Balancing Cost and Quality in Oncology

VBCC - September 2013, Volume 4, No 7 - Economics of Cancer Care
Caroline Helwick

Hollywood, FL—The goal of balancing cost and quality leaves no stakeholder without a challenge, said Grant D. Lawless, MD, RPh, Director, Healthcare Decision Analysis Program, and Associate Professor of Clinical Pharmacy, University of Southern California, Los Angeles.
“If one does not know to which port one is sailing, no wind is favorable,” and the United States is still struggling to chart a course for healthcare reform, Dr Lawless said.

He noted that the “A” in the Afford­able Care Act (ACA) should stand for “accountable” to reflect the need for accountability in healthcare. “That is as important as figuring out how to make it affordable,” Dr Lawless said.

According to Donald M. Berwick, MD, former Administrator of the Centers for Medicare & Medicaid Services, the “triple aim” of the ACA was the coordination of care, population health, and cost control, to which Dr Lawless would add 2 more goals—delivery reform (moving from specialty care to primary care) and reimbursement reform (moving from volume and intensity to quality and cost), 2 changes with far-reaching implications, he said.

Changing Payer Role
Within the rapidly changing landscape for payers are many components that could prove cost-saving, but not all will be easily accomplished. For example, formularies and clinical pathways can help limit choices and the cost of medications, but bundled payments may be a harder sell and could represent “an eternal battle between the provider and the hospital,” Dr Lawless said.

Preventive services and primary care are pivotal areas that have received less attention. Approximately 80% of Medicare enrollees have at least 1 chronic care disease, and 45% have at least 2. Studies have shown that 2 serious medical conditions essentially render patients chronically ill and “complex” in terms of healthcare utilization and costs, such as patients with rheumatoid arthritis or multiple sclerosis. Three overlapping medical conditions put patients on par with a catastrophic illness, such as cancer.

“We are seeing that as more and more patients come through the system with these overlapping chronic problems, they’re consuming healthcare at the rate that we thought was only applicable to very complex medical problems,” Dr Lawless said. “We’re wondering where the dollars are going to come from.”

Impact on the Pharmaceutical Industry
The pharmaceutical industry will be affected by many factors, such as the emergence of biosimilars and generics, the increasing costs of research and development, caps by drug class and dollar limits, and the standardization of care, “all interlocking with one another and putting pressure on the system,” Dr Lawless said.

Figure 1
Figure 1: The 3-Generation Evolution in the Pharmaceutical Industry: Changing Opportunity.
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This is occurring at the end of what Dr Lawless calls a 3-generation evolution (Figure 1). The first generation focused on the development of new products and the creation of “robust volume.” The second generation evolved toward “intensity of care,” with diversified portfolios and greater involvement of payers. The third generation, which is occurring today, is focused on outcomes and value, he said.

“The provider-driven model is evaporating into the payer-driven model, and the primary care model is taking over what used to be specialty care. We may see a complete reversal,” Dr Lawless predicted.

“I think the US may muddle along at the current pace, but if there is another significant downturn in our economy, or tremendous pressure on the system by more people entering and using more services, we may see a massive change in coverage. This is what happened in Germany, which was once a liberal payer, within 1 year of the European Union’s financial downturn,” he said.

Implications for Drug Development
The need to balance cost and quality will no doubt have an impact on clinical research, Dr Lawless predicted. The idea of “high throughput,” risky investing in a multitude of compounds to find a few blockbuster drugs, will fade, because there is limited value in that business model. Only approximately 6% of compounds now enter phase 3 clinical trials, and fewer are approved. “Those kinds of numbers don’t work anymore,” he said.

There will be a push toward new kinds of partnerships and licensing agreements, and new standards will be set. There will be greater use of electronic data collection (prelaunch and postlaunch), and an expansion of comparative effectiveness research (CER) into the areas of devices, diagnostics, physical medicine, mental health, and wellness. CER adds 15% to the cost of clinical trials, and, as yet, there is no clear understanding of how to interpret and apply the data from these comparisons.

Gold standards for determining efficacy will have to change to accommodate new outcomes, value, and the need for personalized medicine. Sample size for clinical trials will need to increase to facilitate subgroup analyses, which are becoming critical for optimizing a drug’s target population. International trials will be accompanied by new requirements for a shifting world market and the control of data integrity away from the source; for instance, some countries now mandate that drug manufacturers maintain a presence there if they intend to test or market drugs in that country.

The skyrocketing expenses related to these changes could result in fewer clinical trials initiated. “Everything just rolls in the wrong direction. I think there’s a real challenge out there,” Dr Lawless said.

Figure 2
Figure 2: 2014 and Beyond: Budget Considerations.
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Shifting Financial Strategies
The future healthcare climate will be accompanied by fixed federal budgets, reduced payments to Medicare, the shifting of financial management to the states and exchanges, and new business models with a focus on primary care (Figure 2). If healthcare dollars are spent on primary care and prevention, which is part of the government mandate, will enough money be left for complex care, such as cancer care, and catastrophic care? It is possible, Dr Lawless said, that “our thinking might be turned upside down” when the goal of having the best outcome at a reasonable price shifts toward “a reasonable outcome at the price.”

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