Drug Revenues May Migrate to Specialty Pharma

Kevin Colgan

The rising number of oral oncology drugs that can be supplied through pharmacy networks rather than administered in clinical settings, such as intravenous drugs, has many physicians worried that they are losing control of an important part of the therapeutic process.

The Community Oncology Alliance (COA) is stepping into the fray by forming a pharmacy association that will strive to represent the interests of oncology practices, particularly those that already have dispensaries or that intend to set them up. The number of in-house dispensary operations is growing, says Ted Okon, executive director of the COA, and at stake in this struggle are control over revenues and control over continuity of care and drug revenues.

On the revenue side of the equation, more and more oncology drugs are orals, which can be dispensed through a retail pharmacy or through a specialty pharmacy with a contract to issue a particular drug, rather than through a doctor’s office as intravenous medications are administered. Oncologists who dispense drugs are concerned about their ability to continue to fully care for their patients with infused drugs as well as by dispensing oral oncolytics, Okon says.

“Oral drugs are on the rise—25% to 30% of the drugs in the research pipeline are oral oncolytics. When you see that, that sort of catches your eye. You have to be thinking about those,” Okon says.

Drugs make up a sizeable portion of oncology practice revenues. A 2007 report in the Journal of Oncology Practice indicated that among a sampling of 164 oncology practices, drugs represented 77% of practice revenues, and drug administration amounted to 9% of revenues, while patient evaluation and management services represented 12% of revenues.2 If oral oncology drugs in the clinical testing and approvals process make up 25%-35% of all oncology drugs in the pipeline—according to a widely accepted industry estimate—a change in the point of dispensing for orals could have an impact on practice finances.

Injected and infused drugs have not presented such a problem for physicians because they are typically covered under the medical benefit and are administered in a clinical setting. Oral drugs, conversely, are covered under the pharmacy benefit and can be self-administered by patients at home. As more drugs switch over to the pharmacy benefit, quality and continuity of care could suffer if specialty pharmacies gain by attaining exclusive control over distribution rights, Okon says.

On the other side of the balance is the question of whether a patient will actually receive and properly ingest the oral medicine that has been prescribed for him, Okon says. Studies have shown that non-adherence is a significant issue, and it becomes more of an issue as drug prices creep skyward and out-of-pocket expenses rise with the higher deductibles and typical of the many cost-saver health policies in vogue.

“When a patient finds out what they have to pay, a lot of times they don’t get the medicine,” says Okon. “It becomes a problem of treating the patient. If you are dis-joining the providing of the drug from the point of care, you’re going to have all sorts of problems.” Indeed, a study sponsored by COA in conjunction with Avalere Health found that when it comes to oral oncolytics, patients with Medicare and those with lower incomes abandoned their therapies almost twice as often as their commercially insured counterparts.1 The 2010 study found that 46% of Medicare patients had cost shares in excess of $500 versus 11% of commercially insured patients, and the study also found that patients with out-of-pocket expenses in excess of $500 were four times as likely to abandon their therapy. The actual rates of abandonment were 16% for Medicare and 9% for commercially insured patients.

Ted Okon

Among its tasks, the COA pharmacy association would work to establish standards for in-house dispensaries to improve safety, but representing the interests of the oncology provider community is paramount, Okon noted, citing a recent, unpublished COA survey of 500 of its members that showed that 80 practices who responded were in the process of setting up dispensaries.

Dispensing high-priced oral oncolytics can be lucrative, says Kevin Colgan, associate vice president of the UHC Specialty Pharmacy Program. This is especially true as the price of oncology drugs continues its ascent into the stratosphere. “The average annual cost for a branded drug in 2013 was $2960 per year or about $250 per month. Even though costs have been rising at 12% per year, we are still only looking at $300 per month for a branded non-specialty drug. The profit on that prescription is 10% or approximately $30. If you compare that to a specialty oncolytic drug like Xalkori or Zykadia for ALK+ non-small cell lung cancer at $12,000 per month and a profit of 5% per prescription ($600), the difference is substantial.” The catch, he says, is that with a high priced oncology specialty drug the care and complexity of handling the drug may eat up some of the profit.

Colgan is not convinced that oncology practices are always the ideal place for the dispensing of oral drugs. He says the specialty pharmacy industry has evolved many competent, multi-level processes for distribution of drugs and for the management of patients who require guidance on taking medicine and also follow-up attention to ensure that they remain adherent to their treatment regimes. The resources specialty pharmacy can bring to bear on a particular case of care often far exceed what the standard oncology practice has at its disposal, he says. Often, only the larger practices have the expertise and the support that specialty pharmacies in integrated care networks have developed, he says.

Citing an example, Colgan told the story of a 26-year-old with bowel disease. “She had probably gone on a health exchange plan and selected a plan that was less expensive, and her copay went from $5 to $1000,” he said. “She couldn’t afford that so she quit taking the medicine. Three months later she calls the physician and says ‘I’m ill and I need some medication I can afford or I’m going to have to come to the hospital.’” In this case, an integrated care network pharmacist helped the patient to resolve her financial need and brought her copay down to $5 with a copay assistance card,” Colgan said. “The physician had no idea she’d ever abandoned therapy.”

CVS/Caremark, for example, one of a number of specialty pharmacies, claims to be able to keep patients “on track” via a roster of services that include round-the-clock pharmacists and nurses, who set dosing schedules, answer questions, respond to concerns when side effects develop, and check to make sure that patients stay on their medication.

Not everyone agrees, however, that patients are getting the attention they need from the specialty pharmacy industry. A report on oral therapies and adherence by the group eyeforpharma sounded a note of concern about what it described as fragmentation in the specialty pharma and integrated care industry, noting a lack of standardization that it said contributed to widely varying results for the patients it serves.3 “Different pharmacists are managing different drugs from different vendors within different silos, so there is no single pharmacy program managing the entire treatment protocol for any given patient,” the report said, quoting Michael Kolodzeij, MD, FACP, national director for Oncology Solutions, Aetna.

Joshua Cox, PharmD

Expanding on the observation, the report quoted Burt Zweigenhaft of Onco360 Oncology Pharmacy, who said the silo approach “results in clinical fragmentation, lack of benefits coordination, and failure to harmonize support around side effects, adverse events and potential drug-drug interactions [and] literally sets up the patient for clinical failure.”

Okon says such concerns contributed to the decision by COA to set up the Community Oncology Pharmacy Association. “What we realized is there’s really a need for more consistency and standards relating to the quality of dispensing or retail pharmacy,” he says. “With oral drugs, it’s really important.”

Joshua Cox, PharmD, director of pharmacy services for Dayton Physicians Network in Dayton, Ohio, says his practice of 32 physicians—including 18 medical oncologists and 7 radiation oncologists, set up an in-house dispensary three years ago. The dispensary was developed because the doctors there felt that they were in the best position to provide patients with high quality service with the best value; earning a profit from the dispensary enterprise wasn’t as important as ensuring that it would pay for the extra manpower and overhead involved in maintaining the operation, Cox says.

“There are many insurance hoops that have to be jumped through and a lot of counseling that is required, and patient education,” Cox says. “In order to make sure patients have the highest level of access and the most rapid turnaround times, we decided to begin providing that service.”

While the specialty pharmacy industry claims to offer comprehensive follow-through care for patients, Cox says the dispensary achieves that goal by putting doctors side by side with a pharmacist when treatment decisions are made and working with patients throughout the process to ensure that they obtain and take their medications. “Our financial counseling staff is very adept at making sure we exploit every resource available to patients, whether that is through some sort of manufacturer copay discount card, some assistance, or any other type of foundation assistance that’s available in the community. We’re able to get assistance for patients and get their out-of-pocket responsibilities reduced dramatically.”

Specialty pharmacies have approached the Dayton practice on various occasions seeking to provide certain medications that the practice cannot otherwise obtain for patients there. “There are times when the payer will deny us the ability to provide patients with a specialty medication, and those patients are forced to go somewhere else. Typically the specialty pharmacies that approach us are seeking to obtain that business from us. Operationally, we tend to stick with one or two as opposed to creating a dozen different processes for a dozen different specialty pharmacy entities,” Cox says.

Doctors may see more and more “house calls” by specialty pharmacies, as the newer orals tend more often to involve high costs, special handling and administration, and complex patient conditions requiring close monitoring. “Most of today’s oral oncoloytics are in a class called kinase inhibitors which … bring a different set of side effects, such as extreme sub-cutaneous rashes and diarrhea,” which can require hospitalization,’ the eyeforpharma report stated. “Sending the patient home to take these complex drug regimens on their own is really a huge leap of faith,” Zweigenhaft stated.

Colgan believes manufacturers are going to want to see these drugs delivered through specialty networks, and he believes that especially in the case of drugs with limited potential users, it makes the best sense.

“If a drug is utilized to treat a large population, such as drugs for hepatitis C, those will go through the traditional channel. This is only because specialty pharmacy providers would have a difficult time handling all of the volume even though these drugs may be classified as specialty pharmaceuticals and require additional patient support,” Colgan says.

“If a drug has a market of fewer than 400,000 patients and requires additional patient care, teaching, clinical coordination and reimbursement support, it is probably best handled through a specialty pharmacy channel.”

In addition, he says, specialty pharmacy networks that deal with large populations of affected patients are probably going to receive preference for specialty drug contracts simply because it makes the best sense monetarily for manufacturers.

“If you look at the epidemiology of non-small cell lung cancer, there’s about 210,000 patients. We looked at our data and within our system, UHC, we treated 138,000 last year. That’s about 62% of the patients. So, you’re probably not going to put your channel for that drug with somebody who’s not doing a lot of work. That’s a really important concept. They want a stickiness to make sure the drugs produce. I understand the manufacturer’s perspective and they have a fair amount of control over that—is what it amounts to—so I think that will continue,” Colgan says.

Okon and Cox say that specialty pharma is already aggressive about capturing a large share of the oral oncolytics market and that oncologists need to need to speak up for patient care and for themselves.

“We in the oncology environment feel strongly that there is value in making sure that patients’ care can be provided from the medical oncologists’ offices, and that we are best positioned to provide the highest value care,” Cox says. “I think the lobbying is certainly coming from all sides and will likely continue. I can’t foresee personally how the legislation will change, if at all, in the future, and how it will affect us. Certainly, that battle is ongoing.”

References

1. Barnes L, Burich M, Little A, Nowak M, Haroldson B. Oral Oncolytics: addressing the barriers to access and identifying areas for engagement. Avalere. http://www.communityoncology.org/pdfs/avalere-coa-oral-oncolytics-study-summary-report.pdf. Published February 2010. Accessed May 14, 2015.
2. Akscin J, Barr T, Towle E. Key practice indicators in office-based oncology practices: 2007 report on 2006 data. J Oncol Pract. 2007;3(4):200-2003. Doi: 10.1200/JOP.0743001.
3. eyeforpharma. Oral therapies in the oncology marketplace. http://img03.en25.com/Web/FCBusinessIntelligenceLtd/%7B21eb8791-89ed-4528-8b94-fc61f3900f65%7D_2742_10APR15_Content_Oral_oncology-marketplace.pdf?utm_campaign=2742%2010APR15%20Content%20Oral%20Autoresponder&utm_medium=email&utm_source=Eloqua. Published February 2, 2015. Accessed May 7, 2015.