Oncology 2011: Today's Payer Strategies and Tomorrow's Market Innovations

The comprehensive management of oncolytic therapy is only possible with the emergence of oncology pharmacy vendors within a unique distribution channel.

Introduction

Triggered by the nation’s attention to rising health care costs within a stagnant economy, health care payers (insurers and plan sponsors) are focused on the oncology sector for increased utilization management. This concern is driven by:

• An aging population with a high cancer incidence.

• A pharmaceutical pipeline filled with oncolytic agents, often replacing lower-cost items or used in combination therapy.

• Wide variations in prescriptive patterns, especially during endstage therapy.

• An entrenched dispensing model (buy-and-bill) which precludes payer controls.

• An affected population whose treatment goals are clouded with emotional needs.

In many aspects, the current landscape is similar to the late 1990s, which saw the emergence of specialty/biotech medications to treat niche disease states. As evident now with oncology, the biotech pipeline then was loaded with high-cost entrants that displaced lower-cost incumbents. Payer concerns were identical—how to manage the utilization and cost of this exploding sector.

The initial payer response was to reduce provider reimbursements as a way to curb billed charges. That strategy was ineffective as network disruptions, “creative” billing practices, and sub-optimal clinical outcomes offset any financial gains. On the whole, substantive payer controls became possible only when specialty pharmacy emerged as a unique distribution channel, permitting the comprehensive management of clinical and financial outcomes.

Premise

If the specialty/biotech experience from a decade ago offers a “teachable moment,” then the comprehensive management of oncolytic therapy is only possible with the emergence of oncology pharmacy vendors within a unique distribution channel. Without a dedicated pharmacy infrastructure, utilization management can never be optimal.

Validation

The premise is validated by experience. As with specialty medications, payers are responding with the same initial tactic: reduce oncology provider reimbursements. The application of ASP-based (average sales price— based) reimbursement has reduced provider margins. However, many community-based oncology practices have suffered financially, and their physicians have decided to either become staff-model employees, or exit the infusion business and transition patients to the hospital outpatient suite. (The plight of the community oncologist is well documented by the Community Oncology Alliance at www.communityoncology.org).

This initial strategy to curb reimbursements has yielded negligible results. The exit of community-based oncologists has reduced access to oncology services, especially in secondary markets. Furthermore, transitioning the referral to a hospital’s outpatient suite actually increases billed charges to the payer and out-of-pocket costs to the patient.

The next strategy payers used to manage specialty/biotech utilization— and are now applying to oncology—is a clinical pathway model. Insurers aggressively adopted treatment protocols to manage biotech therapies such as peginterferon (hep-C), blood modifiers, SYNAGIS, and others.

Today, the predominant strategy to manage oncology costs is to impose clinical pathways around the top tumor types. Consultants have emerged to advise payers on protocol development, reimbursement design, and payfor-performance models. However, the success of this model is still undetermined as the adoption of oncology pathways has hovered around 30%, at best, in the markets where they have been implemented.

If the underlying premise above is correct, comprehensive utilization management in the oncology sector will only be realized when oncology pharmacy emerges as a unique distribution channel. So, what will such a pharmacy provider look like?

Characteristics of an Oncology Pharmacy Vendor

First, the general structure for an oncology pharmacy provider calls for the hybridization of the centralized specialty pharmacy model with a local “home infusion—like” compounding pharmacy.

Dosing for chemotherapy changes 20% to 30% of the time on the morning of the dose, after the patient’s blood levels are determined. Local compounding is vital to address STAT dose changes, and this capability is imperative to gain physician adoption. Complementing the local compounding pharmacy is centralized pharmacy infrastructure to dispense oral oncolytics, oncology adjuncts, and maintenance medications.

Second, oncology pharmacy vendors will need to be credentialed as such. The American Medical Association has recommended a variety of credentials for physician practices dispensing oncolytics that may be applicable here. These include:

• USP-797 standards

• PCAB certification

• Positive-Negative Pressure Clean Room with external air exchange

In addition, basic compounding standards currently used in the home infusion network are also applicable.

These include:

• JCAHO certification

• Board Certified Oncology Pharmacists And finally, oncology-specific credentials are also necessary.

— Follow payer’s authorization process including:

• The use of biomolecular diagnostics

• The use of authorized generics when available

— The use of the most appropriate vial size

— Access to limited distribution drugs

— Ability to offer dosing consults to referring physicians

— Ability to triage appropriate patients to available Patient Assistance Programs

— Manage adherence (data suggest 25% of patients abandon oral oncolytics)¹

— Coordinate high-tech in-home infusion nursing for continuous infusions

— Provide needed injection/infusion supplies

Payer Support

Once the market deploys an oncology pharmacy infrastructure, payers will need to better define criteria on when and how chemotherapy will be used. The National Comprehensive Cancer Network (NCCN) offers evidencebased guidelines for most tumor types. Such guidelines can be stratified by costs and survivability rates to define preferred protocols.

However, most health plans do not typically employ hematologists/ oncologists on their medical management team to help with such decisionmaking. It is highly suggested that such resources are brought on to help define and defend the plan’s protocols, and more importantly, help “sell” the protocols to its network oncologists.

Second, the payer must consider a redesign of its reimbursements to oncologists. Today, the vast majority of practice revenues result from the drug markup. If the market in general wants physicians to derive incomes from cognitive services (versus drug margins), then reimbursements need to follow suit.

One suggestion is to develop a standardized Plan of Care for each designated preferred protocol, and pay oncologists a fee for completing the Plan of Care. Such tactics position cognitive services and clinical outcomes as the primary basis for payment.

Another payer strategy would be to create an “Oncology Benefit.” A key objective within such a benefit would be to encourage the use of preferred protocols and available generics under a tiered paradigm. A significant number of oncology medications lose patent protection over the next 3 to 5 years, offering substantial opportunities. Unless the payer’s oncology benefit promotes generic usage and preferred pathways, similar to strategies used now for traditional tablets/ capsules, cost control becomes more unlikely.

Finally, an aggregate review of clinical studies shows that most oncologists are fairly consistent with their first-line chemotherapy prescriptions. The huge variations happen in the latter stages of care, especially during last-effort salvage therapy. To better manage end-of-life care, incentives can be offered to oncologists to spend an hour to discuss treatment options and treatment costs with the patient and their family. Better information leads to better choices such as hospice, and may help to curb futile care.

Conclusions

Oncology is the problem du jour for payers striving to manage health care costs. As with the specialty/biotech sector, history offers a natural pathway to a solution: deploy oncology pharmacy infrastructure first to support traditional drug utilization management techniques.

As oncology pharmacy becomes a distinct distribution channel, payers will have the partnerships needed to finally manage the clinical and financial outcomes of chemotherapy. SPT

Bob M. Charles, MBA, worked at Express Scripts Inc to first manage the P&L of the St. Louis infusion branch, and then manage all the branches in the Western Region. After the division was sold, Mr. Charles was retained by the acquiring company, Option Care, as vice president of sales and marketing and was responsible for infusion and specialty pharmacy revenue budgets. Mr. Charles joined Priority Healthcare to develop a specialty pharmacy solution for oncolytic therapies. Experiences with specialty pharmacy and payer integration led Bob to Wellpoint Inc where he was a part of the creation of PrecisionRx Specialty Solutions, a payer-owned specialty pharmacy. He oversaw the rapid growth of the division, from its inception at a $60M annual revenue base to its current size of $1.2B in annual revenue, managing sales, account management, and program implementations. Currently, Mr. Charles is founder and principal of GeneriSys LLC, a generic drug purchasing cooperative that aggregates the volume (oral, injected, infused, and OTC drugs) of warehousing pharmacies to reduce cost and gain operational efficiencies.

Reference

1. "Patient and Plan Characteristics Affecting the Abandonment of Oral Oncolytic Prescriptions." The Journal of Oncology Practice.