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Implications of Proposed Medicare Reforms to Counteract High Cancer Drug Prices

Implications of Proposed Medicare Reforms to Counteract High Cancer Drug Prices The high cost of cancer drugs is widely recognized as unsustainable and poses a threat to the long-term solvency of health care systems. The price of new cancer drugs often exceeds $100 000 per year or course of treatment, and price is not related to the novelty of a drug’s mechanism of action, the regulatory basis for approval, or the magnitude of the drug’s benefit.1 To address these concerns, the Centers for Medicare & Medicaid Services (CMS)2 recently announced 6 pilot programs to the Part B program aimed at lowering costs and improving value.2 The Part B program provides payments for drugs administered in a physician’s office or outpatient clinic. In 2015, Medicare Part B spending accounted for $20 billion.2 In this Viewpoint, we consider the 6 proposed measures, which will be tested prospectively with staggered implementation, and their broader implications for the oncologic community. The discussion focuses on cancer treatment because oncologic drugs are frequently administered by infusion, comprise a major portion of Part B drugs, and have been widely criticized for cost, but the lessons apply to other fields. Improving Incentives for Best Clinical Care The first proposal would end the customary practice in which Part B reimbursement includes a 6% add-on payment to the average sales price of a drug and replace this payment with a 2.5% add-on along with a $16.80 flat fee per drug per dose—a proposal considered budget neutral to CMS. The stated intent is to remove the financial loss facing physicians “for selecting lower-cost drugs… when these drugs are as good or better for patients based on the evidence.”2 For instance, current incentives would favor the use of nab-paclitaxel over paclitaxel in metastatic breast cancer, given its higher price, even though available evidence suggests that the drugs are comparable or even that nab-paclitaxel is less effective.3 The Table illustrates 6 examples of oncology treatment in which 2 alternative regimens are commonly used, largely considered equipotent, yet differ, often substantially, in cost. The fourth column shows the reimbursement for each regimen under current 6% rules, and the fifth column shows the reimbursement under proposed rules. In all cases, although the magnitude of the incentive is decreased, in no case does the directionality change. In other words, physicians will continued to be incentivized to select the more costly option, but to a lesser degree. Whether this reconfiguration will change practice remains unknown, and this particular measure has already been criticized by professional organizations.5 What is clear is that the proposed measure will decrease the absolute and relative reimbursement to oncologists. Table. Example of the Potential Financial Effect of Proposed Physician Reimbursement Plan View LargeDownload Discounting or Eliminating Patient Cost Sharing The second proposal is to discount or eliminate patient cost sharing, which can be up to 20% for most Part B medications. This reform could potentially have large implications because a diagnosis of cancer remains a major cause of personal bankruptcy. Prior work also suggests that higher cost sharing is associated with poorer adherence with beneficial medicines,6 which may paradoxically increase downstream health care expenditures, as systems play catch-up to unnecessary complications and poor outcomes. One concern, however, is that decreased out-of-pocket expenses will shift costs from pharmaceutical-sponsored patient assistance programs to payers. Nevertheless, whether reducing cost sharing could be cost saving is an important idea worthy of empirical study. Feedback on Prescribing The third proposal would inform physicians how their prescribing or drug usage fared in comparison to geographic and national trends. Although this information may seem simplistic, a body of evidence from behavioral economics suggests that simply informing how individuals perform with respect to the average or desired performers is a strong motivator for change. Physicians who frequently prescribe higher-price drugs of uncertain superiority may be nudged toward established norms. Indication-Based Pricing Bach7 has previously outlined a strategy for cancer drugs that would vary reimbursement of a single drug based on the effectiveness of that medication for each specific purpose, termed indication-based pricing. For instance, erlotinib is highly effective in metastatic non–small cell lung cancer but has marginal effectiveness for metastatic pancreatic cancer. An indication-based pricing model would reimburse more when the drug is used for conditions for which it provides greater benefit. Just last year, Express Scripts Holding announced that it would be moving to this model for certain cancer drugs.8 Reference Pricing The key question in the fifth proposal, reference pricing, is if 2 drugs are widely considered to offer comparable benefits (eg, bevacizumab, ziv-aflibercept, and ramucirumab in second-line colon cancer) but one drug costs half the price, why choose the more expensive one? This philosophy underlies the concept of reference-based pricing whereby in situations for which multiple drugs offer similar efficacy, Medicare would reimburse at the rate of the lowest-priced drug, with patients free to pay the difference for more costly substitutions. Previously, similar measures had been used for gonadotropin-releasing hormone agonists and antagonists used in the treatment of prostate cancer and have been shown to affect prescribing patterns, reducing spending by an estimated $30 million for these products alone.9 Risk-Sharing Based on Outcomes The sixth proposal would seek to link drug outcomes to reimbursements. Many drugs used in oncology offer limited benefits for a subset of patients but perhaps larger benefits for another group of patients. Linking pricing to outcomes incentivizes companies to find drugs that work for more patients or to encourage the use of drugs in subgroups known to achieve greater benefit. For example, in 2006, after the National Institute of Health and Clinical Excellence concluded that bortezomib did not meet its cost-effectiveness threshold for myeloma, the United Kingdom entered into an agreement with Johnson & Johnson whereby the government would only pay for patients who achieved a response defined as decline in monoclonal (M)-protein of 25%.10 Challenges with this model include the increased administrative burden to track outcomes, uncertainty as to whether this degree of M-protein reduction (less than established response criteria) predicts patient-centered benefits, and how disagreements over whether the end point is achieved are resolved. Given that response rate is a common surrogate end point in cancer, payment for responders may effectively provide CMS with a fixed discount (ie, the predictable percentage of nonresponders), although it will do so with marked administrative burden (tracking those who respond). Conclusions The high cost of prescription drugs is an important concern and threatens health care budgets. Measures to reduce the rate of increase in health care costs are needed, and in its proposals, the CMS has demonstrated a willingness to consider diverse alternatives. What is most important is that proposed changes will not be simply implemented in a uniform manner; instead, CMS has chosen to use prospective experimentation, testing proposals in different sites, in some cases using zip code–level randomization.2 However, policy solutions—even those that are carefully and cleverly conceived—may have unanticipated real-world implications and consequences. Other solutions may simply be ineffective. Yet the problem is too important to continue the status quo, and ideally 1 or more of these proposals will succeed at ensuring effective prescription drugs can continue to be given to the patients who need them the most. Like good medicine, good policy must be evidence based. Back to top Article Information Corresponding Author: Vinay Prasad, MD, MPH, Oregon Health & Science University, 3181 SW Sam Jackson Park Rd, Portland, OR 97239 (prasad@ohsu.edu). Published Online: May 5, 2016. doi:10.1001/jama.2016.5998. Conflict of Interest Disclosures: Both authors have completed and submitted the ICMJE Form for Disclosure of Potential Conflicts of Interest and none were reported. References 1. Mailankody S, Prasad V. Five years of cancer drug approvals. JAMA Oncol. 2015;1(4):539-540.PubMedGoogle ScholarCrossref 2. CMS proposes to test new Medicare Part B prescription drug models to improve quality of care and deliver better value for Medicare beneficiaries [press release]. https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2016-Press-releases-items/2016-03-08.html. Accessed March 8, 2016. 3. Rugo HS, Barry WT, Moreno-Aspitia A, et al. Randomized phase III trial of paclitaxel once per week compared with nanoparticle albumin-bound nab-paclitaxel once per week or ixabepilone with bevacizumab as first-line chemotherapy for locally recurrent or metastatic breast cancer. J Clin Oncol. 2015;33(21):2361-2369.PubMedGoogle ScholarCrossref 4. 2016 ASP drug pricing files. https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/2016ASPFiles.html. Accessed April 28, 2016. 5. Dangi-Garimella S. ASCO, COA unhappy with proposed CMS Part B reimbursement model. http://www.ajmc.com/newsroom/asco-coa-unhappy-with-proposed-cms-part-b-reimbursement-model. Accessed April 28, 2016. 6. Dusetzina SB, Winn AN, Abel GA, Huskamp HA, Keating NL. Cost sharing and adherence to tyrosine kinase inhibitors for patients with chronic myeloid leukemia. J Clin Oncol. 2014;32(4):306-311.PubMedGoogle ScholarCrossref 7. Bach PB. Indication-specific pricing for cancer drugs. JAMA. 2014;312(16):1629-1630.PubMedGoogle ScholarCrossref 8. New push ties cost of drugs to how well they work. http://www.wsj.com/articles/new-push-ties-cost-of-drugs-to-how-well-they-work-1432684755. Accessed April 28, 2016. 9. Least costly alternative policies: impact on prostate cancer drugs covered under Medicare Part B. http://oig.hhs.gov/oei/reports/oei-12-12-00210.pdf. Accessed April 28, 2016. 10. Neumann PJ, Chambers JD, Simon F, Meckley LM. Risk-sharing arrangements that link payment for drugs to health outcomes are proving hard to implement. Health Aff (Millwood). 2011;30(12):2329-2337.PubMedGoogle ScholarCrossref http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png JAMA American Medical Association

Implications of Proposed Medicare Reforms to Counteract High Cancer Drug Prices

JAMA , Volume 316 (3) – Jul 19, 2016

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References (8)

Publisher
American Medical Association
Copyright
Copyright © 2016 American Medical Association. All Rights Reserved.
ISSN
0098-7484
eISSN
1538-3598
DOI
10.1001/jama.2016.5998
Publisher site
See Article on Publisher Site

Abstract

The high cost of cancer drugs is widely recognized as unsustainable and poses a threat to the long-term solvency of health care systems. The price of new cancer drugs often exceeds $100 000 per year or course of treatment, and price is not related to the novelty of a drug’s mechanism of action, the regulatory basis for approval, or the magnitude of the drug’s benefit.1 To address these concerns, the Centers for Medicare & Medicaid Services (CMS)2 recently announced 6 pilot programs to the Part B program aimed at lowering costs and improving value.2 The Part B program provides payments for drugs administered in a physician’s office or outpatient clinic. In 2015, Medicare Part B spending accounted for $20 billion.2 In this Viewpoint, we consider the 6 proposed measures, which will be tested prospectively with staggered implementation, and their broader implications for the oncologic community. The discussion focuses on cancer treatment because oncologic drugs are frequently administered by infusion, comprise a major portion of Part B drugs, and have been widely criticized for cost, but the lessons apply to other fields. Improving Incentives for Best Clinical Care The first proposal would end the customary practice in which Part B reimbursement includes a 6% add-on payment to the average sales price of a drug and replace this payment with a 2.5% add-on along with a $16.80 flat fee per drug per dose—a proposal considered budget neutral to CMS. The stated intent is to remove the financial loss facing physicians “for selecting lower-cost drugs… when these drugs are as good or better for patients based on the evidence.”2 For instance, current incentives would favor the use of nab-paclitaxel over paclitaxel in metastatic breast cancer, given its higher price, even though available evidence suggests that the drugs are comparable or even that nab-paclitaxel is less effective.3 The Table illustrates 6 examples of oncology treatment in which 2 alternative regimens are commonly used, largely considered equipotent, yet differ, often substantially, in cost. The fourth column shows the reimbursement for each regimen under current 6% rules, and the fifth column shows the reimbursement under proposed rules. In all cases, although the magnitude of the incentive is decreased, in no case does the directionality change. In other words, physicians will continued to be incentivized to select the more costly option, but to a lesser degree. Whether this reconfiguration will change practice remains unknown, and this particular measure has already been criticized by professional organizations.5 What is clear is that the proposed measure will decrease the absolute and relative reimbursement to oncologists. Table. Example of the Potential Financial Effect of Proposed Physician Reimbursement Plan View LargeDownload Discounting or Eliminating Patient Cost Sharing The second proposal is to discount or eliminate patient cost sharing, which can be up to 20% for most Part B medications. This reform could potentially have large implications because a diagnosis of cancer remains a major cause of personal bankruptcy. Prior work also suggests that higher cost sharing is associated with poorer adherence with beneficial medicines,6 which may paradoxically increase downstream health care expenditures, as systems play catch-up to unnecessary complications and poor outcomes. One concern, however, is that decreased out-of-pocket expenses will shift costs from pharmaceutical-sponsored patient assistance programs to payers. Nevertheless, whether reducing cost sharing could be cost saving is an important idea worthy of empirical study. Feedback on Prescribing The third proposal would inform physicians how their prescribing or drug usage fared in comparison to geographic and national trends. Although this information may seem simplistic, a body of evidence from behavioral economics suggests that simply informing how individuals perform with respect to the average or desired performers is a strong motivator for change. Physicians who frequently prescribe higher-price drugs of uncertain superiority may be nudged toward established norms. Indication-Based Pricing Bach7 has previously outlined a strategy for cancer drugs that would vary reimbursement of a single drug based on the effectiveness of that medication for each specific purpose, termed indication-based pricing. For instance, erlotinib is highly effective in metastatic non–small cell lung cancer but has marginal effectiveness for metastatic pancreatic cancer. An indication-based pricing model would reimburse more when the drug is used for conditions for which it provides greater benefit. Just last year, Express Scripts Holding announced that it would be moving to this model for certain cancer drugs.8 Reference Pricing The key question in the fifth proposal, reference pricing, is if 2 drugs are widely considered to offer comparable benefits (eg, bevacizumab, ziv-aflibercept, and ramucirumab in second-line colon cancer) but one drug costs half the price, why choose the more expensive one? This philosophy underlies the concept of reference-based pricing whereby in situations for which multiple drugs offer similar efficacy, Medicare would reimburse at the rate of the lowest-priced drug, with patients free to pay the difference for more costly substitutions. Previously, similar measures had been used for gonadotropin-releasing hormone agonists and antagonists used in the treatment of prostate cancer and have been shown to affect prescribing patterns, reducing spending by an estimated $30 million for these products alone.9 Risk-Sharing Based on Outcomes The sixth proposal would seek to link drug outcomes to reimbursements. Many drugs used in oncology offer limited benefits for a subset of patients but perhaps larger benefits for another group of patients. Linking pricing to outcomes incentivizes companies to find drugs that work for more patients or to encourage the use of drugs in subgroups known to achieve greater benefit. For example, in 2006, after the National Institute of Health and Clinical Excellence concluded that bortezomib did not meet its cost-effectiveness threshold for myeloma, the United Kingdom entered into an agreement with Johnson & Johnson whereby the government would only pay for patients who achieved a response defined as decline in monoclonal (M)-protein of 25%.10 Challenges with this model include the increased administrative burden to track outcomes, uncertainty as to whether this degree of M-protein reduction (less than established response criteria) predicts patient-centered benefits, and how disagreements over whether the end point is achieved are resolved. Given that response rate is a common surrogate end point in cancer, payment for responders may effectively provide CMS with a fixed discount (ie, the predictable percentage of nonresponders), although it will do so with marked administrative burden (tracking those who respond). Conclusions The high cost of prescription drugs is an important concern and threatens health care budgets. Measures to reduce the rate of increase in health care costs are needed, and in its proposals, the CMS has demonstrated a willingness to consider diverse alternatives. What is most important is that proposed changes will not be simply implemented in a uniform manner; instead, CMS has chosen to use prospective experimentation, testing proposals in different sites, in some cases using zip code–level randomization.2 However, policy solutions—even those that are carefully and cleverly conceived—may have unanticipated real-world implications and consequences. Other solutions may simply be ineffective. Yet the problem is too important to continue the status quo, and ideally 1 or more of these proposals will succeed at ensuring effective prescription drugs can continue to be given to the patients who need them the most. Like good medicine, good policy must be evidence based. Back to top Article Information Corresponding Author: Vinay Prasad, MD, MPH, Oregon Health & Science University, 3181 SW Sam Jackson Park Rd, Portland, OR 97239 (prasad@ohsu.edu). Published Online: May 5, 2016. doi:10.1001/jama.2016.5998. Conflict of Interest Disclosures: Both authors have completed and submitted the ICMJE Form for Disclosure of Potential Conflicts of Interest and none were reported. References 1. Mailankody S, Prasad V. Five years of cancer drug approvals. JAMA Oncol. 2015;1(4):539-540.PubMedGoogle ScholarCrossref 2. CMS proposes to test new Medicare Part B prescription drug models to improve quality of care and deliver better value for Medicare beneficiaries [press release]. https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2016-Press-releases-items/2016-03-08.html. Accessed March 8, 2016. 3. Rugo HS, Barry WT, Moreno-Aspitia A, et al. Randomized phase III trial of paclitaxel once per week compared with nanoparticle albumin-bound nab-paclitaxel once per week or ixabepilone with bevacizumab as first-line chemotherapy for locally recurrent or metastatic breast cancer. J Clin Oncol. 2015;33(21):2361-2369.PubMedGoogle ScholarCrossref 4. 2016 ASP drug pricing files. https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Part-B-Drugs/McrPartBDrugAvgSalesPrice/2016ASPFiles.html. Accessed April 28, 2016. 5. Dangi-Garimella S. ASCO, COA unhappy with proposed CMS Part B reimbursement model. http://www.ajmc.com/newsroom/asco-coa-unhappy-with-proposed-cms-part-b-reimbursement-model. Accessed April 28, 2016. 6. Dusetzina SB, Winn AN, Abel GA, Huskamp HA, Keating NL. Cost sharing and adherence to tyrosine kinase inhibitors for patients with chronic myeloid leukemia. J Clin Oncol. 2014;32(4):306-311.PubMedGoogle ScholarCrossref 7. Bach PB. Indication-specific pricing for cancer drugs. JAMA. 2014;312(16):1629-1630.PubMedGoogle ScholarCrossref 8. New push ties cost of drugs to how well they work. http://www.wsj.com/articles/new-push-ties-cost-of-drugs-to-how-well-they-work-1432684755. Accessed April 28, 2016. 9. Least costly alternative policies: impact on prostate cancer drugs covered under Medicare Part B. http://oig.hhs.gov/oei/reports/oei-12-12-00210.pdf. Accessed April 28, 2016. 10. Neumann PJ, Chambers JD, Simon F, Meckley LM. Risk-sharing arrangements that link payment for drugs to health outcomes are proving hard to implement. Health Aff (Millwood). 2011;30(12):2329-2337.PubMedGoogle ScholarCrossref

Journal

JAMAAmerican Medical Association

Published: Jul 19, 2016

Keywords: antineoplastic agents,drug costs,pharmaceutical economics,medicare,reimbursement mechanisms,cancer therapy,medicaid

There are no references for this article.