the use of pathways would reduce costs by driving drug savings, but a really interesting development we’ve seen through a couple of our pilots is that with better adherence to clinical pathways, oncologists are specifically able to reduce costs associated with hospitalizations and emergency room visits.” With more standardized care, medical staff gets better at dealing with toxicities, which allows for better care, improved adherence and fewer acute interventions, he says.
In a related development, Epocrates (Ewing, NJ), a leading provider of medical and clinical content for physicians that was acquired by EHR developer athenahealth (Watertown, MA) in March has partnered with NCCN to take the NCCN’s guidelines, protocols and decision trees into a mobile app, so that doctors can access the information more quickly and easily on a user-friendly interface that was created specifically for Apple iOS devices, “so that users can access guidelines with the tap of a finger,” says Heather Gervais, SVP of commercial operations for Epocrates.
“We’ve been working to translate the useful-yet-cumbersome NCCN guidelines for prostate and breast cancer (available now), and non-Hodgkins lymphoma, colon cancer and non-small-cell lung cancer (under development), and to leverage our mobile expertise to break the guidelines down into small, logical bites of information and decision trees that are useful at the point of care,” she says. “And since we already have a critical mass of physicians accessing Epocrates data regularly, we are a natural distribution channel for the NCCN to take its information and put it into a mobile version.”
McKesson Specialty Health and the US Oncology Network also have formed a strategic alliance with NCCN to translate its broad guidelines into more useful, actionable information.
Similar to the P&T committees that convene regularly to develop formularies for private and government payers, independent vendors developing competing clinical pathways also maintain independent clinical pharmacy committees—usually specific to different types of cancers—which meet regularly to evaluate the latest evidence and update the pathways’ clinical content. Drug manufacturers would certainly like to be at that table, but “Industry has no opportunity to directly influence the P&T teams that create, monitor and update the individual pathways, and our committee members cannot accept unpublished materials,” says Lokay of Via Oncology. “To secure physician buy-in, it is essential that the pathway process is unbiased, so manufacturers may only be able to influence pathway creation indirectly,” adds Green of Kantar Health.
Drug companies—which typically have the deepest knowledge about their own products—should seek appropriate ways to showcase their evidence, and to submit it to the pathways committees for consideration, says Bogle of McKesson Specialty Health, noting that most compelling are published, peer-reviewed clinical and pharmacoeconomic data, outcomes-related data in real world settings, patient-reported outcomes, and comparative effectiveness studies that compare competing agents.
“Currently, the available medical knowledge base is inconsistent with respect to how much real world data exists to support the relative effectiveness of different treatment strategies in patients with different characteristics,” says Chris Pashos, Ph.D., a VP at UBC, an Express Scripts Company. “Fortunately, pharmaceutical companies have recognized the need to better understand real-world treatments and outcomes outside of the randomized clinical trial setting, and have begun supporting prospective observational studies to meet that need.”