Suzanne Shelley

As the specialty pharmaceutical marketplace grows, so does the specialty pharmacy provider (SPP) market. And with the former growing at double-digit rates, while traditional retail pharmacy is growing in low single digits, the attraction is obvious.

“In 2015, the FDA tied the record for the most novel new drug approvals since the creation of the Prescription Drug User Fee Act in 1992,” notes Philip Hagerman, RPh, CEO of Diplomat Pharmacy (Flint, MI). “The exceptional growth in new treatment options keeps arriving, bringing hope for patient populations who’ve never had it. These robust pipeline demands call for the very foundation we are built upon—dedication to our patients and a flexible and nimble infrastructure that optimizes therapy management.”

Diplomat is the largest independent SP in the US, competing against the SPs operated by the bigger pharmacy benefit managers (PBMs) and the chain pharmacies, such as Express Scripts, CVS Health and Walgreens. AmerisourceBergen, through the AmerisourceBergen Specialty Group, has several business units that provide SP and specialty distribution services; Cardinal Health, McKesson and H.D. Smith, rounding out the top four US wholesalers, each has its own specialty unit with SP services included. But hundreds of other pharmacies, or pharmacy operations of larger companies, have entered the fray; URAC, one of the organizations that provides accreditation for SPs, says that it will have accredited nearly 400 companies by the end of this year—a near tripling from just 2013.

Additionally, there is considerable realigning of SP organizations, who are being snapped up by larger companies or merged; a couple of the recent, bigger acquisitions were Salveo Pharmacy, now part of UnitedHealth, an insurer that also now owns Catamaran, a major PBM; McKesson Specialty Solutions’ acquisition of Biologics, an oncology SP; part of Diplomat’s recent growth has been fueled by the acquisition of Burmans Pharmacy, a regional firm in the Middle Atlantic. Even food stores are getting into the act: Giant Eagle acquired Rx21 Specialty Pharmacy for an undisclosed price, with the intention of participating more broadly in the hepatitis C therapy area.

The biggest recent deal is CVS Health’s acquisition of Omnicare a year ago, which has both SP and distribution businesses, for $12.7 billion. While the bulk of that price (and the bulk of Omnicare’s business) is in serving the long-term care market, it included the Omnicare Specialty Care Group, which itself had multiple SPs. Of particular interest to pharma marketers is the RxCrossroads unit, which combines an SP, a third-party logistics service, patient support hub services, and field services for patient and healthcare-provider support.

CVS Health, as noted, is already a large player in the SP field; for now, the RxCrossroads part of the acquisition is being managed as a separate entity. “CVS Health's acquisition this past August of the Omnicare businesses, both the Long Term Care and RxCrossroads, provides some unique opportunities,” Rocky Kraft, SVP at Omnicare, tells Pharmaceutical Commerce. “We are in the midst of an analysis across the CVS Health enterprises to enhance current operations and grow innovative solutions for connecting patients to their therapies, furthering CVS's mission helping people on their path to better health.”

Meanwhile Denise Von Dohren, VP of access solutions at RxCrossroads, says that the company has been busier than ever with managing patient support programs for manufacturers. “Our emphasis is on customizing solutions for a wide variety of therapy programs, ranging from a ‘specialty lite’ service for handling prior authorizations for patients, to highly specialized program for, for example, the disabled or elderly.” She cites the utility of the organization’s network of 450 field nurses to help patients with administering self-injectable drugs, and the resources to provide education for HCPs.

National SPs and national distributors have a simple proposition for manufacturers: national coverage is guaranteed. But the hundreds of local or regional pharmacies, plus, to a growing degree, hospital systems want their share of the specialty pharmaceutical market. (For hospitals, some of the distribution arrangements can be handled by the group purchasing organizations of which they are members, but generally speaking, GPOs don’t provide dedicated patient-support services).

 Fig. 1. Accenture’s analysis of current and future industry-sponsored patient services. Credit: Accenture[/caption]

A not-very-straightforward process is entailed in payments to SPs and reimbursements to manufacturers, in specialty pharmaceutical distribution. Manufacturers can choose conventional distribution; distribution through a specialty distributor; direct distribution to major SPs; and exclusive, limited or expansive networks of SPs selected for a drug. Layered into this is the practice of “buy and bill,” common to oncology and other specialties, which enable physicians (or their employers) to be reimbursed for dispensing a drug, often under a medical benefit rather than the typical pharmaceutical benefit of insurers. “White bagging,” covered later in this article, further clouds the distribution process.

Once pricing has been established, however, another layer of competition around patient services ensues. Manufacturers want to ensure the success of a drug’s commercialization, and with many specialty drugs, that can involve coordinating care between pharmacies and healthcare providers or outpatient clinics; assisting patients through the benefits verification process and a growing number of additional services (see Fig. 1). Manufacturers need to weigh the costs of the distribution channel against the quality of patient service provided. Hub service providers—generally, third parties reimbursed by manufacturers to provide much of this coordination—represent 

Accenture, the IT consultancy, has been conducting a survey within healthcare for the past three years on the topic of patient-industry interaction; the latest, just-released study* was a poll of pharma marketing executives in the US and Europe of their patient-services investments. More than 85% of pharmaceutical executives plan to ramp-up their investment in patient services over the next 18 months. And 91% expect to offer six or more types of patient services in the next two years, focusing on key areas like medication delivery, treatment adherence and remote monitoring (Fig. 1).

At the same time, though, Accenture found in a 2015 study of 10,000 patients in various countries in the US, Europe and South America, that only around one in five patients was aware of the services currently available, pointing to a lack of communication between healthcare systems generally and the public. Anthony Romito, one of the study authors, notes that this interactivity can include “pretreatment” information—educating the public, for example, on the warning signs for certain disease conditions, through nonpromotional information.

How to communicate? The Accenture study respondents rely most heavily on healthcare professionals (doctors, nurses) or the institutions they belong to (hospitals, clinics) (Fig. 2). Pharmacies and pharmacists figure in this process as well, representing 29% of the channels used.  Sales rep visits with pharmacists, marketing programs to pharmacists and external patient services organizations (such as hub providers) are three of the most common communication channels.

The survey is not specific to specialty pharmaceuticals (rather it is based on several general therapeutic areas), but specialty products clearly are within the scope of the study. Overall, says Romito, the pharma industry needs to approach the patient communications task more directly, recommending:

Patient services will become a competitive driver and no longer optional for pharma companies

Investment should be led by what patients value, but measuring business value is critical to sustainability

Clear organizational and operational strategy must be in place to ensure companies are structured for success

Articulating the patient and economic value of services needs to be central to healthcare professional interactions

Into this vacuum, several organizations have arisen to fill the gap. The longest-operating one is arguably Armada Health Solutions, which recently changed its name to Asembia. Calling itself “a specialty group contracting and service organization,” it manages purchasing agreements for SPs, prescription data management services and patient-support programs. “Under the new Asembia name, we will continue to expand on our company's tradition of providing our partners with valuable solutions ranging from high-touch patient support hub services, innovative technology platforms and collaborative contracting strategies for specialty pharmaceutical products,” said Lawrence Irene, RPh, CEO, in a statement. While Asembia is coy about just how many SPs or other providers are in its network, it also runs a wildly popular specialty pharmacy summit every year in Las Vegas, NV; the meeting (at presstime) was scheduled for May 2–6, and more than 2,000 attendees were expected.

Another organization has been in business for several years serving the hospital pharmacy sector: ExceleraRx Corp., based in Minneapolis, MN. It currently has 17 member health systems and academic medical centers. For members, it offers a means to retain more revenue, which it calculates is lost to the tune of $15 million per million lives served by the health system.

For manufacturers, it suggests that “while individual health systems provide the point-of-care advantage, pooling their expertise is a more efficient way to improve outcomes,” according to a company statement. “Through its combination of centralized management and localized patient care, the sophisticated Excelera organization meets and exceeds manufacturers’ specifications and expectations.”

Diplomat Pharmacy, for one, is not letting the hospital market fall away as a source of clients. “Diplomat partners with retail and hospital pharmacies across the country in our Retail Specialty Network and our Hospital Specialty Program,” says Atheer Kaddis, PharmD, EVP at the company. “We provide all of the administrative support for the dispensing of specialty medications in the retail and hospital outpatient settings.” The goal, he says, is to “to provide a patient-centric program whereby they have the ability to purchase a product, maintain critical services to their patients and become more relevant in the specialty space, with Diplomat partnering to provide the necessary back-end services.”

The newest entry into this networking field is KloudScript (Oakbrook Terrace, IL), founded by Rinku Patel, PharmD. Its goal is to bring local and mostly independent pharmacies into the specialty fold, banking on the close relationships that local pharmacists have with their clientele to provide SP-level services.

She says that the organization has a membership (who pay fees to KloudScript) of 400, covering 40 states, with a goal of reaching all 50 by year-end. And it is working with the Center for Pharmacy Practice Accreditation (CPPA), one of the national accrediting bodies, to develop an accreditation process for its member pharmacies.

Traditionally, oncologists and other specialists have purchased directly from specialty distributors (SD) and GPOs. Once the drugs are administered to patients, the physicians bill the patient’s insurance plan (typically under the patient’s medical benefit, since the medications are infused in the clinical setting) and accept the reimbursement for the drug itself, plus administration fees, and associated laboratory work and office visits, as payment. Thus, the “buy and bill” model. Now, however, the relentless pressure to control costs is leading to the growth of “white bagging.” Some stakeholders welcome this change, others do not.

Using a white bagging approach, the physician’s office orders drugs on a patient-by-patient basis, rather than keeping them in stock. The ordered drugs are then obtained from an SP, and the drug inventory is stored at the physician’s office until the patient arrives for infusion or treatment. Under the white bagging model, physicians are paid for administering the therapy, but since they no longer purchase and maintain inventories of specialty medications on-site, they are no longer reimbursed directly for the drugs. Rather, the SP then bills the patient’s insurance plan (typically under the pharmacy benefit) and receives the reimbursement payment for the medications, and the patient is billed for any additional out-of-pocket copayment or co-insurance requirement.

Proponents of this newer practice say that it can help to remove some costs from the healthcare system, by streamlining the supply chain and removing some of the price markups that are routinely passed through when physicians use the buy-and-bill practice (these profit margins—typically equal to the acquisition cost plus a fixed percentage—have long been an important, approved source of revenue for oncology practices).

Different stakeholders have different and, at times, conflicting objectives in their use of white bagging,” says Deni Deasy Boekell, senior director, commercial strategies, Kantar Health. In general, larger practices tend to prefer buy-and-bill, because it leads to more revenue, and they have the clinical staff to manage the administrative hassles. Smaller practices tend to favor the white bagging approach, because it helps to outsource some of the financial risk and carrying costs, and reduce some of the logistical and administrative challenges associated with managing a full drug inventory on-site, seeking reimbursements and collecting any co-payment obligations from patients (which are common with the buy-and-bill approach).

However, white bagging also reduces operational flexibility and increases administrative complexity for the practice, especially when the physician may want to change medications or adjust the dosing based on the patient’s ongoing experience with the proposed treatment regimen.

White bagging creates both upsides and downsides for specialist practices. “They win when they are able to selectively use SPs for unfavorably reimbursed or rare drugs, and use SP services for reimbursement and other administrative tasks,” says Deasy Boekell. “But they lose when they are cut out of the traditional buy-and-bill margins on potentially profitable drugs, and sometimes, integrating the SP dispensing into the workflow can bring new administrative hassles.”

Meanwhile, pressure from payers who are pushing white bagging is not welcomed by many practices, since “it cuts providers out of the profits they have historically relied on from buy-and-bill, and often results in additional administrative burdens for practices—in terms of requiring different payer-mandated SP dispensing requirements to be integrated into the practice workflow, on a patient-by-patient basis,” says Deasy Boekell. “And in many cases, the payer-mandated SPs may not be the practice-preferred SP.”

White bagging can also be more expensive for patients, since there can be higher out-of-pocket costs for a drug dispensed under a medical rather than pharmaceutical benefit; the difference depends on payer policies. White bagging also allows payers to negotiate more favorable dispensing rates with SPs than would be possible through buy and bill. “Not surprisingly, in 2016 we see payers pushing white bagging more aggressively,” says Deasy Boekell of Kantar Health. In some cases, payers may either mandate the use of the practice, while in other cases, they may seek to encourage or incentivize it through less-favorable reimbursement structures.

In a recent Kantar Health Payer Survey, the percentage of payers encouraging the use of specialty pharmacies to manage physician-administered injectable cancer agents through white bagging—by, for example, decreasing buy-and-bill reimbursements for certain drugs—grew from 29% in 2014 to 36% in 2016. The percentage of payers mandating the use of specialty pharmacies on certain drugs remained steady at 24% from 2014 to 2016. According to the study, payers are more likely to incentivize the purchase of physician-administered IV cancer drugs through SPs, by creating favorable reimbursement policy (36% of payers), rather than mandating the use of white bagging (24% of payers); only about a quarter of payers are not actively influencing the channel at all.

And some industry observers worry that this change in oncology practice economics and diminished profit margins may also overtly or covertly influence the physician’s choice of therapy options at the point of care. This has potential implications for both patients and drug manufacturers.

When it comes to the disposition of extremely expensive specialty medications (especially biologic therapies), “drug manufacturers want to know where their drugs are at all times, so in some cases, the ability to align themselves with specialty pharmacies and use a white bagging approach brings strategic advantages in terms of better visibility and control,” says Dana Evans, MD, medical affairs payer support for Genentech [Editorial note: Remarks by Evans do not necessarily reflect the viewpoints of Genentech].

“The SP market is fairly fragmented but has been consolidating, and the leaders are competing strongly to grow their business; white bagging offers them an opportunity to do so,” says Deasy Boekell of Kantar Health. “Today, SPs work to offer services that make them more attractive to the practices, vying to become their preferred SP and to make payer-driven white bagging more palatable.”

Articles

The SP channel continues to grow, with manufacturers looking for more control over access

Specialty pharmacy dynamics

According to market research from Epocrates, while 99% of

						physicians use digital devices of any sort, 88% use smartphones,

						75% use tablets, and 68% use all three.

		In the early days of electronic health records (EHR) and e-prescribing systems—a scant 3—5 years ago&mdash;most considered these new electronic tools to represent an end in themselves. Namely, it was widely accepted that these systems would improve physicians’ working lives by allowing them to easily access patient health records; automate many office tasks; and improve the prescribing process through accurate, informed decisionmaking.

		Today, thanks to a confluence of factors—accelerating growth in EHR and e-prescribing systems adoptions, rapid expansion of the richly layered information that can be found in many of these systems, and growth in the use of all types of mobile devices to access them (laptop computers, tablets and smartphones)&mdash;these systems are increasingly being viewed as not just an end in themselves, but as a means to a much greater end. Collectively, the improved “digital workflow” capabilities that are now available for today’s e-enabled physicians provide a bold new paradigm for enriching the doctor-patient relationship, improving drug adherence and clinical outcomes for patients, and reducing overall healthcare costs.

		This explosion in the so-called EHR channel has created new opportunities for drug manufacturers and their brand teams. While many pharma companies are only beginning to explore the opportunities and have yet to fully embrace this new information outlet, parallel efforts by early pioneers have been helping to define some ad hoc rules of engagement for how messaging sponsored by drug makers should—and should not&mdash;be embedded within the doctor’s digital workflow, and what the industry’s self-imposed limits should be.

		“Forward-looking advertising agencies and media buyers should be saying to pharma brand teams, ‘You have your print strategy, you have your Web strategy, you have your mobile strategy; okay, now what is your EHR strategy and how do you plan to get your sales reps knowledgeable and viewing the EHRs as an important way to make sure their brand services are within arm’s reach when the doctor is prescribing?’”, says Edward Fotsch, MD, CEO of PDR Network (Montvale, NJ).

		This is more possible than ever, as a growing number of pharmaceutical sales reps are using iPads or similar tablets. “Today’s technology options let sales reps build on their personal relationships, but enhance the offering with the ability to share with prescribers product information on an engaging Web-based platform that can be easily accessed from the doctor’s office or home,” says George Esgro, vice president of US commercial sales at Quintiles (Parsippany, NJ). “During a Web-based session, reps can often get 15 to 20 minutes of engagement time from the physician, instead of the usual two or three minutes.”

		EHR systems, oriented mostly toward the workflow of healthcare providers in hospital or clinical settings, are rapidly being linked together with e-prescribing; the next step—bringing in drug information, whether branded or not&mdash;is an opportunity area for pharma, systems vendors say. “When actionable, sponsored content from drug makers surfaces at the moment that the doctor is evaluating competing therapeutic options, it provides an important, additional level of information,” says Lawrence Susnow, MD, president of NewCrop LLC (Houston, TX), a developer of e-prescribing systems. “The goal is not to try to influence the prescribing process, but rather to support the doctor’s own decisionmaking&mdash;and that’s an important distinction that is sometimes lost on skeptics.”

		“Since doctors have had to completely change their practices to adapt to their new digital workflow, pharma companies also need to totally rethink the way they do things to take advantage of this new channel,” adds Peter Kaufman, MD, chief medical officer of DrFirst (Rockville, MD), a maker of e-prescribing systems that are available both as standalone systems and currently embedded with more than 200 EHR vendors.

		“We look at EHR systems as building a foundation, and by layering in strategic content from various pharma industry stakeholders, we can continue to add value to really leverage the digital workflows in ways that can improve patient outcomes,” says Jake Boos, chief operating officer, coordinated care solutions, for PatientPoint (Orlando, FL), a provider of patient- and physician-engagement solutions that was acquired by Healthy Advice Networks last February.

		Today, the face-to-face interaction of a physician and a patient has a third component: a digial device. According to a 2012 survey of physicians by Epocrates, Inc. (San Mateo, CA), 97% use a computer in the workplace; 78% use a smartphone professionally (68% at least once daily for professional purposes); and 34% use a tablet professionally (27% at least once daily for professional purposes). Typical uses include accessing clinical and drug data, looking up disease or treatment guidelines, accessing clinical notes, reviewing lab data, examining diagnostic images, accessing formulary information, contacting manufacturers, and carrying out electronic prescribing. Epocrates has coined the phrase “digital omnivore” to refer to physicians who use all three types of mobile computing devices.

		According to Epocrates, among doctors who use tablets, Apple’s iPad is dominant (being used by 81% of physicians), followed by tablets based on the Android operating system (just 9% of physicians). Today, 34% of physicians report using a tablet professionally, but 75% of surveyed physicians expect to be using a tablet within the next year. While the use of smartphones for professional purposes is on the rise among physicians, and many healthcare-related resources can now be accessed through these handheld devices, most experts agree that these handy gadgets will never fully replace the tablet or laptop in clinical settings, mostly because of small screen real estate. Still, these devices give physicians convenient access to top-line information or a glimpse into patients’ charts or prescription details.

		With the growing use of three different types of digital devices, physicians are spending more time online than ever before, at all times of the day and night. And according to the Epocrates report, 85% of physicians agree that mobile devices are likely to lead to better medical decisionmaking, and 72% agreed that mobile devices can significantly enhance their productivity.

		The combination of various government incentives for EHR adoption, coupled with financial penalties for non-adoption, has changed the game for physicians, and today, EHR and e-prescribing systems are used by roughly half of all prescribers, with 80% adoption projected over the next few years. “The current drivers have effectively taken 10 to 20 years of adoption-uptake time and crammed it into just two or three years,” says Fotsch of PDR Network.

		And, despite the rapid growth in EHR use, further growth is assured. “We’re still on the steep side of the growth curve,” says Kaufman of DrFirst. “With only about a half-billion prescriptions per year handled electronically in the US (out of a total four billion written per year), we’ve still got tremendous room for growth, and this provides numerous opportunities in the years to come for pharma companies looking for ways to reach e-enabled prescribers.”

		“All brand teams should be asking themselves, if I have a dollar, will I spend it trying to reach the masses, or targeting my main audience who I know will be most receptive to my information? The mobile channel offers pharma marketers a targeted means to do just that, and if they do it right, they have an opportunity to re-invigorate the pharma-physician relationship,” says Adam Budish, SVP, sales, at Epocrates. “Three out of four physicians say that they have changed a prescribing decision based on Epocrates information. For that degree of influence to happen with a brand, a pharma company needs to do more than just show up.” He adds, “It needs to be strategic about the value it provides to prescribers.”

Fig. 1. Source: OneKey Digital, SK&A Information

		Just where do doctors obtain drug information as they’re making prescribing decisions? FDA has a variety of databases, including the Orange Book, and drugs@FDA.gov, which provide the approved label information, drug alerts and therapeutic equivalencies. But private-sector publishers have long worked at compilations (in hardcopy form or online) that include the label information, along with medical journal literature, edited summaries of recent research, patient education materials (in multiple languages) and other useful resources.

		“Manufacturers are looking to healthcare information suppliers—such as PDR Network, Medscape (from WebMD), MD Consult (Elsevier), JAMAevidence (AMA/McGraw-Hill), DynaMed (EBSCO Publishing), Epocrates and others&mdash;to be the change agents they need to help synthesize the explosion of raw data,” says Peter Harbin of IMS. “Intermediary information providers have a big role to play in synthesizing the vast volumes of information that are available, and to provide content that is instantly understandable and points the way forward. The goal is to have users say, I know what this means and I know what to do with it.”

		From the healthcare provider perspective, these resources are commonly known as “clinical decision support” (CDS), and to Harbin’s list can be added First Databank (a unit of Hearst Business Media), Medi-Span from Wolters Kluwer, Truven Health (the former Thomson Reuters business), and at least 30 or so other vendors. Black Book Rankings (Clearwater, FL), a market research firm, analyzed 42 CDS vendors in its 2012 survey. Some of these are tailored to point-of-care decisionmaking; some are more for hospital or clinical administration, including e-prescribing (which dips into another area of healthcare IT, computerized physician order entry, or CPOE).

		Some of the publishers or database aggregators include drug pricing and formulary status—stepping away from a strictly medical orientation and into the commercial world of drug buying and selling. Epocrates, PDR Network and WebMD, to name three, explicitly allow manufacturers to buy advertising in their information services. And, in a case of the camel’s body following his nose into the tent, some information vendors are allowing manufacturers to place coupon offers in conjunction with the prescribing information&mdash;a service that many physicians like to present to their patients, but one that insurers and pharmacy benefit managers strongly dislike. Another valuable offering for many physicians is the ability to order drug samples through their EHR.

		“The challenge for brand teams, in this fractured marketplace with so many different EHR and e-prescribing systems available, is, how do I get any scale at all trying to reach prescribers?” says Fotsch of PDR Network. By sponsoring messages in any of the PDR Network products, brand teams are able to reach more than 100,000 prescribers (through PDR’s many EHR- and e-prescribing-related partnerships). “With that critical mass, we are able to approach drug makers and say, what additional information resources or services can we provide for your brand that will distinguish you or make doctors aware of useful information you may have, at the moment they need it most?”

		In line with this trend, Physicians Interactive (Marlborough, MA), a multichannel marketing services company for manufacturers, recently launched eCoupon, an automated voucher and coupon distribution solution for healthcare providers. The company has partnered with EHR vendor Allscripts (Chicago) to integrate the eCoupons functionality into Allscripts’ standalone ePrescribe electronic prescribing software, so that coupon availability becomes apparent right in the existing workflow of the physician. Allscripts, by one measure, is the No. 1 EHR system in the US, according to a survey performed by SK&A, a Cegedim Company, last summer (Fig. 1).

		To make the most of the opportunities presented by the EHR channel, branded drug teams, intermediary information companies, and designers of EHR and e-prescribing systems must observe the rules of the road to address two important issues. First, they must ensure good content—not ads, but useful information that can assist physicians in their diagnostic and prescribing efforts. And second, they must present and embed the information, and structure the user interface, in the most streamlined and logical way possible. “If the interruption slows down the physicians or seems to be needlessly intrusive or too blatantly commercial or self-serving, they will reject it (or, if possible, turn off the functionality in their system),” says Kaufman of DrFirst.

		“We tenaciously protect the concept of a pristine, unobstructed digital workflow, so we work hard on the programming end to reduce the clutter on-screen and minimize the number of clicks required, and to think strategically about the best place for a given piece of information to pop up,” adds Susnow of NewCrop.

		At DrFirst, a team of doctors and pharmacists must approve of any branded content that is slated to be integrated into its e-prescribing system, says Fay Hung of DrFirst. “Plain and simple, the branded messaging is not supposed to aim to influence the prescribing choice, but to support and inform the prescribing decision as it’s being made by the physician,” she adds. “And we give users a lot of freedom to set up and turn off alerts, so they can still be in control of the information flow they need most and don’t get ‘alert fatigue.’”

		Another variation on having a promotional presence in EHR systems is to engage the physician through television (which can also be set up as a streaming feed to laptops or smartphones). PatientPoint also offers the PracticeWire platform, which provides a constant feed of breaking healthcare-related news and research updates from journals, along with appropriate, sponsored content from drug makers, on digital screens that are mounted in the back-office setting, for physicians and other clinicians to view when they are between patients. The PracticeWire functionality is also available as a free mobile app for the iPhone and iPod Touch devices, which lets physicians access a constantly updated stream of health content, including research, advice, product safety recalls and FDA-issued boxed warnings for drug labels, from leading medical journals and news feeds.

		A similar service from PatientPoint engages patients: The Care Coordination and Check-in gives patients an iPad based platform, so that they can complete all of their forms electronically when checking in for their appointment. This not only serves to capture all of the information electronically (eliminating the need for office personnel to transcribe or scan paper forms), but helps to immediately highlight gaps in care, by identifying, for instance, that the patient is overdue for a mammogram, colonoscopy or medication refill. This insight automatically surfaces within the doctor’s EHR system, and this can help to focus the conversations between provider and patients once inside the examination room. “Physicians are overwhelmed, and there are many conversations they should be having with patients but are not,” says Boos. “The platform can be leveraged to tee up a more productive conversation between the doctor and the patient during their limited time together.”

Given the accelerating growth of electronic health record (EHR) adoption, pharma marketers are hoping for a new communication channel to open up at the point of care in the physician's office

Pharma gets into the 'digital workflow' of physicians

	Biomarkers, one way or another, have been a near-constant part of drug development and medication therapy—think of testing for the presence of an infectious agent, or how a tumor can be judged to be cancerous or not. But in the wake of new biopharmaceuticals brought to market, a comparable flood of genetic and protein tests has been created. In some cases, these biomarker tests confirm the presence of diseases that can now be treated earlier in their progression. In others, the biomarker can be a “surrogate end point” to decide that a therapy is working, even if the outcome of the disease is years in the future. And yet in others, the biomarker becomes a gateway, indicating that a therapy will only work for certain with the “right” genetic mutation&mdash;and precluding therapy for others. These “companion diagnostics,” as they are called, are becoming a booming industry in their own right&mdash;and in some cases, are being written into the label requirements of an approved drug.

	Add to this picture the fact that not all biomarker tests are 100% definitive measures, and that some of them can carry significant expense to administer (many are also surprisingly inexpensive), and the biomarker scene becomes a mixed bag of opportunities and challenges for drug developers, test developers, payers, physicians and patients.

	Biomarkers are becoming an especially prominent part of cancer therapy (although, as will be seen, other diseases are also being targeted). “When novel agents are prescribed based on a more targeted patient population based on knowledge of some enabling mutation, patients experience higher response rates, fewer adverse events and improved survival,” says Harish Dave, MD, MBA, a VP in the Oncology Therapeutic Delivery Unit of Quintiles (Rockville, MD). “These improvements can lower clinical trial costs, speed drug development, extend market exclusivity and improve favorable reimbursement decisions.”

Although pharma may have to give up on the mass-market model, which has produced so many blockbusters (exceeding $1 billion in sales), companion diagnostics may usher in an era of niche-busters. Analysts are forecasting sales topping the blockbuster mark for some of the new drugs paired with a diagnostic, despite their limited target populations.'

	Market estimates and categories vary widely by definitions of terms and types of technologies. “All diagnostics” (if such a term can be used) break down into in vitro tests (IVDs) and laboratory-derived tests (LDTs); IVDs divide into molecular (genetic) and tissue testing. “Companion” diagnostics are competing, conceptually, with “theranostics” (diagnostics essential to therapy). Market estimates range from about $1.5—$5-billion currently to $3.45 billion, (“Companion Diagnostics,” Visiongain, 2011) to tens of billions (“Companion Diagnostics and Personalized Medicine,” Trimark Publications) in 2015. Molecular diagnostics alone was estimated to be worth $5.4 billion in 2011, according to market analyst Research and Markets.

	FDA, contending with situations where a drug is being reviewed without an approved diagnostic test accompanying it, or a test being reviewed without the drug, or—the ideal situation&mdash;the drug and test being evaluated together, issued draft guidance, In Vitro Companion Diagnostic Devices, last July. Industry was looking for better guidance on how tests would be evaluated, but FDA chose to focus on the interrelationship between drugs and devices, and left test reviews to be determined on a case-by-case basis.

	PwC, in its Diagnostics 2011 report, noted a steady growth in the volume of M&A activity among diagnostics companies themselves, and between those and pharma companies. A “Top 9” ranking in the report (Fig. 1) was already out of date when published (in December 2011), based on the acquisition of Beckman Coulter by Danaher Corp. (Washington, D.C.) for $6.8 billion; and Phadia, an Uppsala, Sweden, test developer, by Thermo Fisher Scientific (Waltham, MA) for $3.5 billion.

Fig. 1. Market leaders by share of 2009 IVD revenues

Credit: PwC Diagnostics 2011, based on 2009 Roche data

	In addition to building their own businesses, biopharma companies are eager candidates for partnerships, both with diagnostics companies and with other biopharmas (Fig. 2). According to PwC, the blockbuster model of the past for the pharma industry could be replaced in the near future by “niche buster” combinations of diagnostics and drugs for disease subpopulations. When the right diagnostic pinpoints the patients who respond most favorably, everyone seemingly wins.

	Consider two leading biomarker-driven oncology agents that launched in 2011—Pfizer’s Xalkori (crizotinib) and Roche’s Zelboraf (vemurafenib). “Each has demonstrated impressive efficacy are its respective subpopulations, and this is expected to drive rapid uptake,” says Kate Keeping, principal analyst for Decision Resources’ Pharmaview (London). “Thanks to the early identification of their respective biomarkers, both drugs were also able to progress extremely rapidly through development (roughly five years from IND to approval), and speeding time to market helps to extend market exclusivity for the producers.”

	“Payers are definitely on board with biomarker tests, particularly when it means that they are paying for drugs that patients will likely respond to—and conversely are not paying for several months of drugs or chemotherapy that will have little positive effect,” adds Gordon Gochenauer, director at Kantar Health (Philadelphia). “And the cost of the biomarker tests is relatively inexpensive compared to the targeted therapies. Zelboraf and Xalkori cost approximately $9,500 each for a month of therapy. Eligible patients will likely be on therapy for at least six months to a year, dwarfing the cost of the biomarker test.”

	However, given the proliferation of genetic test options in recent years, many healthcare plans are struggling to decide which biomarkers to test, which genetic tests to include in their coverage decisions, and what levels of coverage to provide. “Payers are scrambling to analyze the scientific data and complete the necessary patient care and financial impact analyses,” says Doug Neely, CMPE, MHA, senior director for Xcenda, a unit of AmerisourceBergen Consulting Services. As yet, there are relatively few standard coverage policies for biomarker tests, and as a result, coverage for many is still determined on a case-by-case basis.

	For instance, one “genomic recurrence assay”—OncotypeDx from Genomic Health (Redwood City, CA)&mdash;can predict whether early-stage breast cancer patients are likely to have a disease recurrence after removal of the tumor. “The goal is for patients who have a high likelihood of recurring to receive aggressive chemotherapy, while conversely avoiding having to administer chemotherapy to patients with a lower likelihood. Not having to administer chemotherapy saves the patients from toxicity, cost of chemotherapy, and generally saves resources,” says Kantar Health’s Gochenauer. “However, payers often push back on paying for OncotypeDx (which can run $4,000—5,000) if the results of the test are not followed&mdash;for example, if a physician uses the test and finds a low likelihood of recurring, but the patient and physician choose to ignore the result and administer chemotherapy anyway.”

	He says that many payers have written policies that say they will not reimburse for OncotypeDx in these cases. “The policy arguably exists because the assay is so expensive. In this case, the physicians are left with the bill but might attempt to push the expense on to the patient.”

	Meanwhile, having too many choices in a given disease state can add challenges for prescribers and payers. For instance, while Roche’s Zelboraf is approved for melanoma patients who have the BRAF V600E mutation, another medication—Bristol-Myers Squibb’s Yervoy (ipilimumab), an immunologic therapy for metastatic melanoma also approved in 2011&mdash;does not require patients to have the molecular BRAF abnormality. “With the availability of these two options in the same disease class, oncologists now have an additional layer of complexity to assess prior to choosing how to treat patients,” says Jane Quigley, RN, senior principal of IMS Health (Stamford, CT).

	And, while diagnostic tests can help oncologists find the proverbial needle in the haystack to identify suitable patients, such screening efforts also have long-term cost implications for payers as well. Wen Shi, practice executive at Campbell Alliance (New York), points out that in non-small cell lung cancer (NSCLC), Pfizer’s Xalkori is indicated for just 5% of NSCLC patients. “This means that 20 patients need to be tested to find each one who is eligible for the drug. With the cost of the diagnostic test at $1,500 per patient, this can be substantial.”

	Finally, beyond these therapeutic and reimbursement issues, biomarkers represent a significant drug-pricing hurdle for manufacturers. A biomarker can identify a subpopulation for whom the therapy is ideal, while simultaneously excluding a large part of the potential market. Market size is one of the factors that goes into pricing decisionmaking, and when the market is significantly contracted, the pricing analysis breaks down.

	For every potential downside, there seems to be an upside to biomarkers and pharmaceutical markets. In May, Pfizer announced that its lung cancer drug Xalkori appears to be a highly effective treatment for children with a rare but aggressive type of lymphoma and other cancers—specifically, children with anaplastic large cell lymphoma (ALCL) who also have a mutation in the ALK gene&mdash;according to data from an early-stage study. “The study highlights a new understanding of how some cancers operate, one that is based on the patient’s genetic profile rather than the organ in which the tumor originates,” said the company. “The hope is that by identifying more instances of a genetic connection, doctors will be better able to target a drug for treatment.” Pfizer is also investigating Xalkori for children with neuroblastomas and a rare form of sarcoma, and are trying to identify whether the presence of the ALK mutation or some other biomarker will improve outcomes for such patients.

	In fact, more than 80% of oncology clinical assets in the pipeline have associated biomarker programs; and the majority of leading oncology companies, including Roche, Novartis, Bristol-Myers Squibb, Merck, Pfizer, Lilly and GlaxoSmithKline, have publicly stated their intent to develop biomarkers for most or all of their drugs in clinical development, says Shi of Campbell Alliance. “Having a strong biomarker program has increasingly become a cost of doing business—rather than the true differentiator it once was.”

	“FDA has asked for all new drugs to have an associated biomarker, and that is a good thing. But, not all drugs will necessarily have a relevant biomarker,” notes Roy Beveridge, MD, chief medical officer, McKesson Specialty Health and The US Oncology Network.

	The diagnostic-testing industry is built around the development standalone tests or kits that are approved by regulatory agencies, and distributed and supported by diagnostic companies. Diagnostic test kits or protocols are not marketed directly to the oncologist or private practice, but to the pathologists and clinicians who work in hospital pathology labs or standalone diagnostic labs.

	One specialized category of testing is the “laboratory-derived test,” or “LDT,” which is prevalent at hospitals and cancer centers with dedicated, high-throughput pathology laboratories and many large independent diagnostic laboratories. With LDTs, the lab derives its own methodology, using medically accepted laboratory practices and equipment; however, the test does not go through an FDA approval process. As some LDTs require fairly expensive equipment, the high-throughput labs can amortize the costs over time, across a large patient base. “The ability to rely on LDTs instead of proprietary tests can help these labs to keep costs down,” says Gochenauer of Kantar Health. “On average, the cost of an LDT to test for the biomarker might be in the range of $100, while a corresponding proprietary test might be in the range of $200—$250.”

	“A key function of diagnostic manufacturer companies is the sales and support of diagnostic kits that are sold into such lab environments,” says Brad Smith, vice president of drug development in Quintiles’ Planning and Design Unit.

	A good example is the current ALK test for Xalkori (crizotinib) from Abbott Diagnostics, notes Loreen Brown, MSW, an SVP at Xcenda. “The probe (the DNA that binds to the biomarker) is sold as a kit, but because it is a fluorescent probe, analysis requires a fluorescence microscope, and many oncology offices don’t have one.”

	In general, the costs of such companion tests vary depending on what is being measured and by what means. For example, some diagnostic tests may analyze protein biomarker levels using a blood or urine sample; others may determine the expression of a genetic mutation in a tissue sample; while others work by conducting gene-expression profiling. Competing methods include: Immunohistochemistry (IHC), Polymerase chain reaction (PCR), and Fluorescence in situ hybridization (FISH), among others.

	IHC tests typically cost $100—$150, while PCR tests typically cost $400–$500, and more novel or esoteric tests, including proprietary tests, are often priced significantly higher. In oncology, biopsies are extracted or blood samples are drawn as a normal part of treatment, so additional costs are minimal, and the added costs come in the reagents, specialized equipment, and labor to perform the analysis.

	While oncology drugs are leading the charge in pairing novel agents with companion diagnostic tests to identify strategic biomarkers, for researchers and drug developers working in other disease states, efforts to replicate this model have remained elusive, but many of the efforts are just getting under way.

	Genentech, Roche’s US-based biotechnology unit, announced in May that it had won the right to try its experimental Alzheimer’s drug crenezumab on people with no signs of dementia—the first such trial to assess whether early intervention can prevent or slow the disease. HHS is backing the trial with a $16-million grant as part of the government’s National Alzheimer’s Plan. According to the company, the drug will be tested among members of an extended family of about 5,000 people from Colombia, who carry a mutation on a gene called presenillin that makes it “virtually certain to develop Alzheimer’s disease early,” with some experiencing symptoms of memory loss in their mid-30s.

The healthcare system is coming to grips with the wave of genomic diagnostics that has followed new biological therapy introductions

Biomarkers create opportunities, complicate drug dispensing

	In early June, more than 30,000 cancer specialists and more than 400 exhibitors are expected to gather in Chicago for this year’s American Soc. of Clinical Oncology (ASCO) meeting. The event, one of the largest of any medical professional events, will be a showcase of new therapies, research advances and therapeutic innovations. Everyone from hospital administrators, to Wall Street analysts, to patient advocates will be hanging on news coming out of the meeting.

	Oncology is a big business. Nationally, cancer care consumed $124.6 billion in 2010, according to the 2011 Medco Drug Trend report; global sales of oncolytics was $76 billion in that year, according to Decision Resources Pharmaview, and will rise to $98 billion in 2015.

	Society is getting something back for all those expenditures: While cancer remains the second leading cause of death in the US (heart disease is No. 1), ending the lives of 1,500 Americans daily, the survival rate has been rising. About two-thirds of patients survive for five years or more after initial diagnosis—up from 49% in the period 1975—77, according to the American Cancer Society. A growing cohort of patients is able to manage their disease as a chronic condition: By 2020, the number of estimated cancer survivors living in the US is expected to reach 18.1 million (up from 13.8 million in 2010), further driving demand in oncology.

	Nevertheless, the many diseases that fall into the category of “cancer” remain a grim prospect for most patients, especially in cases where the survival rate has remained stubbornly low despite all the therapies available. “Cancer can involve every organ system in the body, and the therapy options available may employ every modality available, including surgery, radiation, chemotherapy, biologics and targeted therapies (such as targeted small molecules, monoclonal antibodies, antihormonals, targeted immunotherapies and gene therapies), photodynamic therapy, laser ablation, bone marrow transplants, and radioisotopes,” says Jane Quigley, RN, senior principal at IMS Health (Plymouth Meeting, PA).

	The high mortality rates of many cancers ensure that it will continue to be a well-funded research arena, and the scientific advances in both pharmacology and chronic care remain high. Fully 28% of all drug research is targeted at cancer, according to Decision Resources (Fig. 1); PhRMA counted 887 drugs in Phase I—III development last year, including 108 for leukemia alone, 98 for lung cancer, and 91 for breast cancer. Key research directions include the development of clinical endpoints (surrogates for identifying a positive outcome); alternative delivery routes (oral drugs vs. injectables); and combination and adjuvant therapies (which combine multiple molecular entities as a single therapy).

	The growing list of commercialized cancer therapies (Fig. 2)—many of which represent a thrilling new lease on life for cancer patients&mdash;are the justification for the hundreds of additional drugs in development. But that commercial success creates its own problems: paying for the therapies, and realigning the economics of how drugs are made available to patients. A 2009 study in the New England Journal of Medicine (NEJM, 2009, 360:626—633) found that the median cost of newly approved cancer medications had increased more than 4.5 times in the preceding decade &mdash; up from $1,553 per month for the period 1995–1999 to $7,112 for 2005–2009 (constant 2007 dollars). At the same time, oncology service providers are still adjusting to reductions in Medicare reimbursements instituted in 2005. Community-based oncologists, like most independent physician practices, are undergoing a wave of business realignments that connect them (or outright sell them) to hospital systems and integrated delivery networks. And that, in turn, affects how manufacturers can gain access to the market.

	“With the average cost of cancer care rising from $53,000 per patient per year a decade ago to $150,000 per patient per year now, the trend is literally unsustainable,” says Burt Zweigenhaft, CEO of OncoMed (New York, NY), a specialty pharmacy. “We can no longer say we don’t care about formulary cost considerations or we don’t have to actually collect patient co-pays or carry out comparative-effectiveness studies.”

	Over the past few years, FDA has raised the bar for approval, and private and government payers have been more aggressive about scrutinizing their coverage policies related to oncology and instituting cost-control measures. These include stricter requirements for prior authorizations and adherence to FDA label indications, and limiting the off-label use of anti-cancer treatments to Medicare-approved compendia listings. “With this heightened scrutiny, payers often have a higher expectation of clinically relevant benefit compared to the level of clinical response that is required for the drug to gain regulatory approval in the first place,” says Debbie Warner, VP, commercial planning, at Kantar Health (Horsham, PA). “For instance, payers frequently cite a minimum of six-month improvement in overall survival before they feel a treatment is ‘worth’ its cost. While approved drugs that deliver significantly lesser clinical benefit may still be covered, they may face a much higher level of scrutiny in the prior authorization process to help control costs.”

	Concerns like these hung up Provenge (sipuleucel-T), the innovative cancer “vaccine” for prostate cancer, for its maker, Dendreon, in 2008—09, until FDA relented and approved the drug in 2010. More recently, Genentech’s Avastin (bevacizumab)—a blockbuster that has been on the market since 2004 (and approved in 2008 for breast cancer)&mdash;had its approval for breast cancer revoked because later studies showed insufficient life extension or improvement in quality of life. (The drug is still approved for other cancers, and is being used off-label by some breast cancer patients).

	Deciding which indication or indications to pursue (when the agent has shown preliminary effectiveness in several tumor types and hematologic disorders) is anything but straightforward. When a promising oncology compound has several potential target indications in different cancers or tumor types, it’s up to drug companies to decide how broad a therapeutic footprint to pursue, and identify which indications may represent the most realistic or lucrative opportunity — a niche vs. more comprehensive market opportunity. The decision involves tradeoffs between clinical and commercial considerations. “It’s common to see a fierce internal struggle within a given drug company, as some stakeholders want to follow the science and let clinical drivers guide the decision, while others would prefer to let commercial issues (related to market size, potential ease of regulatory approval, and potential for high pricing) guide the process,” says Wen Shi, practice executive for Campbell Alliance (New York, NY), the consulting arm of inVentiv Health.

	While large patient populations have traditionally been the primary focus in many disease categories, focusing on areas of unmet medical need in oncology may offer better prospects in terms of rapid regulatory approval and more attractive payer reimbursement. Too often, aiming for a larger population can backfire in oncology, because the efficacy data becomes diluted when highly specific therapies fail to work on a certain percentage of patients, and this can undermine both insurer and prescriber support. In these cases, the ability to segment and focus the patient population—often through the use of biomarkers&mdash;for the sake of a stronger value proposition can make all the difference.

	“Population size can certainly influence the decision, with larger populations offering a potentially more lucrative opportunity,” says Stephanie Hawthorne, PhD, a director at Kantar Health. “However, if multiple agents with the same mechanism are being developed in one indication, it may prove difficult to differentiate your agent, especially if you are not first-to-market; this could drive development toward a less competitive alternative indication.”

	“By targeting an area with few or no effective treatments, a manufacturer can potentially accelerate the time between discovery, approval and commercialization, and accelerate the uptake in the targeted area,” adds Adrian Barfield, GM of the pharmaceutical and biotech group of Cardinal Health Specialty Solutions (Dublin, OH).

	“An increasingly common approach is to obtain initial FDA approval in an orphan indication and then access the larger populations via compendia-supported off-label utilization in larger tumor types,” says Doug Neely, CMPE, MHA, senior director for Xcenda, a business unit of AmerisourceBergen Consulting Services (Valley Forge, PA). However, “that can set up unique pricing challenges,” adds Loreen Brown, MSW, an SVP at Xcenda.

	“The indication of first launch will set the price of the drug for that tumor type, but it could have repercussions for later line extensions if a significantly higher dose (which may prove too expensive) or a lower dose (which may undervalue the product) is approved,” adds Hawthorne of Kantar Health. “Meanwhile, in some indications, particularly those with no therapeutic options and high unmet need, oncology products may obtain accelerated regulatory approval based on limited data, such as a single arm Phase II trial or interim data for a surrogate endpoint—with the goal of getting an active agent to market more quickly.”

	“Paradoxically, while regulators may be willing to fast-track certain anti-cancer agents—as much as 37% of all oncolytics, according to Xcenda&mdash;they are also increasingly calling for more proof of definitive overall survival gains during the regulatory review, especially when other treatment options already exist for that indication,” says Kantar Health’s Warner.

	It’s rare to see a cancer drug in evening-television DTC ads, for the simple reason that their utilization is a complex interplay of cancer types, biomarkers, genetic mutations and step therapies. At the same time, oncologists are renowned for being the most demanding of relevant clinical data in making therapy decisions (Pharmaceutical Commerce Mar/Apr 2011, p. 1). For these reasons, oncology product managers are in continuous contact with oncologists themselves, and that leads to the group purchasing organizations and practice-management companies that serve oncologists and hematologists.

	Traditionally, the “buy-and-bill” model has dominated the oncology drug sales channel; and today, more than 95% of distribution in oncology flows through a handful of GPOs, including Oncology Supply (part of AmerisourceBergen Specialty Group, and the largest dedicated oncology GPO), VitalSource GPO (owned by Cardinal Health Specialty Solutions), McKesson and others. “GPOs facilitate better pricing through aggregated purchasing from manufacturers as they are able to negotiate with manufacturers to create volume- and market share-based incentive contracts,” says Bruce Feinberg, chief medical officer, oncology for Cardinal Health Specialty Solutions. Related practice-management businesses at these companies include P4 (now owned by Cardinal) and ION Solutions (AmerisourceBergen Specialty Group).

	The oncology GPO not only aggregates purchase demand to lower prices for its member physicians, but it can also be an aggregator of data about the behavior of those same member physicians, says Feinberg. For instance, valuable pharmacy data, outcomes data, and information about side effects and adverse reactions can be aggregated at the practice level and linked with patient medical information, adds Michael (Mick) Koerner, RPh, a senior director at ION Solutions.

	Feinberg says that analyzing patterns of care and purchasing trends can help to identify rates of new therapy adoption, areas of significant variance in treatment and more; and such data can then drive clinical trial development and comparative-effectiveness research. “In our view, the GPO of the future will be much more like a trusted advisor and consultant that can provide competitively priced medications.”

	Practice-management groups are centrally involved in one of the other distinct trends in oncology market access: clinical pathways. Driven mostly by payer pressure, the practice networks work with oncologists to develop preferred treatment progressions based on the type of cancer and the patient’s response. These standardized protocols are published and regularly updated by the National Comprehensive Cancer Network (NCCN), ASCO, Innovent Oncology and other stakeholder groups. Today, some payers offer incentives or more advantageous reimbursement strategies when the course of treatment follows an approved treatment pathway. “Similar to getting a drug on formulary, manufacturers need to work collaboratively with providers and payers to ensure that their product is positioned appropriately/favorably within the relevant pathways,” says Brown of Xcenda.

	In addition to dispensing oncology drugs, oncology-oriented specialty pharmacies and GPOs provide an increasingly broad range of services, including advanced clinical support to patients, support with side effect management, improved compliance support, and administrative assistance in gaining insurance coverage or identifying additional financial assistance for patients (such as drug-company-sponsored patient assistance programs for those who need it).

	However, under the buy-and-bill model, “oncologists face increased risk that they will have administered a high-cost therapy only to find that their charge is denied payment or payment is significantly delayed, and a growing number of patients are unable to afford their portion of the bill,” says Warner of Kantar Health.

	In 2005, CMS implemented significant changes in the way it pays oncologists for physician-administered drugs and related services—changes that continue to influence the landscape in oncology today. At that time, Medicare changed its policies to set payments for covered drugs at the Average Sales Price (ASP) rate plus 6%, which is based on actual transaction prices and, basically, less than the previous setpoint, Average Wholesale Price (AWP). “Prior to 2005, it was not uncommon for oncologists to make more than 50% markup on a class of drugs that was already growing at 25% per year, so when patients were not able to pay their co-pays, it didn’t really matter,” says OncoMed’s Zweigenhaft. “The earlier CMS rules, which allowed for huge margins, set up a whole set of perverse economics, rather than economics based on sound outcomes data,” says Zweigenhaft. “Cancer is still not managed that way&mdash;but it should be.”

	With current reimbursement rates dramatically reduced, many physicians would be forced to operate at a loss if they were unable to collect the patients’ co-payment. “In certain situations, it is becoming increasingly common for patients to be referred to the hospital out-patient setting, so that their anti-cancer medications can be billed through the often-more-generous medication benefit, rather than the pharmacy benefit, portion of their coverage, due to these financial dynamics,” says Warner of Kantar Health.

	In an effort to eliminate some of the financial incentives tied to drug administration in the buy-and-bill model, some payer plans now require that oncologists order their infused drugs on a patient-by-patient basis from a specific specialty pharmacy. The pharmacy delivers the drugs to the practice at the time the patient has their infusion visit. “In this newer model, the payer pays the specialty pharmacy directly for the drugs and the physician only bills the drug administration fee,” explains Warner of Kantar Health. “While this eliminates the profit incentive, this model can result in significant drug waste if the patient is not able to receive their intended chemotherapy because the drugs cannot be returned or used for a different patient.”

	Not surprisingly, it is also “very unpopular” with oncologists, Warner adds. “The greatest advantage of the traditional buy-and-bill model is that a large inventory is maintained at the oncologists’ practice setting, so physicians are able to tailor the exact dose and combination of drugs to patients as they arrive for their visit.”

	Altos Solutions, a Los Altos, CA-based IT and oncology consulting company, performs a National Oncology Practice Benchmark annually. In its 2011 Benchmark (published in the November issue of J. of Oncology Practice, an ASCO publication), it reports that drug revenue as a percentage of total practice revenue has declined from 85% in 2005 to about 66% in 2010, and that the drug margin (i.e., profit) has declined from 22% to 9% (as a percentage of total revenue) over the same period. Although drug margin is clearly not the only source of revenue for community oncology practices, it has been an important one. In a previous report (published in the September J. of Oncology Practice), the Altos authors conclude:

	“As the economic model for community practice transitions from one that relied on the profit margin from drugs, the question becomes what is the next economic model? … Clearly, appropriate use of [new diagnostics and sophisticated tumor typing] will demand more physician time, not less. … Although the benefits of new diagnostic and treatment tools are desired by everyone involved in cancer care—patients, providers and payers&mdash;they cannot be delivered in the existing community oncology economic business model.”

	Given the limited number of oncology agents available and the many types of cancers that are encountered, the off-label use of medications in cancer treatment has been widespread for decades. Today, estimates show that more than half of all uses of cancer-treating drugs are prescribed off-label, notes Brown of Xcenda.

	While having more options to choose from may offer an ongoing ray of hope for oncologists and patients who are running out of treatment options, “the quality of clinical evidence to support off-label use for a given patient may be weak, thereby exposing patients to ineffective and potentially toxic therapy, and creating unnecessary expenses for payers,” says Harish Dave, MD, MBA, VP of the Oncology Therapeutic Delivery Unit of Quintiles (Rockville, MD). As a result, to curtail healthcare costs, payers are actively working to curtail off-label prescribing in oncology.

	Today, the majority of cancer patients—roughly 60%&mdash;are on Medicare. When it comes to Medicare, coverage of off-label drug use in oncology is limited to those agents that are listed in at least one of four accepted compendia: 

	• American Hospital Formulary Service Drug Information

	• Gold Standard Inc. Clinical Pharmacology Compendium

	• National Comprehensive Cancer Network (NCCN) Drugs and Biologics Compendium

	• Thomson Micromedex DrugDex Compendium

	“Today, most private payers follow Medicare coverage policy when setting their own criteria. Thus, payers are increasingly refusing to pay for treatments off-label, unless they have a compendia listing or sufficient evidence to support their clinical value,” says Warner of Kantar Health. “For this reason, it’s in the drug company’s best interest to actively pursue a solid compendia strategy.”

	Yet another complexity of oncolytics is that the form of drug delivery can affect its affordability, patient acceptance and, indirectly, its efficacy. Traditionally, chemotherapy has been administered via intravenous infusion, but over the past decade, there has been a surge of newer oral and self-injected agents. Some are traditional chemotherapies, such as Xeloda (capecitabine), while others are targeted therapies, such as Gleevec (imatinib) and Sutent (sunitinib). Today, of the 125 drugs in Phase III clinical development for cancer, 38 are oral medications, according to Medco.

	For drug developers, the decision about whether to pursue the development of a compound as an oral or injectable therapy will be dictated by clinical and commercial considerations. If the drug’s side effect profile supports self-administration, there are some key benefits for the right patients, says Koerner of ION Solutions. These include the freedom for patients to take their medications at home (saving time and travel), and in some instances, increased insurance coverage, as the pharmacy benefit may be preferential to the medical benefit in terms of patient co-pays and administrative requirements for oral oncology medications.

	Meanwhile, the pursuit of self-injectable oncology meds is also garnering attention. For instance, Roche is currently developing subcutaneous reformulations of Herceptin and Rituxan (rituximab). The potential benefit for the patient would be shorter medical visits, as the subcutaneous injection (rather than the IV infusion) can be given in a few minutes rather than hours, or possibly at-home administration. “This is particularly attractive for these two agents when they are used in the adjuvant/maintenance settings with treatment lasting for more than a year,” says Kate Keeping, principal analyst at Decision Resources, a market research company. “From a commercial perspective, this also offers Roche the opportunity to offset the imminent threat of biosimilar competition to the intravenous formulations of these brands.” A subcutaneous formulation of Velcade (bortezomib; Millennium Pharmaceuticals) for multiple myeloma was recently launched, which not only offers more convenient delivery, but also reduced neurotoxicity, she says.

	There are drawbacks to self-administration: the risk of adherence and compliance issues, and failure to use the therapy as prescribed (in particular, missing doses) that can impact outcomes and result in premature emergence of drug resistance. And at-home administration reduces patient interaction with both physicians and nurses, which reduces opportunities for regular monitoring. US physicians, who receive a fee for administering intravenous drugs, may also resist the loss of that revenue stream.

	National studies confirm that overall noncompliance to oral drugs across all disease categories can run as high as 50% to 70%. “This presents a challenge in any disease state but can have a significant impact when it comes to chemotherapy,” says Koerner of ION Solutions. “In some instances, patients may have side effects or cost pressures, and decide not to take the drug or take the drug less frequently,” says Brown of Xcenda. “In others, the physician may opt to dose-reduce the patient to manage through certain side effects, but the patient may want to take the full dose to ensure they are getting the maximum benefit of the drug.” With many of these drugs costing as much as $7,500 a month, says Quigley of IMS, it serves nobody’s interest to have them be administered incorrectly or not at all.”

	As for distribution, oral oncology therapies often fall outside the traditional buy-and-bill model. In this realm, “Specialty pharmacy providers are taking on a much greater role in patient management, as office-based clinicians turn over the ongoing management for self-administered products to them,” says Doug Neely of Xcenda. “Payers are much more comfortable managing drugs through traditional pharmacy benefit management (PBM) systems.”

	“With the growing availability of oral options for oncology treatment, some larger oncology practices have opened dispensing pharmacies, so they can also dispense oral cancer drugs to patients,” says Warner of Kantar Health. However, this approach can bring significant business challenges for oncology practices, so it tends to be seen only in larger oncology practices. It is thought that less than 10% of practices currently dispense oral oncology drugs directly. “In oncology, payers in turn will continue to scrutinize the incremental value of new therapies, while experimenting with new approaches to manage overall costs, while maintaining access to quality cancer care,” she concludes. “Manufacturers need to evolve their clinical development, marketing and sales strategies in order to remain competitive in this complex arena.”

Oncology combines some of the most life-changing therapeutic events with the most complex commercialization pathways. Rising costs of treatments simply add to the tension

Suzanne Shelley

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