New and improved cancer treatments have the potential to save lives, but only for those who can afford the seemingly ever-growing price tag. Experts break down the financial challenges faced by payers and predict what managed care markets may see down the road.
Cancer is one of the costliest conditions to treat in the United States, and national spending associated with this disease has been steadily rising in recent years. Progress made in the realm of immunology and genomics has led to a new wave of cutting-edge therapies that offer hope and promise for extending the life of cancer patients, but these emerging options have posed plenty of challenges as the health care system struggles to figure out how to pay for them.
As cancer’s collective price tag continues to rise, more of the financial burden is shifting to patients in the form of higher insurance premiums, deductibles, and copays. Some, in turn, wind up delaying care, cutting pills in half, or skipping treatment entirely.
Making improvements in this area begins with the understanding that adherence to treatment is closely linked to out-of-pocket costs, according to Brian Connell, executive director of federal affairs at the Leukemia & Lymphoma Society (LLS). Nearly half of cancer patients with out-of-pocket expenses over $2,000 abandon their treatment, he pointed out, referencing a 2018 Journal of Clinical Oncology study conducted by University of Pennsylvania researchers.
“Both commercial insurers and Medicare have too-often responded to the increased treatment costs by increasing cost-sharing for patients,” he said. “But even relatively modest cost-sharing deters patients from getting treatment, with devastating consequences.”
Last year, LLS released a report indicating that nearly 6 out of 10 blood cancer patients covered by traditional Medicare do not begin active treatment within three months of diagnosis. While a variety of factors may contribute to treatment delays or the decision to forgo treatment entirely, cost could play a crucial role.
Some acute leukemia patients on infused anti-cancer therapy incurred out-of-pocket costs of over $16,000 in their first year of treatment, for example, and Medicare lymphoma patients faced out-of-pocket costs of nearly $20,000 during that same stretch. For many, the high cost of care doesn’t end there. After two years, according to the report, traditional Medicare patients diagnosed with multiple myeloma incurred out-of-pocket costs averaging nearly $24,000.
Challenges Faced by Payers
Payers face plenty of difficulties when it comes to covering cancer treatment costs. Some experts have pointed out that the price of surgery, radiotherapy, and diagnostic tests are all on the rise. One of the most notable challenges, however, pertains to the cost of emerging treatments. Today, new cancer therapies that cost over $100,000 a year per patient have become the rule rather than the exception, explained Brandon Gee, a senior health care market analyst at Decision Resources Group.
And the high cost of cancer therapies will continue considering the number of complex immune-oncology drugs and next-generation biotherapeutics currently in the research pipeline—some of which could cost $1 million or more per patient. These may be one-time therapies that cure a patient and could be viewed as cost-effective when amortized over the course of a lifetime, Mr Gee said, but that would only make financial sense for insurers if they enrolled members for their lifetime.
Survivorship is another key challenge. As of 2019, there were an estimated 16.9 million cancer survivors in the United States, according to the National Cancer Institute—a number that is expected to exceed 21 million by 2029. As of 2019, 67% of survivors have survived five years or more following diagnosis, and 45% have survived at least 10 years. As more people survive cancer, Mr Gee pointed out that payers will need to increasingly view and manage the illness as a chronic condition like hypertension or diabetes.
Another critical issue is that payers are facing the prospect of provider consolidation. Many clinics have closed or been acquired by hospital systems in recent years. This poses a financial challenge for payers, said Mr Gee, because hospital-based cancer programs tend to charge higher fees for their services when compared to independent, community-based physician practices.
The Role of Precision Medicine and Prevention
So what can be done to improve adherence and outcomes while bending the cost curve? Some say precision medicine is a useful tool. Oncologists increasingly use a tumor’s molecular profile to zero in on therapies that provide the highest likelihood of a successful outcome, explained Joel Diamond, MD, an adjunct associate professor of biomedical informatics at the University of Pittsburgh who cares for patients at Handelsman Family Practice and serves as Chief Medical Officer for 2bPrecise.
Insights into patient genetics can help oncologists predict toxic responses to specific therapies, for instance, or prevent adverse drug reactions. In addition to contributing to primary cancer treatment, pharmacogenomic insights can also help physicians make better decisions about ancillary therapies, such as prescriptions for pain, nausea, or depression. This can, in turn, help reduce hospitalizations and improve adherence to the care plan.
“Of course, at the end of the day, the best way to decrease the cost of cancer care is to prevent the disease in the first place,” Dr Diamond said. Genetic testing can help pinpoint patients with heritable risks and enable providers to initiate aggressive preventative and screening measures.
But organizations looking to leverage precision oncology need IT functionality that goes beyond what is available in current EHRs, he added.
What Managed Care Markets Could See Next
Although payers have traditionally been relatively hands-off when it comes to managing cancer care, deferring to decisions made between oncologists and patients, Mr Gee indicated that the array of cancer cost containment challenges faced by payers are forcing them to reevaluate. More and more policies are requiring prior authorization or step therapy for cancer drugs, for example, as well as site of care policies that steer patients toward lower-cost facilities. Some payers are still reluctant to manage cancer care, however, so there is also a rise in the use of third-party utilization management vendors that payers engage and, in some cases, delegate risk to.
The use of clinical pathways is also on the rise. These evidence-based treatment algorithms direct physicians to treatments that are determined to be the most effective given a particular condition and a patient’s clinical characteristics. An estimated 60 individual health insurance plans in the United States are implementing this tactic, according to the American Society of Clinical Oncology (ASCO), and over 170 million individuals covered by those plans are potentially being treated under a plan-sponsored pathway.
Typically, cost would only come into play when two or more treatments are viewed as equally effective, in which case the pathway would point to the lowest-cost option, Mr Gee said. Still, he has begun to see scenarios that give cost higher priority and could lead to the recommendation of a treatment with less scientific consensus on effectiveness. “This is certainly controversial,” he added, “but if choosing a more affordable treatment improves adherence, the argument could be made that the net impact on patient care is positive.”
As payers continue to vertically integrate with specialty pharmacies and PBMs, they are also increasingly forcing providers to obtain specialty drugs through those channels. While this practice enables payers to avoid the markups associated with physicians buying and billing for drugs, Mr Gee sees this development as a double-edged sword.
“Independent community-based oncology practices tend to rely heavily on buy-and-bill revenue, so undermining that revenue stream exacerbates the provider-consolidation trend already challenging payers,” he said. “I think you’ll increasingly see payers try to balance their insistence that specialty drugs be acquired through their own specialty pharmacies with other financial incentives for practices that, for example, adhere to clinical pathways or sign value-based contracts.”
As he looks ahead, Mr Gee predicts that payers will begin to evaluate deals with emerging mega networks like OneOncology, Quality Cancer Care Alliance, American Oncology Network, and National Cancer Care Alliance in order to preserve community oncology. The implementation of clinical pathways will accelerate, he added, and the type of innovation seen in payer-provider contracting will likely move to pharma contracting, with more in the way of alternative and value-based agreements.
Other predictions include the use of subscription model pricing to deal with expensive one-time, curative therapies. The best-known examples of this strategy are contracts that state Medicaid programs have initiated for Hepatitis C drugs like Sovaldi and Harvoni. Under these types of contracts, also referred to as Netflix models, payers are charged a set amount for unlimited patient access to a drug for a certain stretch of time. Those hepatitis C drugs are very expensive, Mr Gee noted, but they are also curative. In that sense, they are similar to some of the emerging cancer therapies that have jaw-dropping price tags but require just a single course of treatment.
“Payers might view the subscription model as a useful way of handling an expensive one-time cancer therapy because it would provide a definitive and capped cost regardless of how many members end up needing the treatment,” he said. The mortgage model is another alternative pricing strategy that could help payers deal with emerging curative cancer therapies by spreading the large expense over time.