Advanced APMs and the Emerging Role of Immuno-Oncology Agents: Balancing Innovation and Value

The shift to value-based care, concurrent with innovations in immune-based care, will create challenges in oncology. What should be the physician and manufacturer responsibility during these changing times?
Published Online: February 16, 2017
Michael V. Seiden, MD, PhD; Marcus Neubauer, MD; and Diana Verrilli
As the cost of healthcare in the United States crosses $3 trillion and cancer care approaches $150 billion annually, there is a growing public discourse on strategies to mitigate healthcare expenditures.1 Commercial payers, government agencies, and in particular, HHS, have begun piloting value-based reimbursement strategies to see how these perturbations might encourage the evolution of clinical practice and care delivery towards a value-based, alternative payment model (APM). The Center for Medicare and Medicaid Innovation (CMMI) Oncology Care Model (OCM)—proposed, and now active, in 196 predominantly community oncology practices across the country—will be particularly important, both due to the large number of eligible participants, the complexity of the program design,2 and the wealth of data that will be generated and shared between the payer (CMS) and the participating practices. If this program is successful at reducing Medicare program expenditures, while preserving or improving the quality of cancer care for beneficiaries, it likely will have a profound impact on how cancer care is paid for in the future by both government and commercial payers. 

  APMs that incentivize reductions in the total cost of cancer care (like the OCM) will encourage providers to focus on 2 of the largest categories of spend: avoidable hospital admissions and variations in treatment protocols, with a particular focus on clinical pathways and drug costs. While no drugs are singled out in the OCM model, the rapid increase in the use of immuno-oncology (I-O) agents—programmed death-1 (PD-1) and now programmed death ligand-1 (PD-L1) inhibitors—in oncology suggests that the expanding use of these agents will provide specific challenges to practice success in this program, and will likely present both operational and moral challenges for physicians attempting to succeed in the OCM.3

The Opportunity Offered by I-O in 2016 and Beyond

In recent years, a deeper understanding of how the immune system works, and how cancer disarms typical immune effector functions has led to advances in ways to improve the function of specialized immune cells, called T cells.3 While many strategies are under development, this review will focus on antibodies that bind chimeric T-lymphocyte associated  protein 4 (CTLA-4), PD-1, or PD-L1 in such a way that it interferes with the binding of these cell surface proteins with their natural ligands.1 Vaccines, chimeric antigen receptor (CAR)-T cells, and small molecules that interfere with or augment other immune functions will pose similar challenges in the future, but still require further development and will not be discussed further, except to emphasize that in toto the development of I-O agents, either alone or in combination strategies, will likely dominate therapeutic advances in oncology for the next 10 years.  

CTLA-4, PD-1, and PD-L1–Targeted Agents 

Antibodies that bind CTLA-4 (ipilimumab), PD-1 (nivolumab and pembrolizumab), and PD-L1 (atezolizumab) successfully reactivate an exhausted or deactivated immune response.3 Once reactivated, some tumors will demonstrate an expansion of activated immune cells within the tumor with rapid, cancer cell destruction. Single-arm and randomized studies in melanoma, lung cancer, renal cell carcinoma, head and neck cancer, bladder cancer, and Hodgkin’s disease have demonstrated clinical activity of many of these agents.4-10 While the activity in Hodgkin’s disease and melanoma has been dramatic, and in the case of melanoma, often very durable (measured in years), the findings in solid tumors have demonstrated a few key themes as reviewed in Table 1.

What is most intriguing is not the response rate associated with I-O, instead the tail of the survival curve (Figure 1). In essentially all the studies that used I-O agents, there is a subset of 10% to 20% of patients who demonstrate durable responses with marked clinical improvement persisting well more than a year after treatment. Some studies with longer follow-up have demonstrated multi-year responses.4-11 Durable responses are distinctly unusual in patients treated with standard chemotherapy or molecularly targeted agents that inhibit nonimmune targets.  

For patients with advanced cancers being treated with palliative (noncurative) intent, despite the wealth of data suggesting a very guarded prognosis, their primary question is “can my cancer be cured?” or as a compromise “can my cancer be treated so I can live a lot longer?” If I-O provides hope for multi-year and perhaps decade-plus remissions, even if that likelihood is low (say 10%), all patients will want a chance at winning on what has been described as “an I-O lottery.” Further, patient and physician preference for I-O is also influenced by the fact that, compared with many alternative therapies, I-O is less toxic for most patients than chemotherapy. Thus, PD-1 inhibitors gain a strong acceptance based on slightly superior response rates, the important “tail of the curve” comprised of the I-O lottery winners,” and decreased toxicity.   

I-O at the Center of the Clash of Innovation and Value

The management of cancer is complex and expensive. The use of sophisticated imaging, molecular diagnostic tests along with the frequent use of expensive therapeutic modalities including surgery, radiation, chemotherapy, biologics, and supportive drugs can easily lead to courses of therapy that exceed $100,000 in the first year of a cancer diagnosis. Similar or even greater expenses are often also seen in the last year of life for those patients who can’t be offered curative therapy. Cancer spending was estimated to be $130 billion in 2010 and is expected to be between $170 billion and $180 billion in 2020.1 

Figure 2 demonstrates the rough breakdown of annualized costs from patients with cancer.  As seen in the graph, a significant expense is the office-based drug costs. Cancer drugs (oral plus intravenous) and hospitalization make up almost two-thirds of the spend, thus, it will be hard to ignore these categories of expense as the provider community is challenged to participate and ultimately take risk in the quest to decelerate the increasing spend on cancer care. A special area of focus will be the PD-1 and PD-1–inhibitors, which have gone from investigational agents to one of the top 5 oncology drugs in terms of costs in the community, in the last 2 years, with year-over-year growth of 300%. With the recent approval of pembrolizumab in a subset of individuals with newly diagnosed metastatic lung cancer, the country’s most common lethal malignancy, it is likely even more patients will be getting this therapy with their time on therapy being potentially longer. In addition, it is likely that in 2017 we will see additional inhibitors of PD-1 and PD-L1 approved, and potentially the combination of these agents with ipilimumab or other CTLA-4–binding agents. By some estimates, I-O drugs already represent 18% of the drug spend. As the principal APM in cancer, the OCM is due to pilot through 2021, and it is likely that I-O drugs will represent the principal driver of cancer drug costs, which as a class may represent 50% of the oncology drug spend towards the end of the OCM pilot trial. 

Alternative Payment Models

I-O innovation arrives concurrently with the rapid roll-out of APMs. Both government and commercial payers are exploring novel, alternative payment strategies that will compel physicians to pay considerably more attention to the total cost of the cancer treatment and evaluation they prescribe. As the average age of cancer incidence is adults in their 60’s, Medicare is the single most dominant payer of cancer expenses in this country. Thus, it is instructive to consider the Medicare Access and CHIP Reauthorization Act (MACRA) and the OCM to illustrate how these programs will impact oncology care and the oncology practitioner.

In 2015, Congress repealed a long-standing CMS program called the Sustainable Growth Rate program and replaced it with MACRA, which includes a performance-based adjustment to a practice’s Medicare payment, under the acronym of MIPS (Merit-based Incentive Payment System). This program, which took effect in January 2017, requires the submission of quality data from the practices along with claims data (from CMS). Practices will be scored on clinical quality metrics, cost of care, and practice improvement. CMS will provide 0.5% annual increases in total payouts through 2019 and will then keep payouts flat (budget neutrality), but will rank practices based on the above metrics to pick winners and losers. Those who outperform their peers will receive bonus payments of up to 9% while those that significantly underperform will see their payments drop by 9%. Of note, a well-run oncology practice in the community might expect a margin of 12% to 18% of revenue; thus a 9% gain or loss will have extraordinary effects on the bottom line of the clinic, especially when one considers that overachieving on quality metrics might take incremental investments. Practices that invest wisely and over-perform can expect at least some financial reward. Those that lack efficiency, scale, or a focus on quality will likely face extreme challenges in the MACRA-MIPS environment. Data will be sent to CMS in 2017, with bonuses or penalties being delivered in 2019.

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