Cancer Cost: Drugs Not the Primary Culprit

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Drivers of Cancer Cost: Drugs Not the Primary Culprit

Roxanne Nelson, BSN, RN

April 08, 2016



With all the publicity in recent years about the prices of cancer drugs, it has become a common belief that the cost of cancer care has risen disproportionately in comparison to other healthcare costs. But that might not be the case.

A new study, commissioned by the Community Oncology Alliance (COA) and conducted by the actuarial firm Milliman, shows that cost increases for a 10-year period (2004 to 2014) were essentially the same for cancer patients receiving active treatment as for the noncancer population.

This was true for patients covered by Medicare fee-for-service (FFS) and those covered by commercial insurance.

Another key finding was that the per-patient cost of drugs is increasing at a much higher rate than other components of care. These increases have been largely fueled by biologics that have entered the market, but increases in drug costs have been offset by slower growth in other components.

The third key finding of the study is that since 2004, the site of service for outpatient chemotherapy infusion has dramatically shifted from the lower-cost physician's office to higher-cost hospital outpatient settings.

"If you actually look at oncology costs and per-patient spending, we thought that it would have gone up during that time period," said COA board member David Eagle, MD, a practicing oncologist at Lake Norman Oncology in Mooresville, North Carolina, who was a member of the study team.

The costs of cancer care are escalating, but that can be attributed to a number of factors, such as demographics and survivorship, Dr Eagle told Medscape Medical News. But the study shows that the costs of cancer care are not rising more than the cost of care for other conditions, which, he said, is "somewhat of a surprising finding."
This is somewhat of a surprising finding.

There have been many recent studies and analyses looking at the factors contributing to the cost of cancer care, but this study looked at they way oncology dollars are being spent, Dr Eagle explained.

"This will help put it in better perspective," he said. "For example, drugs get all of the attention when it comes to cost, but they are really just 20%."

"When we put it into a pie chart, it's just one slice," Dr Eagle noted. "While drug costs are important, the whole pie chart needs to be scrutinized."

Drugs, of course, need to be part of the discussion on costs, "but they shouldn't be the only part of the discussion," he pointed out.

Increases in Drug Spending

The goal of the analysis was to identify trends in the overall and component costs of cancer care from 2004 to 2014 and to create comparisons in cost trends with the general population.

The researchers analyzed the annual prevalence and per-patient costs of those undergoing cancer therapy using the Medicare 5% sample claim database and the Truven MarketScan commercial claim database.

The analysis did not include drugs provided under Medicare Part D.

For Medicare beneficiaries, there was an annual per-patient increase of 35.2% for the total population, 36.4% for actively treated cancer patients, and 34.8% for the noncancer population

Findings were similar for those with commercial insurance. There was an annual per-patient increase of 62.9% for the total population, 62.5% for cancer patients, and 60.8% for the noncancer population.

As expected, the researchers did find large increases in spending for cancer drugs. The portion of these costs associated with all types of chemotherapy increased during the study period from 15% to 18% in the Medicare population and from 15% to 20% in the commercially insured population.

In particular, the portion of spending for biologic chemotherapies increased from 3% to 9% in the Medicare population and from 2% to 7% in patients with commercial insurance.

But while the portion of spending for cancer-directed pharmaceuticals increased during the study period, the portion of spending for inpatient care declined.

Site-of-Service Shift for Chemo

One of the most notable changes and cost drivers was the shift in the site of administration of chemotherapy — from the physician's office to the outpatient hospital setting.

From 2004 to 2014, the portion of chemotherapy infusions administered in hospital outpatient settings, which are generally more expensive than a physician's office, increased by at least 30%.

With this increase, there was a corresponding reduction in the use of the less-expensive physician's office.
Medicare spending would be about $2 billion lower if the site-of-service shift hadn't happened.

If the site of chemotherapy infusion in 2014 had been maintained at 2004 levels, the estimated Medicare FFS cost per patient would have been approximately 7.5% lower for Medicare in 2014 — at 51,900 per Medicare FFS patient instead of the observed $56,100.

For commercially insured patients, it would have been $89,900 instead of the $95,400 observed (5.8% lower).

"We estimate that Medicare spending would be about $2 billion lower if the site-of-service shift hadn't happened," said Dr Eagle.

Points to Ponder

This retrospective analysis confirms what health service researchers have been saying, said Jonas de Souza, MD, assistant professor of medicine in hematology/oncology at the University of Chicago Medical Center.

"The costs of cancer drugs are increasing exponentially, and site-of-care costs are also increasing," he told Medscape Medical News. "It would be really interesting to understand the impact on the patient — in terms of survival, out-of-pocket costs, and financial toxicity — of these increases over the same time trend."

Although the finding that costs have been essentially the same in actively treated cancer patients and the noncancer population is interesting, "this fact should not by any means be simply translated into, 'healthcare costs are increasing all over the board'," Dr de Souza explained.

The study reports relative increases, not absolute values, he pointed out. The 20% increase ($8000) in costs for cancer patients — from $40,000 to $48,000 — has a much larger impact on the system than the 20% increase ($2000) in costs for noncancer patients — from $10,000 to $12,000.

"Cancer patients are more expensive and we have short-, intermediate-, and long-term problems if this pace of cost increases is maintained," he said.

Another issue is drug spending. "Even though it is not the only cost driver, it has increased at the highest rate of all component costs, fueled by new biologic cancer drugs," Dr de Souza reported.

This could become very expensive. "We are treating more cancer patients, and for longer periods of time, and with more expensive drugs," he said, noting that in some cases, cancer has become a chronic disease.

Dr de Souza said he agrees with the third key point highlighted in the study — that site of care is important. "The authors modeled what would have happened if the site of care had not shifted to the hospital outpatient setting," he explained. "However, equally important would have been to model what would have happened had the increase in drug costs followed the pattern prior to 2004."

This report was commissioned by Community Oncology Alliance, which received financial support from Bayer, Bristol-Myers Squibb, Eli Lilly and Company, Janssen Pharmaceuticals, Merck, Pfizer, the Pharmaceutical Research and Manufacturers of America (PhRMA), and Takeda.