Attempting to Rein-in Oncology Drug Costs

By May 22, 2019 Commentary

UnitedHealth Group is an innovative health plan, constantly attempting to come up with new approaches to solving issues like the cost of health care, outcomes and access.  Not everything it, or any other health plan, tries works as intended.  An example is found in an article in Health Affairs regarding a program to incentivize oncologists to use lower cost drug treatments.    (HA Article)   Chemotherapy is a mainstay of cancer treatment and has become very expensive.  Drug companies think they can get away with charging a lot for cancer medications because of the emotion attached to the disease.  Cancer overall is the second-highest source of health spending and has the fastest growth rate.  Many cancer drugs are infused, so they need to be administered in a doctor’s office or similar setting.  For some drugs, there are generic alternatives, but they are often not used.  This is a side-effect of a bizarre reimbursement methodology under which doctors are paid the cost of the drug plus a percentage markup.  Obviously the doctor makes more on a higher-priced drug.  The patient’s copay, however, is then also much higher.  UnitedHealth attempted to address this problem by paying oncologists a higher fee for using generics, thereby equalizing what they might make on use of a brand-name drug.

Participation in the program was voluntary and it was initiated throughout the period 2007 to 2016.  Here is an example of how crazy this world is.  Generic paclitaxel costs about $60 a month.  Brand-name paclitaxel costs $7200 a month.  The physician marks that up by 20%, making $1400, compared to only a few dollars on the generic.  So UnitedHealth raised the generic markup to around $500, way more than the actual cost of the drug.  Did doctors respond in a way that might show a little concern for our health spending problem and for patient out-of-pocket costs?  They did not.  For 12 generic cancer drugs, the prescribing patterns before and after the program was initiated were studied.  While 695 of 1905 oncology practices switched to the new fee schedule (what the hell is wrong with the rest of you oncologists), after adjusting for differences between switchers and non-switchers, there was little effect on treatment patterns or spending.  Drug spending was about half of all cancer treatment costs for patients included in the study, and these patients had an average out-of-pocket drug cost of $700.  The doctors who selected the new fee schedule were already more likely to be a little more cost conscious, but they could have improved their behavior further and didn’t.  I would really like to hear whatever lame explanation oncologists would offer for not using generics when they are available.  It isn’t just drug companies that are often greedy and more interested in looking out for their own financial interests instead of patients’ overall welfare.  But it is more depressing and despicable when it is physicians who do it.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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