May 2012 Edition Vol.0, Issue 0

Peter B. Bach, MD, and the Case for Interchangeability in Oncology: A New Model for an Episode-based Payment System

Peter B. Bach, MD, and the Case for Interchangeability in Oncology: A New Model for an Episode-based Payment System

By John McCleery

At this point in the cancer care continuum, it is probably safe to say that cancer care stakeholders can all agree that the rising cost of cancer care is economically unsustainable; not only for the patients the drugs are intended to treat, but for many of the practices that are delivering that care. Using IMS estimates, the sales growth of anticancer-fighting products on the market has more than tripled from $5 billion in 1998 to $19.2 billion in 2008. Although most of that increase can be attributed to newer agents costing several thousand dollars per month of treatment (with some only achieving marginal benefit); oncology drug costs have nonetheless soared past that of all other classes of pharmaceutical agents. This steady incidence of more expensive cancer treatments being introduced to the marketplace is putting oncologists and policy makers in a bind since they need to find ways to continue to deliver high-quality care while at the same time, reduce costs. To help contain these costs, alternative payment approaches by policymakers are being explored.

Peter B. Bach, MD, Director of the Center for Health Policy and Outcomes at Memorial Sloan-Kettering Cancer Center, in New York City, has a proposal designed for an episode-based payment model in oncology, that includes a framework that Medicare could implement to cover the cost of guidelines-approved cancer treatments (and their administration for a predefined period), and still have the potential to reduce costs through, what he terms, the drugs’ “interchangeability.”

According to Dr. Bach, for episode-based payments to work in oncology, a couple of features have to be inherent. “First,” he said in a presentation at the 2011 Cancer Care Business Summit, “there has to be the potential for savings, meaning price differences between treatment approaches.” Multiple, evidence-based, clinically-approved equivalents for most major cancers are already present in oncology so in an episode-based payment system, savings would inherently be present—especially when there are competitive approaches in price differentials. “Second,” he continued, “there has to be the guarantee of high-quality care that is based on established standards of care or evidence-based guidelines. Both of these elements already exist in today’s oncology care.”

Using metastatic non-small cell lung cancer as an example, Bach presented the 8 preferred drug regimens listed in the various guidelines and then detailed how they differ in cost. For example, Figure 1 illustrates the substantial price differential between the monthly costs of the pemetrexed/cisplatin combination ($7,074) compared with the monthly cost of the paclitaxel/cisplatin combination ($1,292)—a vast difference of $5,782. Although the choice of carboplatin vs cisplatin matters clinically, according to Bach, it’s not meaningful in terms of costs and thus not important for the example.

The key agents in these treatment approaches have different manufacturers and different price points. This, according to Bach, makes them interchangeable and creates the potential for competition based on price. With Medicare and other payers spending increased resources on these treatments it makes sense to Bach that if the drugs are interchangeable, “there is potential for huge drug-cost savings.” When Bach uses this cost comparison approach for NSCLC and applies it to an episode-based payment model system the incentive for oncologists becomes very clear (Fig. 2).

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