January 2013 Edition Vol.7, Issue 1

Forecasting 2013: A Look Forward at Issues Affecting Oncology

Forecasting 2013: A Look Forward at Issues Affecting Oncology

By Valerie Hutchins and Christine Perez

In 2012, several steps were taken to improve access to cancer therapies. At the federal level, the Affordable Care Act (ACA) put policies in place to close the Medicare Part D doughnut hole by 2020 and end lifetime coverage limits. At the state level, four states (Maryland, Virginia, Delaware, and Nebraska) have passed anticancer oral/IV parity laws. While it is still to be determined if oral/IV parity will be considered a state required benefit under the ACA’s health insurance exchanges, and how mandates enacted in 2012 will be incorporated into benchmarks, this is progress for access to cancer therapies. In total, 19 states and the District of Columbia have anticancer medication oral/IV parity laws.

Moving into 2013, the main focus in health care will continue to be the implementation of the ACA. However, given the nation’s financial state, many programs, including Medicare, will continue to be scrutinized in the context of cost-savings. Listed are some of the other issues that are likely to be revisited in the coming year:

  • Sequestration and the Debt-Ceiling: With the fiscal cliff negotiations resulting in a pared down package of tax cuts and offsets, the issue of the mandatory spending cuts to Medicare and discretionary spending have been delayed by two months. Republicans want significant entitlement reform in return for raising the debt ceiling; however, they have not released a concrete proposal. We believe past proposals will reemerge, possibly including controversial proposals such as means testing Medicare, cutting payments for evaluation and management services provided in the hospital outpatient setting, instituting cost-sharing or for home health and laboratory services or extending Medicaid drug rebates to Part D. There is even discussion of bringing back competitive bidding for drugs and biologics (the CAP program) or reducing physician-administered drug reimbursement to average sales price (ASP) +2% and expanding competitive bidding to laboratory services. Everything, in short, is on the table. All of these cuts could reduce access to quality and affordable care for seniors.
  • Physician Fix: A yearlong physician fix was included in the American Taxpayer Relief Act of 2012, also known as the fiscal cliff legislation. This move only maintains a temporary fix to avoid deep cuts to Medicare physician payment, and undermines efforts to repeal the sustainable growth rate methodology in full, by taking this issue off the table as the Congress and the White House move into more significant budget negotiations surrounding the debt-ceiling and the sequester. With each year that the sustainable growth rate (SGR) is not repealed, Medicare loses credibility with physicians and patients. Cancer affects a disproportionate share of the Medicare population and access to treatment under a potentially insolvent system is vulnerable. However, SGR could be repealed on its own or in concert with a grand bargain, as the SGR issue always demands attention. The Congressional Budget Office estimates the SGR repeal to cost $243.7 billion.
  • Implementation of the ACA’s Health Insurance Exchanges: While not legislation, implementation of the exchanges will expand insurance coverage to approximately 30 million people, previously uninsured, over the next 10 years. Open enrollment begins in the fall of 2013 for coverage beginning January 2014. As required by statute, all plans sold in the exchange must offer essential health benefits (EHB), which DHHS requires each state to define through the use of state benchmark plans. Overall, the EHB package should mirror an employer plan, but also must meet requirements intended to protect consumers, such as cost-sharing limitations, mental health parity, and clear description of actuarial value through metal level descriptions.

Based on analyses of the benchmark plans and rules governing the EHB we believe a few areas of risk remain unresolved:

(1) The reliance on 50 state benchmark plan formularies rather than the Medicare Part D protected classes for inclusion of oncology drugs, particularly physician administered products;

(2) No current rules or policy related to the coverage of new drugs or biologics, particularly oncolytics;

(3) No clear pathway for mandated coverage of compendia listed anti-cancer indications and implementation of oral/IV parity rules; and

(4) It continues to be unclear how affordability and overall costs could affect the standards used to determine medical necessity; the standards used to determine medical necessity could be less comprehensive that what we have become accustomed to under the Medicare and Medicaid programs.

  • Biosimilars: Biosimilarity versus interchangeability will continue to be the central question. In February 2012, the FDA released draft guidance on follow-on biologics, stating that products must first meet a standard of biosimilarity (meaning that there are no clinically meaningful differences from the innovator product as to safety, purity, and potency, but may have some slight formulation differences) before meeting a higher standard of interchangeability. Interchangeable products are those that are clinically proven to pose no safety risk to a given patient who switches back and forth between the innovator and the follow-on.

Payers and providers will continue to wait on final guidance from the FDA before advocating for the use of follow-on biologics. Providers will be hesitant to switch patients between follow-ons and their innovators if the follow-on is not deemed interchangeable by the FDA. For manufacturers of the follow-ons, this could lead in a delay to market as they develop data to meet the higher standard of interchangeability.

CMS has not developed extensive policies on follow-on biologics. However, the agency has stated that the ASP of the follow-on will be based on the innovator product and the biosimilar. Interchangeability has not been addressed by CMS or at the state level. Given this current stance, it remains to be seen as to whether or not the introduction of biosimilars into the market will have a profound and immediate cost savings impact.

  • Drug Shortages: Congress will continue to examine “gray markets” and their potential role in driving drug shortages and associated cost increases. Rep. Elijah Cummings (D-MD) introduced H.R. 5853, the "Gray Market Drug Reform and Transparency Act of 2012." Among other provisions intended to prevent improper price hikes in the drug supply chain, is a requirement that would require companies distributing drugs listed on the FDA’s critically short supply list to disclose the sales price of the drugs to the buyer, so that the buyer is aware of any markups applied to drugs in shortage.
  • Prompt Pay: Cancer advocacy groups will push for the re-introduction of legislation to exclude manufacturer to distributor prompt pay discounts from the ASP calculation used to determine drug reimbursement rates. This was introduced in 2012 by Senators Pat Roberts (R-KS) and Debbie Stabenow (D-MI) and Reps. Ed Whitfield (R-KY) and Gene Green (D-TX) (S. 733/H.R. 905). Currently, the inclusion of this 1.5% discount in the ASP calculation causes physician practices to purchase oncolytics at a loss.

In addition to these, specific potential threats or opportunities remain across government and the commercial payer segments depending on where the reader sits in the oncology space:

  • Bundling of services
  • Continued rollout of pathways and guidelines including in diagnostics and radiation
  • Radiology benefit management and other new tools in the utilization management of cancer care services
  • ACOs and medical homes
  • National coverage decisions (NCDs) and the potential NCD list published by CMS
  • Parallel review and coverage with evidence
  • Flattening and equalization within and across technologies and care settings

Each of these issues can be appropriately forecast, analyzed, and strategically managed proactively. We invite readers to contact us to discuss these and other issues and opportunities we expect in 2013 and beyond at info@hillcohealth.com

About the Contributors

Valerie Hutchins and Christine Perez; Associate and Senior Associate, respectively, HillCo HEALTH. HillCo HEALTH is a leading advisory services firm to the bioscience industry and those that fund and do business with bioscience companies and organizations. 

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