As the costs of new cancer drugs skyrocket—they averaged $150,000 in 2017, nearly double the average in 2013—health plans are increasingly looking to oncologists for help managing costs. Yet until more oncologists take direct responsibility for value-based prescribing decisions, and can keep up with the pace of innovation, we’ll just end up converting what used to be a death sentence into a financial life sentence.
Let’s be clear: As oncologists, we want to do what’s best for each individual patient—the most effective treatments with the fewest possible side effects. If a new drug is a game-changer, we want our patients to have it, and cost may be a secondary consideration.
Still, there are many cases in which the options for treating a patient’s cancer will have nearly identical clinical outcomes, but the costs are dramatically different.
Take, for instance, two medications that prevent bone fractures in patients with breast cancer, each with similar effectiveness and side effects: One costs Medicare about $2,300 a year, while the other costs about $550 a year.
In other cases, it’s an issue providing treatment over more appropriate timeframes: Many patients receive medications to regrow their white blood cells and prevent infections. Often, the best choice is a short-acting growth factor that lasts a few days and costs $100 to $200. But physicians frequently still order a longer-acting, brand name drug that costs $3,000—providing treatment that goes beyond what patients need.
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Why don’t oncologists select these less expensive options? One reason is that it’s hard to keep up. When new treatments hit the market, they change the calculus for the most effective—and cost-effective—option. It’s nearly impossible for the individual oncologist to keep up, and sometimes, drugs that appeared groundbreaking when they hit the market turn out to be no better than older, less expensive drugs.
But in all honesty, value isn’t always top of mind. Oncologists understandably focus on helping their patients live as well as they can, for as long as they can. They aren’t always investigating which drugs are equally effective as well as more economically friendly.
The challenge goes beyond educating oncologists on their options and the importance of using value-based regimens. The problem is that the standard oncology practice business model doesn’t reward physicians for prioritizing value. In many cases, these practices see their profitability slip by going with equally effective but less-expensive medications.
Here’s why: A large chunk of profit margin and revenues doesn’t come from services and care, but from a markup on the drugs above what the practice pays for them. Reimbursement from provider-sourced medications is often called “buy and bill.” We buy the drugs and, after they’re administered, we bill the payer at a markup. For some practices, these markups can account for about a third of revenues.
It’s simple math—the more expensive a drug you order, the more your practice receives.