ASCO Postscript: In Oncology, Cost is in the Hot Seat

This past ASCO meeting may have held few surprises on clinical data, but it certainly brought cost pressures to the forefront of oncology. The message: cost now matters in oncology treatment, just as it does in the rest of the pharma industry.

Oncology is still one of the least managed areas of specialty pharma and still not a top priority for cutting at most commercial payers, according to a survey presented recently at a managed care conference by Debbie Stern, a VP at the consulting firm Rxperts. Those payers are more concerned about rheumatoid arthritis, human growth hormone deficiencies, psoriasis and respiratory syncytial virus.

But payers are looking at spending trends and oncology pipelines ... and they’re scared. Oncology’s growth outstrips biotech’s overall and the pharma industry’s by a wide margin – Sales to pharma customers (hospitals, doctors, pharmacies) are growing at 8.6% this year, compared to 2.8% for biotech and flat-to-slightly-down for pharma overall, according to IMS Health. Lots of expensive new oncology drugs keep patients alive longer (if only a few months longer) and offer them a better quality of life.

As a result, the knives are getting sharpened. It’s been a slow process, mostly to-date led by the federal government, which beginning in 2004 clamped down on the amount it reimburses doctors for administering drugs in their offices. Commercial plans are following hesitantly, but they’re getting tougher, both on doctors and patients.

The upshot: doctors are getting less money for providing services to patients and therefore not able to forgive bad debt or lower bills for low-income patients. As for consumers, payers are hitting them with higher cost sharing, even as drug prices rise overall.

So how are manufacturers responding? Chiefly, by making sure patients can get the high-priced drugs, even if reimbursement is unwieldy. To help the process, they’re expanding programs that help patients cover the cost of the most expensive treatments, and also providing advice and guidance for physicians beleaguered by ever-changing reimbursement policies. The latter’s important because oncologists pay up front for drugs they administer in their offices, and then get paid by insurers for the cost of the drugs and their services. Supporting doctors is also important as oncologists talk more about cost with patients, as discussed in this Pink Sheet story.

What about price cuts? Isn't that what patients and doctors really want? Not happening, at least in the US and at least so far. If companies are spending lots of money to expand their patient access programs – reliable stats don’t exist, but consultants say the trend is growing—why don’t they de-emphasize those programs and just cut prices?

Because no matter how much they cost, patient access programs are more attractive than simply lowering prices on many drugs because even if the price of a $100K drug was slashed in half, patients still couldn’t afford it, points out Richard Ford, director of reimbursement consulting at AccessMed, a division of US Oncology, which runs patient access programs for pharma manufacturers. In other words, pharma gets more revenues from charging $100K then helping patients cover their 20% out of pocket expenses, he explains.

As for payer angst—pharma is addressing payers’ concerns by expanding its managed markets groups, which call on payers and try to negotiate the tricky waters linking providers, payers, and manufacturers. Pharma’s also paying more attention to getting its drugs listed on compendia, which helps gain payer support, particularly for off-label uses.

In the US, at least, however, pharma has yet to offer the creative kinds of risk- and cost-sharing options that it is engaged in the UK, i.e. along the lines of Merck-Serono’s tough new deal with the UK’s National Institute of Clinical Excellence for its cancer treatment Erbitux (cetuximab). Granted, the Merck-Serono deal (written up here in The Pink Sheet DAILY) takes some getting used to, and the company’s back was against the wall – the reimbursement agency had already issued negative opinions twice on Erbitux.

The industry, however, doesn’t seem to be particularly proactive in taking some other, potentially less drastic, steps US payers say they want, according to the Rxperts survey: namely, higher-quality data on survival benefits and outcomes—and preferably including information on cost effectiveness.

If industry doesn’t step up with something along those lines, it should be prepared to hear more from payers.--Wendy Diller

image by flickrer josefsilver.com used under a creative commons license