Coverage from the Community Oncology Alliance Payer Exchange Summit, held in Tyson's Corner, Virginia, October 24-25, 2022.
Understanding the Complexity of Oncology Drug Pricing
The explosion of new, lifesaving therapies in oncology offers opportunities to transform patients’ lives. But for some, the complex system of pricing, insurance coverage, and rebates in the United States creates barriers to care, according to an expert who spoke during the Community Oncology Alliance Payer Exchange Summit in Tyson’s Corner, Virginia.
Brian Corvino, MBA, managing director of life sciences and health care practice, Deloitte Consulting, LLP, offered an overview of how the surge of innovation in oncology—and resulting drug approvals—is dominating the biopharmaceutical sector. As he noted, new therapies, better screening and prevention, and other improvements have led to a 32% drop in cancer death rates during the past 3 decades, alongside a 73% rise in survival gains.
For many patients, the focus has shifted to survivorship; some may take medication over an extended period. “If you think about how different that is from the insurance benefit designs of many years ago—in certain cancer conditions we are really moving toward normal chronic disease management,” Corvino said.
The rise of FDA approvals in oncology, including a bumper crop in 2021,1 has come with greater focus on precision medicine and biomarker-driven trials, he said. Most approvals occur through expedited pathways, which Corvino noted require ongoing studies and investment after the approval.
Oncology, by far, outpaces other disease areas for research and development into new therapies. “This has been the frontier,” Corvino said, where the smartest scientists go to spend their careers. Yet, as has been well documented, for every success in drug development, there are many failures—the success rate is approximately 10%.
Drug pricing and value. Once approved, a cancer therapy must get to patients, and Corvino explained that this is far from a direct path. He described a drug’s journey through “an ecosystem” that includes payers and pharmacy benefit managers (PBMs), employer groups, pharmacies, distributors, pathway vendors, provider groups, and population health decision makers, among others. A PBM decision tree looks like a subway system map before one lands at what seems a simple question: What does a drug cost?
As Corvino explained, this question has many answers. The “price” of a drug is defined many ways, depending on the stakeholder and where the drug is on its path to the patient. For example, wholesale acquisition cost (WAC) is not the same as average sales price (ASP), yet both are important in other parts of the ecosystem, with ASP being used to calculate reimbursement for providers.
Corvino said there is more than 1 “lens” to consider when establishing the WAC. Beyond traditional market considerations, the new Inflation Reduction Act offers new guidance on thinking about costs, as it spells out terms that the CMS must use for selecting a “maximum fair price” for certain drugs used in Medicare.
Drug makers use multiple factors to set prices, including measures of value—which include traditional measures such as quality-adjusted life-years, and whether the drug’s use yields net savings, such as reducing overall hospital admissions. Other factors may be used; for employers, a value measure might be whether someone can return to work without limitations.
Corvino noted that “most biopharmaceutical manufacturers today are publicly traded entities with shareholders” and thus must deliver shareholder return on capital.
Drug spending. Corvino presented data to show that US health care spending reached $4.12 trillion in 2020; according to the CMS, this is 19.7% of the gross domestic product (GDP).2 So, while US health care spending is larger than the total GDP of many countries, Corvino said drug spending as a percentage of health spending is “roughly comparable, if not slightly below the average.”
Second, Corvino explored the reality of net prices in drug spending. Although spending has increased by $82 billion in the past 5 years, he said the main drivers have been the number of new drug brands and their volume, not the prices. These factors were offset by the arrival of generics, as older brands lost exclusivity and gave patients lower-priced options.
Although overall oncology drug spending is projected to climb to $114 billion by 2026, growth will slow due to uptake of biosimilars, and Corvino projected that net price increases will be small, less than the consumer price index.
Corvino then broke out what goes into the WAC for most pharmaceutical companies. “If you take the list prices that they charge, and you take out the rebates and discounts, it’s about 50%,” he said. An estimated 19% is taken up by 340B discounts.
What patients pay. A patient’s perception of drug prices is not the WAC or the ASP but instead the out-of-pocket (OOP) costs, and Corvino said that medical bankruptcies and financial burdens that prolong time to therapy are ongoing problems that affect patient outcomes.
There is good news on this front. “We are living in an environment where patient support is better,” he said. Industry support for patient assistance, independent foundations, and other supports have increased. Policy changes coming to Medicare will shape patient spending; a tenet of the Inflation Reduction Act calls for capping beneficiaries’ OOP costs at $2000 per year by 2025.3
Corvino pointed to multiple “catalysts” that he said will continue to drive discussions on drug pricing and access; besides innovation, new payment models, and government policy changes, he pointed to ongoing “frictions” in the pricing system.
Gaining knowledge in this area matters, he said, because drug pricing affects virtually everyone at some point, yet “it’s one of the most complex pricing ecosystems that exist for any good that I can imagine.”
1. Novel drug approvals for 2021. FDA. May 13, 2022. Accessed November 2, 2022. https://www.fda.gov/drugs/new-drugs-fda-cders-new-molecular-entities-and-new-therapeutic-biological-products/novel-drug-approvals-2021
2. NHE fact sheet. CMS. August 12, 2022. Accessed November 2, 2022. https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NHE-Fact-Sheet
The Inflation Reduction Act lowers health care costs for millions of Americans. CMS. October 5, 2022. Accessed November 2, 2022. https://www.cms.gov/newsroom/fact-sheets/inflation-reduction-act-lowers-health-care-costs-millions-americans
Redesigning Benefits, Value-Based Agreements With Better Cancer Care in Mind
To deliver better cancer care and save money, some employers have turned to direct contracting. In some places, practices that are too small for the Oncology Care Model (OCM) have tried adjustable care coordination fees. Even before the OCM, larger practices brokered agreements with insurers to deliver value-based care, and those agreements remain today.
The quest to deliver better cancer care—with better outcomes and patient experience—is not a one-size-fits-all journey, as seen in panels during the Community Oncology Alliance (COA) Payer Exchange Summit, held in Tyson’s Corner, Virginia.
Lalan Wilfong, MD, vice president of payer relations and practice transformation, The US Oncology Network, led the discussion, “New Strategies for Insurance Benefit Designs: From the Simple to the Complex,” which examined how employers can reduce the cost of cancer care—sometimes by thousands of dollars. Joining Wilfong were:
Wilfong asked for an overview of the market, and van Caulil said that as the COVID-19 pandemic eases, there is “renewed interest” in cancer care among employers. A recent survey showed that cancer had surpassed musculoskeletal conditions as the top area of benefit spending, she said.1
Finally, van Caulil said, plan designs are embracing the concept of precision medicine by paying for biomarker testing and targeted therapies. “They’re finally seeing the value of paying for that on the front end.”
Attention to mental health in cancer care and high-value providers are other trends, she said.
Jackson’s coalition is evenly split between companies and labor unions, and many employees have rich benefit plans where cost sharing is not top of mind for hourly employees. The focus since 2017 has been on creating incentives for oncologists to stick with evidence-based medicine based on National Comprehensive Cancer Network guidelines, in part by reducing administrative burdens if practices can provide data that show guideline adherence.
Scruggs, who serves the Portland, Oregon, and southwest Washington State markets, outlined a direct contracting program developed with employers in those areas that he is trying to bring to all 50 states. “It’s a massive savings for these employers,” Scruggs said, often 50% of the cost of treatment that had been $100,000; for higher-cost drugs such as pembrolizumab, the savings are larger.
Typically, he said, this level of savings allows the employer to eliminate cost sharing for patients, who are likely already missing time from work and opportunities for raises or bonuses. Recent evidence shows that patients experiencing financial toxicity are less likely to stick with their medication regimen2; thus, removing these burdens can improve outcomes.
Insurer perspectives. Michael Diaz, MD, president and managing physician of Florida Cancer Specialists & Research Institute (FCS), led the next panel, “Insurer Perspectives on Oncology Reform Efforts and New Payment Models,” which featured:
Frick repeated a warning heard throughout the COA Payer Exchange Summit: Some value-based models, including those unveiled by the Center for Medicare and Medicaid Innovation (CMMI), may be too risky for small practices that are essential to care delivery in rural areas. This was true of the OCM, and oncologists have warned that the successor model, the Enhancing Oncology Model (EOM), poses even greater risk to small practices.3
The CMMI encouraged commercial plan participation in the OCM, and Frick said that BCBS of South Carolina was able to adjust its model, “but we didn’t do shared savings.”
Today, she explained, the insurer’s partnerships with practices revolve around monthly care coordination fees, which can rise or fall at predetermined intervals based on both internal benchmarks and comparisons to peer practices. Ten practices participate and are evaluated based on 6 cancer types every 6 months, Frick said.
Mason said Minnesota Oncology asked BCBS of Minnesota to enter a value-based arrangement, which took a few years to complete. Like the South Carolina agreement, the agreement covers care coordination—in this case, for both commercial and Medicare Advantage. It has both fee-for-service and total cost of care components. As Mason explained, the agreement covers 2 distinct types of risk scenarios and spells out the conditions for shared savings.
As is the case in South Carolina, there are elements for data sharing, which helps BCBS of Minnesota with vendor selection and quality measurement. But there remain elements that are challenging to reconcile.
“We believe this is a learning opportunity for both of us,” Mason said. “We’ve seen this relationship as something that will evolve over time, and so we are working together to see what works.”
Frick was candid that BCBS of South Carolina applied for the EOM largely at the urging of Kashyap Patel, MD, the current COA president who is CEO of Carolina Blood and Cancer Care Associates, a small practice based in Rock Hill, South Carolina. The insurer’s relationship with Patel is clearly a component in its willingness to explore the workability of the EOM, despite concerns about the model’s reporting requirements.
Parzik traced the history of Florida Blue’s foray into value-based oncology agreements, which started with the “just do it” mentality of CEO Patrick Geraghty in 2010 and led to the first agreement with Advanced Medical Specialties of South Florida. From there, Florida Blue executed dozens of agreements, learning more about what worked. The agreement with FCS, reached in 2016, marked a milestone in the plan’s design. The 2 sides announced an update earlier this year that found an 18% reduction in health care spending and a 22% decline in emergency department visits in the agreement’s fourth year.4
Over time, Parzik said, the FCS agreement added measures of downside risk. “When we did it in a thoughtful way, we were well aware that downside risk is not a one-size-fits-all approach,” Parzik said. Independent oncologists and hospitals do not have the same structures for taking on risk, and this must be recognized. He said the need for a “collaborative spirit” is essential to take on any such agreement—there must be trust when the 2 sides are sharing data bidirectionally and working to understand complex issues in cancer staging and genomics.
“We want to make sure what we’re doing is accurate and fair,” he said.
Mason agreed that trust is essential for insurers to pursue agreements with practices. “It’s been important that it be something that where you have a partner, and you are willing to take leaps together, to be honest to lay your cards on the table,” she said. “That’s really, really important.”
1. Cancer now top driver of employer health care costs, says Business Group’s 2023 Health Care Strategy and Plan Design Survey. News release. Business Group on Health. August 23, 2022. Accessed November 2, 2022. https://www.businessgrouphealth.org/en/who%20we%20are/newsroom/press%20releases/2023%20lehcspds
2. Knight TG, Deal AM, Dusetzina SB, et al. Financial toxicity in adults with cancer: adverse outcomes and noncompliance. J Oncol Pract. 2018;14(11):e665-e673. doi:10.1200/JOP.18.00120
3. Caffrey M. EOM creates a heavy lift for small practices, leading oncologists say. The American Journal of Managed Care®. October 26, 2022. Accessed November 2, 2022. https://www.ajmc.com/view/eom-creates-a-heavy-lift-for-small-practices-leading-oncologists-say
4. Florida Cancer Specialists & Research Institute’s innovative collaboration with Florida Blue enhances patient care, addresses rising costs. News release. Florida Cancer Specialists. August 11, 2022. Accessed November 2, 2022. https://flcancer.com/articles/florida-cancer-specialists-research-institutes-innovative-collaboration-with-florida-blue-enhances-patient-care-addresses-rising-costs/
Cancer Payment Models Improve Care, but Making Them Work Takes Effort
Value-based payment models in cancer care have done much to improve outcomes and patient experience, and over time they can have positive effects on practice culture. But making the models work financially is painstaking, according to 3 practice leaders who discussed what it takes during the Community Oncology Alliance Payer Exchange Summit, held in Tyson’s Corner, Virginia.
Michael Diaz, MD, president and managing physician, Florida Cancer Specialists & Research Institute, served as moderator for the discussion, “Cancer Care Team Perspectives on Oncology Reform Efforts and New Payment Models,” which featured:
Diaz encouraged the panelists to share what has gone well with value-based care and, later, what has proved frustrating. Cosgrove said that Medicare’s Oncology Care Model (OCM), which ran from 2016 until June 2022, seemed to be a good fit for Compass initially. The practice was already delivering palliative care, and leaders believed the practice’s metrics would compare favorably to area competitors.
But early on, Compass was disappointed, Cosgrove said. It was hard to achieve savings until the practice had a “laser focus” on managing the cost savings and quality-of-life metrics. “With biosimilars, we saw cost savings at the end of the program,” he said.
Maintaining that focus was difficult during the COVID-19 pandemic, when practices had to deal with implementing telehealth and staffing shortages. Some models start with high ideals, Cosgrove said, but for those working them day to day, “there’s the perception, ‘I have to do my work and then this?’”
Kruger, whose practice serves some of the poorest areas in Virginia and North Carolina, had a more positive view of value-based care. “We’re a better practice because of it,” he said. Personnel shifts have directed more resources into patient services, including helping patients identify community resources for food or programs that can support drug costs.
The process of working with other agencies has allowed the practice to build partnerships and trust that go beyond delivering care. “It’s improved quality and changed our standing in the community,” he said.
OneOncology practices have worked with multiple payer models beyond the OCM, Lyss said, including oncology models developed by Aetna, Cigna, and Humana; Astera Cancer Care, which is among the 15 OneOncology practices, has worked on value-based models with Horizon BlueCross BlueShield of New Jersey. Although that experience is valuable, Lyss said the variation between different oncology models can create management challenges for a practice.
When there are different quality or clinical data reporting requirements across models, he said, “even if 80% are the same, that 20% difference is really difficult to manage,” both at the point of care and at the administrative level.
Kruger echoed a point heard throughout the sessions: Practices are unlikely to give different levels of care based on payment models. Instead, they will try to deliver the highest level of care possible to all and work to make the financial side make sense. “The goal is not to make money on value-based care, but we don’t want to lose money—whatever we’re going to do, we’re going to do the same thing for every patient,” he said.
On the positive side, Cosgrove said the process of implementing value-based care “has made the whole team more engaged.” But turning around data has been a challenge—practices still wait approximately 18 months to get the full picture of how they will fare on shared savings. This can make it difficult to fully implement initiatives such as integrating additional social work services or putting added focus on certain diseases. “Keeping up the momentum is a struggle,” he said.
Diaz asked Lyss what benefits OneOncology saw from participating in value-based models. Lyss said there were still benefits, but the question was “increasingly tougher to answer.”
“It provides a vehicle for practices to make investments in care delivery that they want to make, that they might need to compete in their markets with the infrastructure of a hospital system or academic center,” Lyss said. This would include services such as care coordination, palliative care, psychology services, social workers, and financial counselors to help patients cover the cost of medications.
Embracing value-based care also allows for the investments in data analytics and claims infrastructure—all the back-end side that provides measurement and fuel for practice transformation, which Lyss said results in the culture change that is critical for success when operating value-based payment models. “That doesn’t happen overnight,” he said.
Diaz asked the panelists to elaborate on current challenges with “carve-outs,” which are exceptions to overall value-based contracts among commercial payers that require practices to deviate from standard procedures. These requirements have increased as payers have become vertically integrated with pharmacy benefit managers and other health care delivery entities. As Lyss explained, carve-outs typically mean money for the payer and headaches for the practice.
“The payer will use their preferred vendor or vertical integrated joint venture for services that the practice wants to provide for the patients—especially services that are key to driving performance,” Lyss said. When there’s no transparency—especially in areas such as specialty pharmacy or imaging services—it makes it hard for practices to manage costs and quality.
“We’ve been successful in making the case why the OneOncology practices should be empowered in these models to manage patient care in these services,” he said.
Said Diaz, “We can see that in my practice, too. And the way I like to summarize it is that when patient care is fragmented, it makes it very difficult for the person who’s supposed to be quarterback in all of this.… Because these other parties aren’t necessarily aligned.”
Kruger said he’s seen this in his area, where hospitals refuse to use less expensive biosimilars because they’d rather get the financial windfall from branded medications under the 340B program. “They want people to go to infusion centers,” Kruger said. “I don’t think they do as well as they think they do, and they charge 5 times as much for the drug.”
Diaz asked how practices that have worked with value-based payment models with one population—most likely Medicare patients—can start conversations to expand to other patient groups.
Kruger said this can be challenging if data are not available. An effort in his area to bring more alignment among psychological services has stalled for this reason. “As difficult as the lack of data is for us, the hospital also has a lack of data,” he said.
Encouraging “smaller bites of the apple” is a good place to start, Kruger said. “I can control where the patient goes, and how many times I see them,” he said. If needed, patients can come in more often. Kruger can decide when to start palliative care. When it comes to community services such as transportation or help with groceries, he said, “Sometimes you just have to ask, and you’ll be surprised what you’ll get.”
Lyss highlighted the need for regular, ongoing contact. OneOncology’s practice, Tennessee Oncology, works closely with BlueCross BlueShield of Tennessee and is in contact weekly on how to address issues such as steerage or reduction in utilization.
In response to a question, Lyss said the experiences of the past decade in value-based care—including the years in the OCM—are what a management services organization such as OneOncology offers practices that have not tried value-based care but are considering the Enhancing Oncology Model (EOM).
Lyss acknowledged that parts of the journey were “painful” for the practices that were early adopters. “It took a long time to get the practice redesign that those practices have now,” he said. He warned that practices that are still holding out must understand that staying with the Merit-based Incentive Payment System (MIPS) will not be easy, because MIPS will change, too.
A “critical ingredient” is appreciating the need for culture change. “If a practice is willing to do that—if they’re bought in on the culture change front—there are a lot of other problems that will really help them solve.… And once we have those, we [will] be able to help our clients to succeed in the EOM.”
EOM Creates a Heavy Lift for Small Practices, Leading Oncologists Say
Leading oncologists said that the proposed Enhancing Oncology Model (EOM), which would take effect next July, requires practices to take on more risk and data collection with less guaranteed revenue, making it too much to ask for many small practices—especially those without experience in value-based care.
Michael Diaz, MD, president and managing physician, Florida Cancer Specialists & Research Institute, moderated the panel, “Practice Perspectives on the EOM: Why or Why Not Participate?” featuring:
The Center for Medicare and Medicaid Innovation (CMMI) unveiled the EOM in late June as the successor to the Oncology Care Model (OCM), which had drawn on the experience of McAneny’s COME HOME project in creating a model designed to improve outcomes and patient experience while reducing cancer care costs.
The EOM clearly draws on lessons from the OCM experience but with some key differences: All practices must take on risk right away, regardless of size or experience with value-based care.
The EOM has 2 risk tiers: The lower-risk tier will not let a practice escape reporting under the Merit-based Incentive Payment System (MIPS). Practices that followed the OCM did not have to report under MIPS.
The EOM will impose additional data reporting requirements on social determinants of health (SDOH) while at the same time cutting monthly payments to deliver added services.
The EOM will focus on 7 types of cancer, so fewer patients will be covered under the model—which means less revenue to run patient navigation and other services.
Blau said 11 of the 18 QCCA practices have applied for the EOM, and some elements show that CMMI listened to feedback from oncologists based on the OCM. Her initial reaction to the EOM was, “It’s good that it’s here,” but whether the numbers will work for the smallest practices is an open question.
With the OCM, she said, practices had time to learn the model before taking on risk. “I can’t imagine a non-OCM practice taking on this with no history and experience,” Blau said, especially with EOM changes that restrict the number of covered patients to 7 disease types. The smaller number of patients will make it very difficult to earn a pay-for-performance bonus, and the additional requirements for inclusion of electronic patient-reported outcomes (ePROs) will be challenging for some.
“Our practice was pretty successful with the OCM,” Escudier said. “I think it instituted some favorable changes in practice in terms of some of the patient-centric features; the care plans, I liked a lot.”
As for the EOM, her first reaction was, “Gosh, they’re asking us to do more for less.”
Escudier noted, as others have, that with the EOM covering only a portion of the Medicare population, practices will face a choice of what to do about offering added services, such as navigation or 24/7 access to medical records, to all patients. The consensus is that practices will treat all patients the same way.
She also questioned whether oncology practices had the capacity to solve problems of poverty, transportation, and other social conditions alongside treating patients’ cancer.
Diaz and McAneny said they have observed many of the same issues. “In the EOM, the chances of rewards are not that big, but the chances of loss are big,” McAneny said, and this could crush smaller practices that have large numbers of patients in rural areas. The risk scenarios presented in the EOM could put some small practices out of business, she said, and what happens to the patients? If the doctors are absorbed by a hospital system, costs for Medicare will increase.
“We don’t mind being held accountable,” Diaz said. “But we aren’t necessarily graced with having these large potential positive upsides.… Because when we’re talking about risk, it’s not just for the cost of their cancer care.”
McAneny also took issue with the SDOH data collection, which she said would create cultural issues with the Native American populations she serves. Approximately 48% of McAneny’s patients are Medicaid eligible and 12% receive coverage from the Indian Health Service.
“First, it’s very important in terms of looking at this from the viewpoint of the people we’re trying to impact,” she said. Data collection “is a very dominant culture” to a group that doesn’t see this as a way to solve problems, she said, “so, we’re starting with that bias.
“Secondly, when you collect data, you are implying to people that you’re actually going to do something better. And, as [Escudier] just said, oncology practices are not going to fix poverty or racism, which are the key issues of the [SDOH]. We don’t have the bandwidth to do that.
“Third, I really have some concerns about collecting these data and sending [them] to the federal government.” The Navajo Nation population she has served for 15 years has deep mistrust of the federal government. Over a 400-year period, McAneny said, every time the government collects data, “they get moved to less desirable territories, the benefits get taken away, and treaties get broken.
“It’s not easy for somebody who looks like me to establish some street cred with people who live in that population.… Am I willing to put that acceptance that is hard fought on the line to collect data to give to the federal government, when nothing is going to come back to that population that will be of value to them? That is really something that I’m struggling with.”
Blau offered some warnings for ePROs, which she said can be important for managing symptoms but have to be deployed with extreme care. “If a practice is not savvy, patients will be complaining about everything,” and this could overwhelm a small practice.
Escudier said her practice had developed a system for managing patient symptoms and needed to maintain control over it. McAneny agreed, saying that giving patients unrestricted ability to call in symptoms could have unintended consequences. “Patient satisfaction can drop from this instead of increase,” which in turn could drive more clinicians out of practice.
“It’s not ideal to have a one-size-fits-all solution,” Diaz said.