November 2013 Edition Vol.11, Issue 11

The Evolving Landscape of Payment Care Delivery and Manufacturer Implications of Coverage Expansion

The Evolving Landscape of Payment Care Delivery and Manufacturer Implications of Coverage Expansion (continued)

Historically, Medicaid has not been a major component of cancer payer mix with the majority of the Medicaid being a pediatric population.  However, the expansion of Medicaid under ACA will likely result in more adults being covered by this payer. 

Additionally, the Department of Health and Human Services just announced that the state health insurance exchanges will not be subject to regulations similarly to Medicare.  The crux is that patients who purchase policies through the exchanges will be eligible for manufacturer-designed PAPs.  

340B Enrollment

Hospitals that qualify as 340B institutions (as Disproportionate Share Hospitals) based on the treatment of Medicaid (or other low-income patients) have enjoyed discounts of 21-50% on outpatient drugs for several years. 340B participation has been growing for hospitals and the practices affiliated with them, but as Medicaid expands in 2014, even more entities will be 340B eligible. Institutions in states that opt in for Medicaid expansion will become more likely to exceed the 11.75% disproportionate share threshold required to access 340B drug discounts. Since the end of 2009, 1,588 institutions have become active in the 340B program. Since the end of 2011, 3,423 hospital “sites” joined with the addition of only six hospital entities due to many systems adding more satellite and affiliated sites into the 340B program. With Medicaid expansion, it is estimated 1,500 more institutions may be newly eligible. This is important as exhibited by Genentech. Genentech’s 340B drug discounts totaled $1 billion in 2012 and are growing at 20% to 25% a year, impacting product pricing and causing the company to establish a 340B integrity program to ensure recipients of the discounts are complying with legal requirements.

Profit from 340B participation funds non-billable services and physician employment, but at the expense of manufacturer revenue. A lack of definition of the “340B patient” results in the use of these discounted drugs for insured patients, which are then billed for full reimbursement from the insurer. The 340B program has resulted in a competitive disadvantage for non-340B providers, such as independent community oncology practices.

Formulary Inclusion in the Exchanges

A key concern for manufacturers is which agents are included in formularies among plans offered through the exchanges. Exchange plans need to include only one benchmark option. While formulary exclusion has been a touchy topic in oncology in the past, there are signs that certain oncology agents and other specialty agents may not be included in all plan formularies, particularly the bronze and silver plans.

Manufacturers will need to develop and continuously reevaluate product value propositions of their drugs to ensure formulary inclusion and for pathway inclusion by payer and provider decision makers. As oncology participation in ACOs grows, manufacturers will also need to place greater emphasis on patient experience, quality and care coordination. Additionally, the evolution coverage expansion will alter the payer mix within a cancer thus will have a direct effect of the affordability of cancer care.


About Kantar Health

Gordon Gochenauer is a Director, Commercial Planning at Kantar Health.

Kantar Health is a leading global healthcare advisory firm and trusted advisor to the world’s largest pharmaceutical, biotech, and medical device and diagnostic companies. It combines evidence-based research capabilities with deep scientific, therapeutic and clinical knowledge, commercial development know-how, and marketing expertise to help clients launch products and differentiate their brands in the marketplace.

Kantar Health’s oncology-related offers include Oncology Market Access US (OMA US), which provides strategic and tactical insights into the evolving oncology landscape. Combining Kantar Health’s commercial and clinical expertise in oncology, OMA US provides cutting-edge information and analysis on critical reimbursement, coverage and competitive issues in the US oncology marketplace.

If you would like us to act as catalysts for you, contact us at



  1. ERBI Characteristics of the CDHP Population, 2005–2010.

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