Cost of Biologics Therapy Soars Above Other Cancer Expenses

Debra Patt, MD, MPH, MBA

Biologics therapy spending soared several hundred percent from 2004 to 2014; but despite rising treatment costs in general, oncology spending kept pace with spending for all categories of medical care, according to a report on Medicare and commercial data from the Community Oncology Alliance (COA).

“There has been a long-held belief in research and policy circles that cancer care costs in America have gone up disproportionately as compared to other health care costs,” said Debra Patt, MD, MPH, MBA, a practicing oncologist at Texas Oncology and a COA board and study team member. “This study shows that this commonly held belief is not supported by the evidence.”

The study by Milliman, a global actuarial and consulting firm, also noted a dramatic shift in site-of-service for chemotherapy infusion from community oncology centers to more expensive hospital outpatient departments, which has added to the rise in the cost of cancer care overall.

Table 1: Infused chemotherapy drug spending by site of service

Source: Based on Milliman analysis of the 2004-2014 Truven MarketScan data and Medicare 5% sample data

For example, whereas roughly 90% of commercially insured chemotherapy infusion was done in physician offices in 2004, by 2014 nearly 60% of commercial infusion was being done in hospital outpatient centers, according to the report (Table 1). The report estimated that Medicare would have saved $2 billion had there been no change in site-of-service for chemotherapy infusion from 2004 to 2014.Various categories of oncology care spending went up dramatically, according to the report, which distinguished between Medicare and commercial payer spending on these items. From 2004 to 2014, Medicare spending on emergency department care rose 132%, whereas related commercial spending was up 147%. For radiation oncology the respective numbers were 204% and 66%; and for biologic chemotherapy, 335% and 485% (Table 2).

Among the less dramatic increases were hospital inpatient admissions, which saw a 22% increase in Medicare spending versus 44% commercial; and cytotoxic therapy up 14% and 101%, respectively.

Table 2: 2004 to 2014 allowed cost trend by major service category for actively treated patients — Medicare and commercial

Source: Based on Milliman analysis of the 2004-2014 Truven MarketScan data and Medicare 5% sample data

While drug spending was up sharply, it amounted to just one-fifth of total costs among actively treated cancer patients in 2014, the report said. Therefore, overly focusing on drug costs in the effort to reduce overall oncology spending would be a misguided strategy, said Ted Okon, executive director of COA. The report comes out just shortly after The Centers for Medicare & Medicaid Services announced a plan to modify physician reimbursement for Medicare Part B drug expenses. Okon said the findings are evidence that the proposed adjustment to payment rates would add to the difficulties of running an independent oncology practice and accelerate the trend of consolidation among cancer treatment centers that is contributing to higher costs of care.Okon said the report shows that more attention needs to be paid to the use of radiation therapy, given that the increase in spending in this category was among the highest of those looked at. “I think we have to do a better job in general of making sure all of that is appropriate use.” An evaluation also needs to be made of emergency department use, given the findings, Okon said.

The report included an analysis of site-of-care payment differences between outpatient centers and independent oncology clinics offering chemotherapy infusion. The report cited a $6,500 lower cost on average for Medicare beneficiaries receiving chemotherapy infusion at a physician’s office versus a hospital outpatient setting.

While the cost of drugs is not solely at fault for the rising cost of cancer care, there has been a plethora of new drugs approved and new indications approved for existing drugs, all of which has contributed to rising expense, the report noted. Over 70 new drugs and biologics were approved for cancer indications over the 11 years of cost data looked at by Milliman. “In each of the past three years, more than 20 therapies have been either approved to treat cancer or received new cancer indications,” the report said.

In addition, patient survival rates are increasing, which also leads to greater, long-term treatment costs, the report said, citing the example of treatment for multiple myeloma, for which the 3-year survival rate was 42% during the 1980s and climbed to roughly 66% in the 2000s with the introduction of thalidomide analogs and proteasome inhibitors.

Over the 11 year study period, patient costs increased 35.2% for the Medicare population, 36.4% for the actively treated cancer population, and 34.8% for the noncancer population. For the commercially insured, the cost increases were 62.9% for the total population, 62.5% for the actively treated cancer population, and 60.8% for the noncancer population.

Also among the findings, the prevalence of cancer increased between 2004 and 2014 from 7.3% to 8.5% (a 16% increase) in the Medicare fee-for-service (FFS) population and from 0.7% to 0.9% (a 26% increase) in the commercially insured population, according to the study. However, the prevalence of actively treated cancer remained relatively stable for both populations: 2.7% in 2004 and 2.6% in 2014 for the Medicare FFS population and 0.4% in both 2004 and 2014 for the commercial population.

The report was commissioned by COA and received supportive funding from the pharmaceutical industry, including Bayer, Bristol-Myers Squibb, Eli Lilly and Co., Janssen Pharmaceutica, Merk, Pfizer, Takeda, and the Pharmaceutical Research and Manufacturers of America.

A full copy of the study, methodology and detailed appendices is available on the COA website at www.communityoncology.org/costdrivers.