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Oncology Study Shows Need for Value-Based Prices, Author Says

By Kerry Young, CQ Roll Call

May 2, 2016 -- Prices of cancer drugs often don't fall when similar treatments become available, according to new research unveiled Monday in the journal Health Affairs. The finding could bolster arguments for a controversial Medicare proposal to lower spending for drugs provided in physicians' offices, said the lead author of the study. 

The monthly prices for orally administered cancer drugs rose about 5 percent a year above the rate of inflation, University of Washington researchers said in their paper. This trend isn't abating, although the number of cancer pills being developed by drugmakers is growing, wrote Caroline S. Bennette, a researcher at the University of Washington in Seattle, and her colleagues. New approaches will be needed to reduce spending, according to the researchers.

"Our findings therefore suggest that competition is unlikely to meaningfully rein in the escalating costs of oral anticancer drugs in the near future," they wrote. "Instead, potential policies to address these trends could seek to link reimbursement rates or coverage mandates with a metric of comparative clinical value or benefit."

Officials at the Centers for Medicare and Medicaid Services (CMS) outlined steps for considering such an approach in a draft proposal unveiled last month that would change how the program pays for drugs administered in doctors' offices. Medicare spends more than $20 billion a year for medicines covered through its Part B outpatient program, which covers services provided in doctors' offices such as injections and infusions of chemotherapy.

The research published in Health Affairs focuses on oral treatments, such as the Gleevec pill that can cost about $90,000 a year. The cancer pills would be covered by Medicare's Part D drug plans, since people take them on their own.

"I'm impressed with the proposal to test new Medicare Part B prescription drug models. I'd be interested to see Congress or CMS potentially encouraging similar evaluations among Medicare Part D plans for anticancer drugs," Bennette said in an email to CQ HealthBeat.  "I think a key part of this would be facilitating indications-based pricing."

CMS has attracted both strong support and fierce dissent for its outpatient drug proposal. Editorials in the Washington Post and New York Times praised Medicare for putting forward the Part B drug model. AARP and 24 other organizations also sent a letter Monday to Health and Human Services Secretary Sylvia Mathews Burwell and Acting CMS Administrator Andy Slavitt supporting the proposal.

Opposing it are many influential Republicans in Congress. Budget Committee Chairman Tom Price, R-Ga.; Rep. John Shimkus, R-Ill.; Rep. Charles Boustany Jr., R-La.; and 239 of their GOP colleagues on Monday sent a letter to Slavitt asking that the agency withdraw this proposal.

The Pharmaceutical Research and Manufacturers of America (PhRMA) and the American Medical Association, plus many medical specialty organizations, also oppose the program.

The CMS proposal calls for a shift in the months ahead in how many doctors are paid for Part B drugs. Some would continue with the current reimbursement of the reported average sales price plus a 4.3 percent premium. Others would get a premium of about 0.9 percent plus a flat fee that might be set at $16.80. A second phase of the Part B drug model calls for implementing the same kinds of value-based purchasing tools that insurers and pharmacy benefit managers already use.

In response to Bennette's paper in Health Affairs, PhRMA noted in a Monday statement that many factors can cause a drug price to fluctuate. The trade group for drugmakers also pointed out that consultant IMS Health has found net prices for brand medicines increased just 2.8 percent in 2015, down from 5.1 percent the prior year, as negotiated discounts and rebates rose sharply.

The University of Washington researchers allowed that getting Food and Drug Administration approval for additional uses for drugs might justify price increases in some cases.  "However, if the supplemental indication offers a smaller benefit for newly indicated patients than those receiving the drug under the original indication, then higher prices across the board are not justified," they wrote.

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