As managed care continues to have greater influence on the success of brands, payers are now turning their management efforts toward categories such as oncology, once thought to be off limits. Today, cancer is one of the fastest-growing expenses for both commercial and Medicare payers. As a result of these escalating costs, less clinical differentiation, loss of patent exclusivity, and a growing emphasis on the practice of evidence-based medicine, payers have significantly increased the priority of cancer management.
The Centers for Medicare & Medicaid Services (CMS) and the Medicare Modernization Act (MMA) have had a significant impact on this market. Prior to MMA, oncology was a very profitable business with limited restrictions. It is estimated that up to 70% of an oncologist's revenue came from the sale of infusion products based on average wholesale price reimbursement models. During the advent of MMA, CMS implemented a new payment structure based on the average sales price (ASP) of products, drastically cutting into drug margins. Commercial payers have followed suit. Beyond ASP reimbursement, additional management mechanisms have also been implemented and include relying on drug compendia to determine reimbursement, as well as requiring precertification approval to confirm that treatment is in line with medical policies. More aggressive measures are also starting to be utilized, such as increasing coinsurance, academic detailing, specialty pharmacy distribution, and differential reimbursement based on adherence to protocols.
As a result of these changes, oncologists are making adjustments. More judicious product selection is occurring based on reimbursement. Practice offerings are being extended beyond infusions (eg, radiology). Treatment is being delayed until precertification approval is received. Credit checks are performed on patients to determine their ability to pay. And the number of staff dedicated to reimbursement has increased.
We are only beginning to see the influence that payers will have in oncology. Explosive growth in the specialty market is expected for the foreseeable future. Payers will become more progressive, with a focus on new reimbursement models and quality.
It is incumbent on pharmaceutical manufacturers to stay ahead of, plan for and influence these changes on the horizon. And alignment with agency partners in the thick of these market dynamics today can help to ensure that brands are ready for further change tomorrow.Shaun Urban is president, Solara/Valos, part of Ogilvy CommonHealth Worldwide