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Evidence-Based Oncology December 2015
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Managing Costs and Enhancing the Value of Oncology Care
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Managing Costs and Enhancing the Value of Oncology Care

Surya Singh, MD; Christine Sawicki, RPh, MBA; Ken Vander Pyl; Alan Lotvin, MD
Management of high and rising costs in oncology requires a multifaceted approach using both innovative strategies and pragmatic tools. In this article, we discuss several factors that influence the costs of oncology care.
Management of high and rising costs in oncology requires a multifaceted approach using both innovative strat­egies and pragmatic tools. Increased spend is often attributed by plan spon­sors to factors including the growing number of novel oncology therapies and expanded indications for previ­ously approved therapies. In this ar­ticle, we discuss these and several ad­ditional factors also influencing costs of oncology care, including improved patient survival, regulatory changes, increasing drug utilization, off-label drug use, and provider consolidation.
Current management methods in oncology include prior authorization, pharmacy and medical claims editing, restructured plan designs, and phar­macist- and nurse-led care manage­ment. The use of alternate sites of care for select therapies and the increased availability of genomic and other ad­vanced molecular diagnostic testing are newer additions to the portfolio of management tools.
Value-based cancer care models are emerging and represent a significant evolution of the oncology payment model. In these new models, provid­ers are rewarded for providing cost-ef­fective and higher quality patient care. With respect to management in these new models, the focus shifts away from individual point-of-care activities and instead recalibrates on a holistic view defined by episodes of care. Sev­eral prominent organizations in oncol­ogy, including the Centers for Medicare and Medicare Services (CMS), the Na­tional Comprehensive Cancer Network (NCCN), Memorial Sloan-Kettering Can­cer Center (MSKCC), and the American Society of Clinical Oncologists (ASCO) have created and launched new tools and initiatives intended to help facili­tate the adoption of value-based cancer care models.
Cancer care represents a central source of growth in spending on specialty med­ications. Approximately 29% of health care costs in the United States stem from oncology, which has seen spend­ing grow at a rate of 15% annually.1 De­spite the prominence of oncology, how­ever, the marketplace has not coalesced around a unified, effective, and scalable approach to oncology trend manage­ment. It is clear that a multifaceted and adaptable approach is necessary to help ensure that patients have access to high-quality compassionate cancer care that minimizes waste and inappropriate use of resources, while simultaneously taking full advantage of ongoing sci­entific advances and multidisciplinary, well-coordinated care.
The high and rising cost of oncology medications is buoyed by several factors (FIGURE 1), which include:
Drug development pipeline
Improved rate of survival
Regulatory process changes
Drug utilization variation
Off-label drug utilization
Oncology practice and hospital con­solidation
Drug Development Pipeline
The robust drug development pipeline includes more than 5400 products in clinical development, with an estimated 55% for use in oncology. This includes both new molecular entities and ex­panded indications based on additional clinical studies of approved drugs or combinations of drugs. Approximately 45% of new molecular entities are first-in-class therapies, with 80% of these for use in oncology.2 The number and breadth of oncology medications en­tering the market each year continues to expand, with many more drugs cur­rently in various phases of development (FIGURE 2).3,4
Improved Rate of Survival
Survival rates for several cancer sub­types, including some in breast and lung cancer, have increased in recent decades. The overall 5-year relative survival rate for female breast cancer patients has improved from 75% in the 1970s to 90% in the 2000s.5 This in­crease in survival is largely attributed to improvements in treatment (hormonal treatment and molecularly targeted therapies) and earlier diagnosis from screening (driven by the widespread use of mammography).6 The 1-year relative survival for all lung cancers combined increased over the same 30-year time span from 34% to 45%, largely due to im­provements in surgical techniques and combined therapies.7
Regulatory Process Changes
In recent years, the pipeline has deliv­ered new oncology treatments, almost all of which have been “targeted thera­pies,” or drugs aimed at a specific mo­lecular target within tumor cells. The speed with which some novel treat­ments and expanded indications have reached the market has been quickened by the “Breakthrough Therapy” designa­tion created by the FDA in 2012, further increasing the total spending on oncol­ogy (FIGURE 3).8,9 The advocacy group Friends of Cancer Research reports that 133 of the 304 total requests between 2013 and 2015 for breakthrough status have been granted by the FDA. Of these 133, there have been 30 approvals, 14 of which are cancer treatments (46.1%).10 Looking forward, there are 36 antici­pated approvals for cancer treatments in the remainder of 2015 and 2016, 3 of which are for breakthrough-designated treatments.
Drug Utilization Variation
The high degree of drug-utilization variation between oncology practices is another factor driving the cost of cancer care. In a study of 2012 data for Medi­care beneficiaries, researchers analyzed administrative claims to evaluate varia­tion in the use of chemotherapy and supportive care agents, acute hospital­izations, and advanced imaging among 1534 oncology practices. Between the practices at the 25th and 75th percen­tiles, there was a $3866 (26%) difference in the cost of drugs used for cancer treatment (inclusive of chemotherapy, supportive care, and administrative fees for infusions). Cost variation for acute medical hospitalizations (surgical ones were excluded) and imaging were slight­ly larger on a percent basis; however, as the authors pointed out, on an absolute basis, the drug cost variation was by far the largest and most meaningful.11
Off-Label Drug Utilization
While off-label use of chemotherapy is permitted by the FDA, treatment usually includes newer higher-cost therapies and may be administered after comple­tion of an approved protocol. Off-label use is often a major focus of attention in discussions of cancer care economics, but there have been few large-scale pub­lished analyses quantifying the degree of this use. In one of the largest such studies to date, a group from MSKCC used prescribing data for 19,500 cancer patients treated by 570 oncologists, and categorized the utilization of 10 chemo­therapy agents into “on-label,” “off-label and National Comprehensive Cancer Network (NCCN) supported,” and “off-label and NCCN unsupported.” Based on this sample, they found 30% of the utilization was off-label, split into 14% NCCN supported and 16% NCCN unsup­ported.12

Oncology Practice and Hospital Consolidation
Consolidation of providers in the cancer care delivery system has caused many stakeholders to raise concerns about both access and cost. First, consolida­tion often leads to a reduction in the available options for patients to access care. Secondly, the comparatively high cost of care in hospital outpatient cen­ters is likely a driver of this cost trend. In October 2014, based on 6 years of moni­toring, the Community Oncology Alli­ance reported that 544 oncology prac­tices have been acquired by hospitals and 313 outpatient clinics have closed.13 Hospital acquisition of practices results in immediate revenue growth based on the typically higher reimbursement rates for oncology services that hospi­tals have in place with payers.

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