Oncologist Highlights Primary Reasons for the High Cost of Cancer Care

April 23, 2015
Surabhi Dangi-Garimella, PhD

With the rising prices of innovative oncology treatments, many of which fall under specialty pharmaceuticals, curbing the cost of care is high on the agenda of healthcare providers.

With the rising prices of innovative oncology treatments, many of which fall under specialty pharmaceuticals, curbing the cost of care is high on the agenda of healthcare providers. During his session, “What are the key cost drivers of cancer care,” David Eagle, MD, partner at Lake Norman Oncology, a past-president of the Community Oncology Alliance who also serves on their executive committee, discussed where the dollars go in oncology care at the 2015 Community Oncology Conference.

He opened the discussion at the meeting, Community Oncology 2.0, Moving Forward on Payment Reform, by asking participants to actively contribute to the discussion based on their background.

“Every idea begins with an analysis of the problem… what problem are we trying to solve? We need to think about what the problem is and what contributes to the cost curve. What are the premises behind any specific payment reform model and does the model help solve the problem?” asked Dr Eagle.

Cost curve contributors, he said, include drug pricing, which is only 25% of the cost. To understand the true costs of care though, we need to consider all the contributing factors. The estimated cost of oncology care in 2007 was about $89 billion, which was 5% of the total healthcare spending.

Dr Eagle then went on to list the causes of spending; demographics, such as aging, he said probably is the most powerful. Other factors include more intense treatment, rising costs of therapeutics, and changes in site of care.

1. Demographics: The impact of demographics has been extensively studied and modeled, he said. The models have predicted that there would be a 27% increase in costs due to changes in the US population, independent of incidence, survival, and cost of care. This key cost driver is non-modifiable, Dr Eagle emphasized. “This part of the curve cannot be bent,” he said. He added that good data is hard to find.

2. Intense treatment: While we have a much bigger armamentarium of therapy options, it’s not only the multiple lines of therapy that we need to think about. Cost contributors also include lab tests, imaging, clinic visits, supportive care, and so on.

3. Rising costs of therapeutics: Payer spending is increasing substantially, with chemotherapy accounting for 25% of cost and systemic therapy for one-third of cost, according to Dr Eagle. A recent US Oncology Network study found that cancer drug spending has caused a steep increase in the cost curve. Cancer drugs are likely to be more expensive than other drugs treating other conditions.

Dr Eagle pointed out that there is no restriction on the initial price of a drug, stating costs are decided based on “Whatever the market will bear.” Prices are then subjected to mandatory 340B and Medicaid discounts.

4. Site of care: The shift in site of care is increasingly important in driving the costs of care. With a shift in care from private clinic to a major hospital or cancer center, studies have found that outpatient hospitals increase payer costs for chemotherapy administration as well as other services offered.

Dr Eagle emphasized that mark-ups by hospitals on costs for chemotherapy is uncalled for—private practice charge Medicare + 22%, while hospital-based oncologists charge Medicare + 146%.

Providing an example of bevacizumab, Dr Eagle presented data showing that a hospital setting charged between 2 to 3 times higher costs of administration of bevacizumab for colorectal and lung cancer in a hospital vs a private office setting.

Dr Eagle concluded by saying that while oncology costs are high, we are in definite need of solutions. “We need to distinguish between modifiable and unmodifiable factors and paying more for the same thing (site of care shift) is unethical. Reigning in drug prices would also have a substantial impact on the cost of care,” he said.