Journal of the National Cancer Institute Advance Access originally published online on June 12, 2007
JNCI Journal of the National Cancer Institute 2007 99(12):910-914; doi:10.1093/jnci/djm031
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© Oxford University Press 2007.
NEWS |
Sticker Shock Sharpens Focus on Biologics
Never mind their novel targets and mechanisms. It's the cost of new biologic agents that's creating a buzz these days. At thousands of dollars a month, which can mean many tens of thousands for some regimens, sticker shock has generated recent, prominent articles in both the national and trade press.
At the same time, debate is intensifying over what such costs mean for society and what—if anything—should be done about them. Drug companies, private insurers, and government are all talking about—and often beginning to do something about—costs. Each is approaching the issue from its own perspective.
On one level, the argument is about macroeconomics. Neal Meropol, M.D., of Fox Chase Cancer Center in Philadelphia, pointed out that cancer drugs account for 40% of all Medicare drug expenditures. That makes them a major contributor to the country's high health care costs, now about 17% of our gross domestic product (GDP) and growing. That percentage is much higher than in other developed countries with higher life expectancies, he said at a forum on cancer care costs at the American Association of Cancer Research annual meeting.
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High health costs have also been blamed for sending negative ripples throughout the economy. They make U.S. businesses less competitive on the global stage, raise insurance costs, expand the ranks of the uninsured and underinsured, and exacerbate racial and ethnic health disparities, said Deborah Schrag, M.D., of Memorial Sloan-Kettering Cancer Center in New York, at the same AACR forum.
On the other side of the macroeconomic debate, experts point out that the U.S. has a high GDP to begin with and so can afford to spend more on health. And cancer biologics, though among the most costly drugs, are still only a tiny fraction of total GDP, said Genentech's Susan Desmond-Hellmann, president for product development, at AACR.
Hellmann and others argue that with these drugs’ potential to alleviate the huge societal burden of cancer, biologics are worth the cost. The fact is that "good health care costs money," said Peter Juhn, M.D., of Johnson & Johnson, who took part in a panel on drug costs at the annual meeting of the National Comprehensive Cancer Network (NCCN) in March.
But on a more microlevel, the day-to-day realities of cancer care in various sectors are driving new tactics to contain, or at least address, costs.
Industry Programs
The industry has responded to concerns about costs by putting more resources into patient assistance programs. When Genentech received U.S. Food and Drug Administration approval for bevacizumab in lung cancer last October, it also announced a cap on expenditures for the drug for patients with family incomes less than $100,000 a year. In 2005, the median household income was $46,326.
Originally announced as $55,000, the cap actually doesn't kick in until after a patient has received 10,000 mg. At the wholesale acquisition cost, 10,000 mg is about $55,000, said Genentech spokesperson Edward Lang.
Genentech has also announced that it will provide assistance to Medicare patients prescribed erlotinib for non–small-cell lung cancer. In addition the company is increasing patient assistance and donations to groups, such as the Patient Advocate Foundation, that help with copays. In 2006, Genentech gave $70 million to these public charities, according to Hellmann.
Amgen likewise has established a cap for its drug panitumumab for colon cancer patients with adjusted gross incomes of $75,000 or less. When patients’ copays reach 5% of their adjusted gross income, the patients are eligible to receive panitumumab free under this program.
What the companies have not done so far is reduce prices. The reason, industry representatives say, is the need to recoup massive research and development costs, including high manufacturing costs for biologics. These costs have long kept biotech companies from making much of a profit overall, Hellmann said. She noted that profit levels of publicly held biotech firms have "hovered close to zero" throughout the life of the industry. In setting prices, the industry also considers the market, Juhn said. Companies look at the cost of rival drugs and how their new drug compares, as well as how many patients may benefit from the new drug, he said.
If there is any factor that puts downward pressure on drug pricing, it may be sticker shock itself. "If prices are too high, patients and policy makers get mad," said Sean Tunis, M.D., director of the Center for Medical Technology Policy in San Francisco and a former Center for Medicare and Medicaid Services executive who focused on standards and quality of care. "Then policy makers will want to regulate prices, and investors will get nervous."
One sign of this restiveness is proposed legislation, introduced in February by Henry Waxman (D-Calif.) and others, that would allow the FDA to establish a process to review and approve generic versions of biologics. Currently the agency has no regulatory framework for generic biologics, which require complex manufacturing techniques different from those used for conventional chemotherapy drugs.
So far, though, the biotech companies seem undaunted by such pressures. In fact, some observers have suggested that current cost containment efforts may be having the opposite effect. "They seem to realize that the buffet is about to close, and so they are loading up their plates," said Peter B. Bach, M.D., of Memorial Sloan-Kettering Cancer Center, a former senior adviser on health care quality and cancer policy at the Center for Medicare and Medicaid Services.
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Insurers Concerned
The high cost of biologics is also driving change in the insurance industry. Higher premiums and copays are one response, including the use of coinsurance, where patients pay a percentage of a drug's cost rather than a flat copay.
Another trend is the growing use of specialty pharmacies, often in association with disease management programs. Specialty pharmacies provide medications not readily available at conventional pharmacies, including some special oral drugs, self-injectable drugs, and medications delivered at doctor's offices. About 50% of all spending on specialty drugs is for cancer care and adjunct treatments. These pharmacies can buy in bulk, and some large insurers, such as Aetna, have recently created their own specialty pharmacies to help contain costs.
The disease management program at Aetna, established along with the specialty pharmacy in 2005, provides patient training and assessment, injection training and support, compliance and adverse-effects monitoring, and communication with physicians about the patients’ status all aimed at increasing quality of care and reducing costs, according to the company. This year CIGNA launched a similar oncology management program in conjunction with its own specialty pharmacy.
Another cost-containment trend in the insurance sector is the increasing number of self-insured employers. Once identified with Fortune 500 companies, self-insurance is now available to companies with just a few hundred employees, and unlike fully insured health plans, self-insured employers are not subject to state mandates or regulations on coverage or minimum reimbursement. They can simply not cover expensive therapies (as national insurance plans in Great Britain and Canada have done) or shift to high levels of coinsurance for these drugs. Among many self-insured companies, there is a trend in the direction of these "blunt instrument cuts," according to Schumarry Chao, M.D., a consultant and adjunct professor of pharmacoeconomics at the University of Southern California in Los Angeles.
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Value-Based Coverage
While these tactics may have an immediate effect on costs, both private and public payers are also talking about longer-term strategies that would link payments to evidence of value or quality of care.
Some experts say that the quality-of-care movement—also known as value-based purchasing or pay for performance—is the real key to cost containment. "It is about measuring quality and efficiency and linking that to payment," Bach said, and it could have a major effect on costs. "I am confident that under a value-based system, we would find there is a lot of money lying around."
Under the current system, physicians have financial incentives to do more tests and deliver more treatment, and this results in excess spending in the range of 30%–40%, Bach said. For example, he said, there is "a strong suspicion" that physicians do more testing for disease recurrence and deliver more cycles of chemotherapy and radiation than are supported by the evidence and guidelines.
Closely linked to the focus on value is interest in using standards or guidelines to measure value. Medicare has recently completed a demonstration project in which it gathered data on oncologists’ use of the guidelines issued by the National Comprehensive Cancer Network and the American Society of Clinical Oncology. The agency is now evaluating the results. It has not said how the data will be used, "but there are lots of signals," Bach said. "There are likely to be more quality measures," (see J Natl Cancer Inst 2007;99:346–7).
Private insurance companies also are interested in greater use of health care guidelines. UnitedHealth Group, one of the largest, is gathering data on whether physicians are adhering to guidelines in their use of specific drugs, said Lee Newcomer, M.D., senior vice president for oncology. In one study, the company found that 12% of breast cancer patients on trastuzumab either did not overexpress Her2/neu, trastuzumab's target, or had not been tested for the protein. The company now requires that claims for the drug include the patient's Her2/neu status. As a result, its use has declined by 15% since May 2006, Newcomer said.
In another study, UnitedHealth found that 30% of patients receiving the antianemia agents epoetin alfa and darbepoetin alfa were not anemic—their hematocrit levels were 37 or above (equivalent to a hemoglobin of about 12 g/dL and above). The company has now begun requiring information on hematocut levels before approving payments for the agents. Anticipated savings are $35 million, Newcomer said. And because these erythropoiesis-stimulating agents are the single largest budget item for health insurance companies and Medicare, the potential savings for the health care system as a whole could be substantial, he said.
In another step toward value-based purchasing, UnitedHealth is now in discussions about using NCCN's Drugs and Biologics Compendium, which is based on expert clinical guidelines, as its standard for covering off-label uses of agents. In addition, the company is starting to collect more data on cancer treatments and how they compare to the NCCN guidelines, following the example of the Medicare demonstration project.
UnitedHealth is also examining whether doctors are using the most cost-efficient treatments—drugs that cost less but have identical outcomes to more expensive drugs. How the information will be used is still being discussed, Newcomer said, but in general "my approach is to begin profiling so we can show groups the difference between what they are using and what the evidence is. We will also probably add incentives to promote efficiency and value, such as paying more for the initial consultation."
In the Trenches
How individual patients and oncologists are responding to high drug costs is still mostly a matter of anecdote. In the clinic, where cost might be considered an immediate issue, it can actually be rather abstract, both physicians and patients said. One reason is that insurance, even with high copays, helps blunt the sticker shock. Another is the fear that comes with a life-threatening disease.
"Speaking from the trenches, when people are in a fight for their lives, cost goes out the window," Schrag said.
Patient advocates agree. "A lot of patients are afraid that if they bring up the topic of cost, they won't be offered the latest and greatest treatment," said Mary Lou Smith, a longtime breast cancer advocate who is cofounder of the Research Advocacy Network. "They tend to say they’ll worry about that later."
A study at Fox Chase confirms these observations. "The stakeholder group of patients may rationally value things differently from us healthy doctors and policy makers in making their treatment choice," Meropol said.
Another impediment to addressing cost issues at the clinical level is reluctance by physicians. In a recent survey, nearly a third of oncologists reported discomfort in talking about costs, while 20% said they did not consider doing so to be their role. "Many physicians say that they are there to do the best job for the individual patient and they are not health policy persons," said Schrag, who led the study.
Despite these impediments, policy experts hope that more information on the value of specific treatments will ultimately promote more informed patients and doctors—and more cost-efficient decisions. "It would create tremendously difficult conversations, but then the information would be on the table," Bach argued, and individuals could make informed decisions earlier. For instance, when they sign up for insurance, they could opt for a policy that covers highly expensive drugs or drugs up to a certain amount.
One issue for the individual patient is uncertainty about where they will fall on the range of possible outcomes, Smith said. Benefit from a drug evaluated in a clinical trial is usually reported as a median, and an individual patient could do much better or much worse. "With a life-threatening disease, the small chance of a big benefit is very attractive," Smith said.
Despite their different perspectives, the various sectors of the cancer community seem to share a growing sense of urgency about costs. "There will have to be changes," Bach said, but "it's not going to happen just because there is a lot of hand wringing, which is where we have been over the last few years."
Newcomer agreed. "If we don't make changes, people will drop out or there will be adjustments, like unlimited coinsurance ... and what we will have is an increasingly smaller group of people getting very expensive care whether they need it or not."
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