Medicare Unable to Control Rising Costs of Cancer Care

Roxanne Nelson

February 06, 2009

February 6, 2009 — Spending on cancer drugs has risen faster than spending in many other areas of healthcare in the United States, and much of this cost has been borne by Medicare. Patients 65 years and older accounted for more than half (56.2%) of all cancers diagnosed in the United States between 1998 and the end of 2002. But even though the Centers for Medicare and Medicaid Services is by far the largest healthcare purchaser in the country, federal laws restrict its ability to negotiate pricing or to freely manage the use of anticancer drugs.

According to a health policy report that appears in the February 5 issue of the New England Journal of Medicine, these laws place more limitations on cancer therapies than on therapies in other areas of healthcare, and hamper Medicare's ability to reign in costs. Spending for Medicare Part B, which covers drugs administered in a physician's office setting (of which cancer treatments make up a large proportion), rose from $3 billion in 1997 to $11 billion in 2004.

Peter Bach, MD, associate attending physician at Memorial Sloan-Kettering Cancer Center, in New York City, and the author of the report, points out that this is an increase of 267%. In comparison, overall Medicare spending rose only 47% — from $210 billion to $309 billion — during the same time period.

"The law is special when it comes to cancer drugs, and I'm not surprised to see the prices rising faster than for other areas of healthcare," said Dr. Bach.

Drug Costs Rising

In part, the cost of cancer care has risen because of advances in diagnostic and surgical techniques and pharmaceutical innovations. "But there's no question that the key driver is the cost of the drugs," he told Medscape Oncology. "When drugs cost thousands of dollar a month, then treatment can get very expensive."

But there's no question that the key driver is the cost of the drugs.

Of concern to health economists, said Dr. Bach, is that, at least in some cases, the cost of oncology drugs appears to be rising faster than the health benefits associated with them. Several experts have suggested a pattern of "diminishing returns," for example, in the treatment of metastatic colorectal cancer.

One 2007 report (J Clin Oncol. 2007;25:180-186) notes that until 1996, the only available treatment for colorectal cancer was fluorouracil plus leucovorin, at a cost of less than $100 for a 6-month course. Regimens that added irinotecan or oxaliplatin cost $20,000 to $30,000 for the same 6-month course, and adding bevacizumab contributes an additional $24,000. The cost of weekly cetuximab alone exceeds $50,000. Thus, the authors write, the aggregate drug cost for treating patients with metastatic colorectal cancer is $150,000 to $200,000 for an additional year of survival, compared with fluorouracil plus leucovorin alone.

The American Society of Clinical Oncology (ASCO) "has recognized and is concerned about the rising cost of cancer care, and that these costs are not sustainable," said Richard Schilsky, MD, president of ASCO. "Our view at ASCO is that all physicians need to be practicing evidence-based medicine, and that will help to control costs, and continuing cancer research will help us decide which treatments will work best for which patients."

An example, Dr. Schilsky told Medscape Oncology, is the extensive evidence regarding KRAS mutations and cetuximab. "That's the kind of evidence that can help guide us in choosing therapies," he said.

However, discussions must also look at clinical efficacy and not just cost. "If you have several drugs or regimens that are commonly used, we must look at which one is most effective," he said. "Selecting the optimal regimen also depends on the individual patient's unique needs."

Unable to Employ Cost-Saving Strategies

Dr. Bach believes that the rapid growth of cancer spending can be largely attributed to Medicare's unique legislative and regulatory framework that shields cancer drugs from strategies that healthcare payers typically use to control spending.

For other types of drugs, Medicare employs a number of strategies to control costs. These include limiting coverage of payment, encouraging price competition among manufacturers of interchangeable drugs, and control of both use and prices. However, Medicare is unable to employ these approaches when it comes to cancer therapies.

Medicare is required by law to provide coverage of any drug used in an "anticancer chemotherapeutic regimen" that is for a "medically accepted indication." These terms have been broadly interpreted to mean uses approved by the US Food and Drug Administration, or that are listed in drug compendia, or that are supported by peer-reviewed medical literature.

For Medicare Part D, which took effect in 2006 and includes oral drugs that are obtained from a pharmacy, the private plans that implement the program are required to cover virtually all of the cancer drugs that were available at the time the program began. In addition, Dr. Bach notes, a complicated set of laws and regulations prevents Medicare from deeming that related cancer drugs are interchangeable.

The increased total costs of cancer care leads to higher out-of-pocket expenses for patients. Medicare contains premiums, deductibles, copays, and coinsurance, all of which are paid by the patient. But another consequence of rising costs is the effect on physician fees.

"Medicare is budget neutral," explained J. Leonard Lichtenfeld, MD, MACP, who is deputy chief medical officer for the national office of the American Cancer Society. "If costs increase in one area, they have to be reduced somewhere else. The physician fee schedule is where they go to reduce the cost and keep the budget equation. That is an unintended consequence of trying to keep the balance."

That is an unintended consequence of trying to keep the balance.

The population is aging, and that is a risk factor for cancer, one that will place further demands on Medicare. "The use of biologics is also rapidly increasing, and these agents are very expensive," Dr. Lichtenfeld said. "We have to look down the road at why this program isn't sustainable, and we are going to have to address it."

According to Dr. Bach, policymakers are going to have to decide whether they want to see lower prices and reduced spending on cancer drugs by Medicare. If they do, then it must be determined how this can be achieved without stifling beneficial innovation. "One possible approach," he writes, "is to judiciously amend or reverse the laws that limit Medicare's flexibility with respect to cancer drugs, while moving rapidly toward the creation of a center for comparative effectiveness that could guide Medicare's actions."

Increasing Off-Label Use

Recent changes in Medicare policy will expand reimbursement for cancer drugs used off label. Until last year, Medicare relied on a single compendium, which was published by the American Hospital Formulary System, to guide reimbursements for off-label usage, but now they will be using 4 different compendia.

Several articles in the popular media, including the Wall Street Journal and the New York Times, have questioned whether this will increase healthcare spending and lead to inappropriate drug use. Other concerns are possible conflicts of interest, because some of these new compendia appear to have financial ties to the pharmaceutical industry.

Off-label use is very common in cancer care, and Dr. Lichtenfeld emphasized that Medicare has always covered off-label drug use. "Medicare has been paying for off-label use for many years, but now we really need better reference points — for what is and what is not appropriate," he said. "This is not a perfect solution, but it is better than what we have now."

Another challenge is that much of Medicare's decision making is not done on a national basis, but is done by regional Medicare providers. "The regional carriers can make their own decisions about what they will or will not pay for," said Dr. Lichtenfeld. "By at least having some reference standard, whether it relies on expert opinion or is evidence based, there is now some reference point we can apply in the multiple places where decisions are being made."

Although there are advantages and disadvantages to off-label drug use, Dr. Schilsky pointed out that regulatory decisions often lag behind evidence. "We often encounter situations in trials and compendia that support off-label usage, but regulatory decision making lags behind," he said. "We don't want to exclude a drug if there is reasonably good evidence to support its use."

The issue is primarily in the strength of the evidence. "There is no question that if drugs are available and covered, they will be used, even if evidence is limited," Dr. Schilsky said. "This will drive up the cost of care, especially when drugs of unknown evidence are being used, and it may also discourage enrollment in clinical trials."

"Medicare does need to make evidence-based reimbursement decisions, and when the evidence is very limited, enrollment in a clinical trial may be a better option for the patient," he said. "Decision making can be improved with more head-to-head trials."

Dr. Bach reports receiving consulting fees from Genentech, Wyeth, and Abraxis; lecture fees from Genentech, Biogen Idec, and Johnson & Johnson; and reports serving as a senior advisor to the Centers for Medicare and Medicaid Services from February 2005 to November 2006.

N Engl J Med. 2009 360:626-633.


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