Navigating the tense, complex oncology market

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 payer environment

The growing list of commercialized cancer therapies (Fig. 2)—many of which represent a thrilling new lease on life for cancer patients—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 — 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)—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—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—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.

Market access

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—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—they cannot be delivered in the existing community oncology economic business model.”

Off-label drug use in oncology

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%—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.”

Oral meds and self-injectables

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.”