Manufacturers looking at any market for a therapy, branded or generic, are dealing with a more complex interplay of market demand, reimbursement and regulatory compliance. The oncology market takes that complexity up exponentially, and not just because it’s a highly valued market seeing many new therapies being introduced and in the pipeline.
The good news—which should not be overlooked no matter what the commercial difficulties are—is that cancer patients are surviving longer, and new therapies entering the market hold renewed promise. The number of cancer survivors has increased from 9.8 to 11.7 million between 2001 and 2007, according to data just published by the Centers for Disease Control; “more effective treatment” is one of the factors mentioned. (Conversely, around 600,000 people die annually from cancer in the US.) The “war on cancer” has been going on for nearly a half-century, and now with renewed vigor. The American Soc. of Clinical Oncology (ASCO) renamed its research foundation as the Conquering Cancer Foundation in February, partly as a way of “telling others—and reminding ourselves—what we are all about,” said Dr. George Sledge, ASCO president. “We aren’t trying to negotiate with this disease. We are out to beat it.”
Growth in new instances of major cancer types have slowed, but an aging population will keep the rate of incidence up. The current growth rate is 6-7% in the US, about a percentage point above the rate of growth for all pharmaceuticals, according to IMS Health (Fig 1.). The top 10 products account for 63% of this market. Meanwhile, PhRMA reported in 2009 that there were 861 cancer drugs in development, one of the largest categories of all types of drugs in development.
The commercial challenge to oncology is that few products have high rates of success, leaving oncologists to continually refine their approaches in hopes of raising that rate. At the same time, oncology products are among the most expensive available, especially the newer biologics, leading to intense pressure from insurers and the federal government to control costs, and to question alternative or off-label therapies from established guidelines. Another complexity—unusual but not unique to oncology—is that many of the drugs are purchased directly by physicians, at least those in community practices.
“Many people have spoken about the end of the ‘buy and bill’ model for community oncologists, especially after reimbursement changes by Medicare in 2005, but our annual surveys indicate that the decline is relatively small—from 88.3% in 2003 to 86.7% in 2010,” says Coline David, a member of the Market Accesss team of Kantar Health (New York). What has happened, though, is that drug reimbursements have shifted from an AWP- basis (average wholesale price, minus a fractional reduction), to ASP+ (average sales price, plus an administration reimbursement), generally bringing down reimbursement across the board. That, in turn, has generated a groundswell of activity by manufacturers and benefit administrators to make up shortfalls in reimbursement, both for commercial insurance plans and for public plans.
Dominance of the oncology networks
Over the past decade, a new force has entered the oncology market: the companies that manage oncology practice networks. No surprise, they are dominated by the major wholesalers, with AmerisourceBergen having the lion’s share (generally measured at 55%), McKesson at No. 2 with around 25% and Cardinal coming in third with a substantially lesser percentage. McKesson upped its participation in one fell swoop by acquiring US Oncology last fall; that company was the leading practice network apart from the Big Three wholesalers.
The repercussions of the US Oncology acquisition are yet to be felt. “Since the acquisition closed at the end of December, we have been carefully evaluating our respective capabilities to determine the best way to harness our collective strengths and enable our customers’ success. We are now working through our go-to-market strategy, and will be able to share more details over the coming months,” Grant Bogle, member of the executive committee of McKesson-US Oncology, tells Pharmaceutical Commerce.
“This is a good news/bad news development for manufacturers,” says Jennifer Dolan, another member of Kantar Health’s Market Access team. “On the one hand, consolidation among distributors increases their leverage in negotiations with manufacturers. On the other, the acquisition will bring a combined set of tools from both McKesson and US Oncology to a larger base of practices, and that will lead to a richer dataset for manufacturers, potentially greater market share opportunities for drugs, and more efficiencies in drug distribution.”
Meanwhile, Cardinal Health (which, in no small irony, sold a business that became a key part of McKesson’s oncology network several years ago), recently reorganized its entire specialty distribution division, which includes its oncology network. It acquired P4 Healthcare in mid-2010, which continues as a practice-management network and service provider to payers and physicians, while maintaining its specialty pharmaceutical distribution business, and OncoSource, a specialty pharmacy expressly for oncology prescribers and patients. The company is also introducing a specialty GPO, VitalSource, to the oncology market.
“It’s all about the patient,” says Meg Fitzgerald, president of Cardinal Health Specialty Solutions. “Our entire team is focused on working with physicians, payors and pharma companies to make sure that patients get the best, most effective care.”
AmerisourceBergen, which appears to be first to the field with a coordinated practice management and drug-distribution management business, sees its role as being a facilitator between payers and providers. “We want to provide rock-solid partnering to the oncology practices to enable them to be successful,” says Gina Clark, chief marketing officer of AmerisourceBergen Corp. “We work very hard to maintain long-term relationships with providers, and manufacturers value us for those relationships.” AmerisourceBergen brings ION, the oncology part of its specialty distribution business, as well as consulting practices for manufacturers (Lash Group and Xcenda).
Hospitals or integrated delivery networks are the other major part of the oncology field besides community practices. Possibly the most prestigious is the National Cancer Care Network (NCCN), a loose grouping of 21 of the leading oncology hospitals in the country. Collectively, says NCCN, they treat 160,000 new patients annually.
From a manufacturer perspective, the specialty distribution businesses of the Big Three (plus smaller specialty distributors focused on oncology) are the primary means of getting their drugs to market. And, although the focus of the practice networks is mostly on the individual practices, they all provide services to manufacturers.
“It’s hard to see price competition among the distributors as they negotiate with manufacturers, but there’s no doubt that organizations that can move market share get rewarded by manufacturers through discounts, rebates or their service relationships with the manufacturers,” says Jen Dolan, another member of Kantar Health’s Market Access team. “The main activity, though, is the ability of the practice networks to gather data on prescribing practices and outcomes, so that manufacturers have a picture of what’s going on in the marketplace.”
The variability of cancer care and the relative lack of highly effective treatments have focused healthcare providers on preferred or recommended treatment regimens, so-called “clinical pathways,” for a long time. More recently, the growing recognition of genomic factors in cancer outcomes are making a variety of genetic tests a recommended—or mandatory—part of cancer care; these, in turn, dictate various treatment alternatives. Without diminishing the importance of pathways to a patient’s outcome, pathways have now become a type of cost- and quality control exerted by payers, at least for first-line therapies.
Organizations like NCCN have developed pathways that are used within and without the network. For-profit companies, including the major distributors, have their own pathways programs, as do some PBMs, some individual hospitals, and a few companies that develop pathways as a marketable information product (sold mostly to payers).
ABSG, McKesson-US Oncology and Cardinal have pathways programs as part of their advisory services to practices. All are emphatic that manufacturers have no place at the table when pathways are discussed. “The biggest thing manufacturers can do pertaining to the development of pathways is to be a rich conduits of scientific/clinical data on their products, and to be cooperative with the pathway development committees, which value timely and complete clinical information,” says Kantar’s Dolan.
US Oncology has operated a pathways program called Level I Pathways for a number of years; it stands on a comprehensive electronic health records (EHR) system called iKnowMed in which oncologists in the network participate. US Oncology says that the system resulted in “35% lower costs with equivalent clinical outcomes” for non-small cell lung cancer, in a study published jointly with insurer Aetna, in the peer-reviewed Journal of Oncology Practice.
“Pathways can serve as a starting point in demonstrating quality and creating a reimbursement system that ensures patients receive appropriate, scientifically proven care while addressing escalating healthcare costs,” says Kimberly Bergstrom, chief clinical officer, McKesson-US Oncology.
“Physicians participating on the steering committee are required to declare any relationships with pharmaceutical companies and are prevented from voting on decisions that involve their relationship,” says Cardinal’s Fitzgerald. The steering committees are set up for each payer in the network. “Only when efficacy and toxicity are equivalent is cost a factor in pathways selection,” she says.
AmerisourceBergen’s Clark says that its Xcenda unit was invited to help coordinate payer-provider discussions over pathways in a program that began in 2007, called the National Oncology Working Group Initiative; besides evaluating pathway programs, the group also examined related care issues of cancer patients, such as nutrition and pain management. “Industry observers have expressed doubts about how willingly oncologist will follow payers’ clinical pathways,” she says. “What we’re finding is that there’s a middle ground between provider and payer perspectives, and forums like the National Oncology Working Group help create meaningful discussion on how providers and payers can work together to compassionately balance the cost and quality of care.”
IntrinsiQ (Burlington, MA) is a market-research firm that uses a similar process of collecting clinical and outcomes data as the practice networks, but for a different purpose: analyzing market share and treatment trends in oncology. It has a network of 750 oncologists who provide access to de-identified patient data, and thereby gain access to treatment trends that IntrinsiQ identifies.
“My view of pathways has evolved and is somewhat counter to much of the current discussion. Most physicians already treat inside of clinical guidelines and pathways in early lines of therapy,” says Jeff Forringer, president. “I worry that the pathway programs are an overly complex means of creating a prior authorization program for a few expensive drugs. It is in later lines of therapy where doctors are more likely to treat outside of guidelines. In this case situation the choice is between treating and not treating. If pathway programs are to be adhered to in later lines of therapy a viable end-of-life program needs to be made available as an alternative to treating patients that are outside of the pathway’s parameters.”
Oncologists themselves recognize that there are wide variations in treatment for most cancers, depending on the region of the country and the type of care setting. Analyzing these variations themselves is a topic of research among oncologists.
Reimbursement and market access
The high cost of cancer care, combined with the cost-limiting pressures exerted by payers and Medicare/Medicaid (60% of cancer patients, who tend to be older than the average population, are on Medicare), is generating dramatic growth in funding mechanisms for patient treatment. Payers have already been raising co-pays, or requiring the purchase of additional co-insurance, for years, and not just for cancer, but the costs for oncologics, which can reach $100,000 per year or more, top out most benefit budgets.
For the community oncologists, working out how they patients can afford treatment becomes a necessary part of their service. The practice management networks have extensive advisory services for the benefits manager or office manager at an oncology practice, with access to patient assistance programs (PAPs; see Pharmaceutical Commerce, Jan/Feb, p. 1). Everyone, meanwhile, is watching how the politics of healthcare reform play out in the aftermath of the passage of Obamacare in 2009.
For manufacturers, who routinely put 1-5% of their annual sales into various types of PAPs, the questions are how to get the best results for their company, while at the same time providing needed assistance to patients. Reimbursement practices can also have an effect on the course of treatment.
“The typical picture is, a patient sees an oncologist, and after the conditions are worked up and a therapy is proposed, the patient goes to the benefit counselor to figure out how to pay for it. Depending on personal finances and eligibility, the patient may simply say, ‘I can’t afford this,’ in which case the patient goes back to the oncologist and a treatment change can occur,” says Kantar Health’s Coline David. A Kantar Health annual study on oncology market access shows that while 31% of recipients of PAPs are uninsured (which might be expected), as many as 27% of PAP recipients have commercial insurance—“this has really grown in the past five years,” she says.
There are other complexities to the patient-assistance puzzle. Oncology practices generally look on benefits counseling as an administrative burden they’d rather shed, and so the practice management networks assist in providing these services. But the individual oncologist also recognizes that if a patient can’t afford treatment, the practice loses that patient to the hospital, and so benefits management becomes a factor in the overall business development of the practice.
Another complexity, says David, is that while manufacturers can offer financial assistance (e.g. co-pay cards) to help manage that part of the bill, such financial assistance is not legal for federally funded treatment. “From a manufacturer perspective, there’s a desire to level the playing field for patients regardless of how their insurance operates, but that’s considerably more complicated for Medicare patients,” she says. One alternative is for manufacturers to fund a cancer-care foundation, but the rules there generally preclude the funders from being involved in reimbursement decisions, “So a manufacturer’s contribution may wind up funding treatment by a competitor’s product,” she says.
Most sources interviewed by Pharmaceutical Commerce indicate that, while there are a variety of strategies to apply in the current oncology market, the overall system is not sustainable, given the aging population, the increased incidence of cancer, and the many (likely to be expensive) drugs in the pipeline. Accountable care organizations, which put a cap on the cost of individuals’ treatment without specifying how treatment should be conducted, are one potential alternative. But it’s looking as if the complexity of funding cancer care is about to become as daunting as the complexity of the science of researching cancer.
“The biggest thing manufacturers can do pertaining to the development of pathways is to be rich conduits of scientific/clinical data on their products, and to be cooperative pathway development committees," says Kantar's Dolan. "Clinical information is valued by these healthcare providers.” PC