Drug prices plus low reimbursements force cancer docs to sell out

Rising cancer drug prices aren't just alarming to payers. They're squeezing oncologists, too, at a time when doctors are paid less to administer drugs--to the point where they're selling out to hospitals.

Why should drugmakers care whether cancer docs practice under the umbrella of a healthcare system rather than treating patients independently? Because many hospitals pay less for cancer drugs. Plus, still-independent doctors may be swayed more than ever by rebate and discount offers, because their spread on oncology meds has shrunk dramatically.

Why should everyone else care? Because the overall cost of cancer care through hospitals is much higher, as the IMS Institute for Healthcare Informatics said in a recent report on the oncology market. "Since hospitals incur higher costs and overhead for the delivery of care, their reimbursement levels for the administration of drugs are higher than those for physician offices," IMS Health said in a statement. 

And as The New York Times reports, the exact same drugs are reimbursed at up to three times the amount per dose at hospitals than at private oncology practices. For instance, according to the NYT, hospitals can get almost $10,000 per dose of Roche's ($RHHBY) breast cancer drug Perjeta (pertuzumab), while independent oncologists collect somewhere around $4,000.

That's because the overall cost of operating a hospital is higher, including uncompensated care for poor and uninsured patients, the facilities say. But many hospitals pay less for their supplies of drugs. About one-third of hospitals participate in the 340B discount program--designed to encourage care for the poor and uninsured--which requires drugmakers to supply their cancer meds at about half the usual cost. These 340B hospitals "have expanded their oncology presence," IMS Health said.

Other hospitals are able to negotiate better prices because they're buying in bulk. Oncologists get better deals if they buy in quantity, too. But because cancer drugs are increasingly expensive, it's difficult to finance bulk purchasing. Oncologists have to pay up front for their drug supplies, billing their cost plus profit as the drugs are used.

And more expensive therapies are on their way. A new generation of "game-changing" immunotherapies is coming to market, including Bristol-Myers Squibb's ($BMY) Opdivo and Merck's ($MRK) Keytruda, with mid-six-figure price tags.

- see the NYT story

Special Reports: Top 10 best-selling cancer drugs of 2013 | Top 10 most expensive drugs of 2013

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