News Release
gupta bekelman release

PHILADELPHIA — A program in which medical oncology practices could opt to receive increased reimbursement from a health plan for less expensive, generic cancer drugs in contrast to their costlier brand-name equivalents did not significantly affect prescribing patterns or spending on cancer care.

Researchers from the Perelman School of Medicine and the Wharton School at the University of Pennsylvania found that healthcare providers who voluntarily contracted for the program already had higher rates of generic drug use and those that did not participate prescribed the costliest cancer drugs. This means the program did not attract the practices with the greatest potential to lower the financial burden of cancer care. The study’s authors say the findings point to an inherent flaw in voluntary payment reform programs, which is particularly important as the Centers for Medicare & Medicaid Services (CMS) continues to evaluate a way to reform payment in cancer care and other settings. The findings are published today in the journal Health Affairs.

“This is a strong and early warning that voluntary payment reform programs should be considered with caution,” said the study’s co-lead author Atul Gupta, PhD, an assistant professor of Health Care Management at Wharton.

Healthcare spending on cancer in the United States is second only to heart disease and continues to grow faster than other healthcare areas. Spending on cancer drugs, specifically, has risen $16 billion dollars in just the last five years – now totaling more than $41 billion annually. Based on the Medicare Prescription Drug Improvement and Modernization Act of 2003, healthcare providers buy cancer drugs at one price and bill Medicare or other health plans at a markup. This system is called ‘buy and bill’ reimbursement and incentivizes prescribing higher-cost drugs.

To address this, United Healthcare, the largest health plan in the United States, initiated a program in 2006 to increase reimbursements for generic cancer drugs. The program, which ran until 2016, aimed to reduce differences in payments to practices between generic and brand-name cancer drugs while preserving the ability of practices to prescribe the cancer drugs doctors and patients felt were best for their cancer.

Because generic cancer drugs are less costly than brand-name drugs, the program overall would still potentially lead to cost savings. Differential payment for generic cancer drugs, like the one evaluated in this study, was one of the first approaches used to try to address the increasing cost of cancer therapy.  More recently, United Healthcare and Medicare have been implementing more comprehensive alternative payment models to improve the quality and value of care. Nevertheless, lessons from this study may help to inform current efforts.

“This is the kind of program that makes sense in theory, and it could have been a win-win-win: a win for patients through lower out-of-pocket expenses with equally effective cancer treatments, a win for practices through preserving financial margins, and a win for payers through a reduction in overall spending,” said the study’s senior author Justin E. Bekelman, MD, director of the Penn Center for Cancer Care Innovation at the Abramson Cancer Center and senior fellow in the Leonard Davis Institute for Health Economics. “But in practice, the program had no measurable effect on either prescription patterns or spending.”

The authors identified 1,905 oncology practices across the United States treating 12,689 patients with breast, lung and colorectal cancer. Overall, oncologists prescribed 188 unique cancer drug regimens; and in the first 30-days of treatment, average total spending was $20,624, average cancer drug spending was $10,033 (49 percent of total spending), and average patient out-of-pocket spending was $677. The authors determined whether oncology practices opted-in to the new program and, if so, when. They then conducted a series of analyses to evaluate the effect of the program on prescribing of cancer drugs, cancer drug spending, overall healthcare spending and patient out-of-pocket spending.

They found 36 percent of practices (695 of 1,905) switched to the new fee schedule. Overall, the practices that opted-in to the new program had higher rates of generic drug prescribing both before and after starting the program.

“Voluntary payment programs that entice practices already predisposed to higher-value healthcare may have good intentions but may not bend the clinical transformation or cost curve,” said Bekelman.

Gupta also noted that a single commercial health plan, even one with a large national presence like United Healthcare, may not have enough market share to promote practice change or reduce spending on its own, a reality he says could inform decision-making at the federal level. “Traditional Medicare, Medicare Advantage, and commercial insurers should work together to innovate in the design and execution of alternative payment models for healthcare, considering the pros and cons of voluntary and mandatory programs,” Gupta said.

This research was funded by the American Cancer Society (RSGI-12697) and the National Cancer Institute (K07CA163616).

Penn Medicine is one of the world’s leading academic medical centers, dedicated to the related missions of medical education, biomedical research, excellence in patient care, and community service. The organization consists of the University of Pennsylvania Health System and Penn’s Raymond and Ruth Perelman School of Medicine, founded in 1765 as the nation’s first medical school.

The Perelman School of Medicine is consistently among the nation's top recipients of funding from the National Institutes of Health, with $550 million awarded in the 2022 fiscal year. Home to a proud history of “firsts” in medicine, Penn Medicine teams have pioneered discoveries and innovations that have shaped modern medicine, including recent breakthroughs such as CAR T cell therapy for cancer and the mRNA technology used in COVID-19 vaccines.

The University of Pennsylvania Health System’s patient care facilities stretch from the Susquehanna River in Pennsylvania to the New Jersey shore. These include the Hospital of the University of Pennsylvania, Penn Presbyterian Medical Center, Chester County Hospital, Lancaster General Health, Penn Medicine Princeton Health, and Pennsylvania Hospital—the nation’s first hospital, founded in 1751. Additional facilities and enterprises include Good Shepherd Penn Partners, Penn Medicine at Home, Lancaster Behavioral Health Hospital, and Princeton House Behavioral Health, among others.

Penn Medicine is an $11.1 billion enterprise powered by more than 49,000 talented faculty and staff.

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