There’s little doubt oncology drug spend will continue to grow at an unsustainable pace, as the drug pipeline pumps out high-priced therapies.
But as we look ahead, there are a few developments that have the potential to bend that curve—up or down—over time.
Here are the three trends we’ll be watching:
Drug Pipeline: Significant increase in spending for breast cancer—and improved outcomes
We at NCH are often quick to point out when new cancer drugs fail to deliver outcomes to match their sky-high price tags. An oft-cited study found that across 71 FDA approvals for solid tumors, survival increased just 2.1 months, on average.
So, we’ve been thrilled to see recent developments in breast cancer treatment that may truly transform patient outcomes. Over the last 18 months, the FDA has approved three drug indications that offer major improvements to survival. Not only are these drugs expensive, but the new indications allow them to be used for much larger subsets of patients. So, plans should brace for a surge in breast cancer spending—these drugs will be game changers both clinically and financially.
Providers: Continued consolidation of oncologists—and more difficulty negotiating favorable rates
Since 2015, there has been an 18% decline in the number of medical oncology practices, and 40% of all medical oncologists are expected to work in the largest 5% of practices. These consolidations occur more frequently in regions that already have seen decreases in hospital competition. Radiation oncology has witnessed similar trends.
As our health plan partners know, when local competition goes down, costs frequently go up. Dominant market players use their leverage to negotiate deals more favorable to them. Continued consolidation, in combination with drug costs, is a double whammy for those seeking to manage oncology spend.
Policy: Future relief from IRA provisions—but potentially increased cost pressure to providers and plans
Over time, patients and plans can expect a dose of relief on spiraling drug costs as three key provisions of the Inflation Reduction Act (IRA) take effect. First, starting this October, pharmaceutical manufacturers with drug prices that rise faster than inflation will be penalized with rebates.
Other provisions take longer to kick in. Beginning in 2025, Medicare beneficiaries will have a $2,000 cap on out-of-pocket expenses for Part D drugs, including oral cancer drugs. The IRA will also empower the federal government to negotiate prices of top 50 drugs with the highest Medicare spending that have no biosimilar or generic competition—excluding orphan drugs. Those new prices won’t go into effect until 2026 for the first 10 Part D drugs that the government decides to negotiate, although those drugs will be selected this year. Negotiated Part B drug prices won’t take effect until 2028.
We hope that these IRA provisions will help keep cancer drugs costs in check. Still, we should not hold our breath for a dramatic slowdown. Consider that Medicare cannot negotiate on Part D drugs for seven years post FDA approval, and on Part B drugs for 11 years. High-cost new therapeutics will stay on the market for years before they face the possibility of negotiation.
Three ways health plans and NCH can respond to these trends.
So, even with positive news on the legislative front, our industry can expect to see cancer drug spend stay on its steep trajectory. We believe that blunting this increase requires that plans take active—and even bold—steps to challenge the status quo.
First, as FDA approvals continue apace, we need to look beyond clinical compendia. There can be dramatic differences in outcomes, toxicity and cost between drugs on compendia for an indication. We need to leverage the primary medical literature and real-world evidence to determine what is the best path for patients. This is where our clinical team has been focused—on aligning with providers to eliminate use of regimens that are compendia-approvable but low value.
Next, we need to aggressively pilot new programs that aim to reduce costs without sacrificing quality of care. Some of the biggest opportunities to create value in cancer care are on the horizon, like moving infusions into the home. But it’s going to take experimentation and creativity to find models that work. Our efforts to pilot home-based cancer care have run across barriers: Workforce shortages affected the ability to commit to at-home nursing support for infusions, and home health agencies may be incentivized by higher drug margins to use more expensive drugs. In 2023, we’re partnering with plans to reinvigorate our efforts here, and in other areas such as early palliative care referrals.
Plans need to align with more oncologists via value-based payment models. Through these models, we can ensure that providers are kept whole financially when they opt for drug regimens that are less expensive, but equally effective, as higher costs ones. As Medicare negotiates prices on more oncology drugs, we might begin to see more oncologists warming to such arrangements. The Community Oncology Alliance expects a roughly 50% reduction in the add-on payments that providers receive through buy-and-bill reimbursement for negotiated cancer drugs. In this environment—still five years away—alignment between plans and providers could help ensure that community-based cancer care remains financially viable.
It is becoming even harder to bend the trend in cancer spend—success will require deep expertise in oncology, relationships with providers, and creative solutioning to figure out the best opportunities to create value.
About the Authors
As Associate Chief Medical Officer, Dr. Monica Soni works to ensure high-quality, cost-effective care for patients and the best possible experience for providers. She is a board-certified, practicing internal medicine physician with over a decade of experience in both inpatient and outpatient safety net care. Immediately prior to joining New Century Health, Dr. Soni served as the director of specialty care for the Los Angeles County Department of Health Services, the second-largest municipal health system in the United States. She is also an assistant clinical professor within the UCLA Department of Medicine.
As the chief medical officer of New Century Health, Dr. Andrew Hertler is responsible for the advancement of the company's clinical quality and value-based strategy, utilization management policies and clinical thought leadership initiatives. A practicing board-certified oncologist for 30 years, he is a nationally recognized leader in oncology clinical practice. Dr. Hertler has volunteered on a number of American Society of Clinical Oncology (ASCO) committees, including the Clinical Practice, Quality of Care and Payment Reform Committees, as well as the Quality Oncology Practice Initiative Certification Program Oversight Council.