Practice Economics and the Decision to Prescribe Oral Oncolytics
Published Online: December 05, 2013
Karen E. Van Nuys, PhD; Joseph J. Conoshenti Jr, BPharm, RPh, MBA; and Dana P. Goldman, PhD
The global market for oncology drugs is large and growing quickly. In 2010, oncology drugs accounted for $57.1 billion in sales, and that number is expected to reach $75 billion by 2015.1 Within this already growing class of agents, oral oncolytics are poised to grow particularly rapidly. By some estimates, nearly onefourth of the antineoplastic drugs in the development pipeline today are oral agents.2,3 Among them are many oral oncolytics that would substitute for currently available intravenous (IV) formulations. At first glance, it would seem that oral formulations would be preferred, at least by some parties, to their IV equivalents. Yet the uptake of oral substitutes for IV chemotherapy has been mixed,4 leading one to wonder why a drug that is equally effective yet more convenient is not more popular in the marketplace.
Many factors influence the decision to prescribe oral versus IV oncolytics, most importantly the drugs’ relative efficacy and safety. But even in cases where oral and IV formulations have equivalent efficacy/safety profiles and patients prefer the convenience of an oral regimen, the oncologist’s choice is not straightforward. Other issues such as patient adherence and out-of-pocket costs, uncertain reimbursement for adverse event management, and practice infrastructure and processes may dictate one form of treatment over another.
In addition, the profit implications of prescribing oral versus IV therapies are different, and prescribing oral instead of IV therapies will divert patients from IV regimens, which in many cases are profi table, into oral regimens which may not be. In these cases, oncologists face complex nd sometimes conflicting incentives for how best to treat their patients. We call these incentives and how they vary with oncology practice characteristics the “practice economics” that oncologists face, and they are an important element of understanding the eventual market response to new oral chemotherapy agents.
Practice Economics’ Role in Prescribing IV Versus Oral Oncology Agents
Physicians routinely alter their practice patterns in response to changes in financial incentives: one study recently profiled here found significant changes in treatment patterns for lung cancer in response to changes in reimbursement rates.5 Similar responsiveness to financial incentives might be expected in the case of oral versus IV oncolytics.
Typically, with a patient visit for infusion of an IV agent, the oncology practice is reimbursed for the office visit, the IV infusion services, and for the drug, including a “buy-and-bill” margin (average sales price + x%). By contrast, if an oral oncolytic is prescribed instead of an IV-infused drug, the practice is reimbursed for the office visit only, as illustrated in the Figure. Any profit margin on the cost of the oral drug will be captured by the dispensing pharmacy and, unless the oncology practice incorporates the dispensing pharmacy, lost to the practice. Depending on the relative size of these reimbursement elements, a practice could easily make more profit on IV compared with oral chemotherapy.
About the Study
We conducted a survey to explore the incentives that prescribing physicians face when choosing between oral and IV chemotherapy regimens, and the role they play in the market uptake of oral chemotherapy agents. We began with structured telephone interviews with 5 oncologists, practice managers, and account managers at a large pharmaceutical manufacturer to gain insight into the economics of oncology practices. We then emailed a convenience sample of 225 oncology practice managers across the country, inviting them to complete the online survey. Forty surveys were returned, with an average question-level response rate of 68%. On average, survey respondents came from relatively large practices (average practice size was 11 oncologists seeing 600 patients per week), mostly from community-based partnerships in urban settings. Twenty percent of responding practices were affiliated with a hospital.
Responding practices reported that, on average, 17% of their patients received some kind of oral oncolytic. Of the top 5 oral oncolytics named at each practice, 4 drugs had IV-equivalent formulations: capecitabine, temozolomide, cyclophosphamide, and melphalan (in order of the frequency withwhich they were mentioned). We classified practices according to how many of their top 5 prescribed oral oncolytics had IV equivalents. Practices naming 1 or more drugs with an IV equivalent among their top 5 oral oncolytics were classified as “willing to substitute” (87%); practices with no oral drugs with IV substitutes in their top 5 were classified as “not appearing to substitute” (13%). We then compared the economic incentives faced by doctors in the 2 types of practices.
We found that among survey respondents, practices that were willing to substitute oral for IV oncolytics tended to be larger (92% vs 50% with average monthly revenues over $1 million) and less likely to be affiliated with an academic institution (8% vs 50%). Interestingly, they were much more likely to have a dispensing pharmacy onsite than those who did not appear to substitute (62% vs 0%). That is, practices willing to substitute oral for IV oncolytics were in a better position to capture the profit stream associated with the oral medications than practices that did not appear to substitute. Doctors’ individual fi nancial incentives could also matter in the decision to prescribe oral versus IV medications.
Doctors whose pay depends in part on the overall profitability of the practice, through ownership, profi t-sharing arrangements, or bonuses based on practice performance should be more sensitive to practice profi tability than doctors who receive only a fixed salary. In fact, we found that practices that did not appear to substitute oral for IV oncolytics were also more likely to pay doctors bonuses based on the practice performance, that is, practices that did not appear to substitute less profitable oral oncolytics for more profitable IV oncolytics were also less likely to pay their doctors profit-based bonuses. However this did not hold true for practices’ likelihood of being owned by physicians or including them in profit-sharing programs. Oncologists may also have relationships with drug providers that further complicate their prescribing incentives, although we did not collect data on these factors so we cannot assess their significance.
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