The Cost of Cancer Care: We Must Incorporate Value and Quality of Life into the Mix

June 2013, Vol 4, No 5

Hollywood, FL—The cost of cancer care or cancer cure means different things to different stakeholders. Finding a consistent definition may be impossible, but in today’s environment “it is probably unfair to focus on costs without incorporating value,” said John E. Hennessy, MBA, CMPE, Vice President, Operations Midwest Division Oncology, Sarah Cannon Cancer Center, Nashville, TN, who spoke at the Third Annual Conference of the Association for Value-Based Cancer Care. The types of costs in cancer care include:

  • Direct (“per-click”) costs
  • Indirect costs that are part of “the package”
  • Opportunity costs (the beyond-the-bill impact)
  • Hard currency costs for patients mean out-of-pocket costs
  • Quality-of-life or productivity costs for drugs, diagnostics, and radiation.

The Cost of Drugs
Drug costs are almost always direct costs, and they are almost always “reimbursed on a line-item basis.” The direct cost of drugs is highly variable in a system in which there are many effective generics; “teaching old dogs new tricks”; and highly focused, targeted, expensive agents—$6000, $8000, $12,000, or even $20,000 monthly. These new agents are very effective in a small subset of patients, but are therefore very expensive. Costs are often driven by drug patent expirations and research rather than value, Mr Hennessy said.

“In a market where people aren’t able to choose freely among drugs, or to have perfect information, you get an imperfect market, and you get prices that are out of control,” he said.

The indirect costs of drugs can also be substantial, incorporating the unwanted consequences of treatment, such as toxicities, and the need for staff support to keep patients on protocol.

Opportunity costs are part of drug delivery as well. When one treatment option is chosen, another may be eliminated or delayed. When a new treatment is introduced, an old option is often being ignored, as less effective. For example, failing to initiate neoadjuvant chemotherapy may lead to a loss of opportunity for a pathologic complete response before surgery, and clinical trial opportunities may be limited by previous treatments.

“Premium costs are impacted by drug costs,” Mr Hennessy said, noting that Missouri has an oral chemotherapy parity law, but the business community there fought against it, to keep insurance costs down by maintaining high copayments. Reinsurance issues may become part of this drug cost component, as the Affordable Care Act caps maximum out-of-pocket costs and reinsurance companies are brought in to off-source the commercial payers’ losses.

“Out-of-pocket costs are obviously substantial,” Mr Hennessy said. Although patients are shielded from the 100% of the cost of the drug, they are not shielded from the 20% of the cost. “Oral chemotherapy parity…is also beginning to shield patients in certain states from these costs,” and industry-supported patient assistance programs are also shielding patients from the cost of the drug. But copayment can be very substantial, and many patients with cancer cannot afford it: “20% of forever for a Medi­care patient is really a big deal,” he emphasized.

Finally, quality-of-life costs related to drugs—primarily side effects—are addressed rarely, and if addressed, it is done so “indirectly, with pathways.” According to Mr Hennessy, “common” side effects “are not so common to patients,” who suffer losses in productivity and capabilities. Incor­por­at­ing quality-of-life costs into the economic analysis is a challenge, not only to society at large but also to providers, who must spend time dealing with these issues, and are largely uncompensated for this.

Diagnostics Cost
For diagnostics, “we have a lot of new tools, and we are challenged with establishing their clinical value,” Mr Hennessy said. “The challenge is that we are an ‘action society’: I see something, I want it.” But some have asked, “are we treating the findings rather than the disease?” Are we getting real value from our very sophisticated diagnostic tools? Do we know what to do with the findings?

Questions to be answered include what is the right tool, the right time, and the right frequency of use? What is the tool’s relative value in screening, diagnostics, and surveillance? These settings require different approaches to utility and cost, he said, adding that “with broad swaths can come unexpected consequences.”

The indirect costs of diagnostics largely pertain to determining the tests’ clinical values. Diagnostics that lack clinical meaningfulness contribute to unnecessary spending; however, diagnostic testing also saves money when it enhances timely diagnosis, determines disease stage, and guides treatment. Newer diagnostics may be bundled with their related procedures.

Out-of-pocket costs related to diagnostics continue to be problematic for patients, who may be unable to afford the recommended surveillance and monitoring. Quality-of-life costs remain ill-defined for diagnostics; however, “when we find something, we do something,” and therefore, side effects will accompany these interventions, Mr Hennessy emphasized.

Radiation Costs
The direct costs of radiotherapy are rising, whereas the number of fractions delivered is dropping, and with a variety of modalities in use, costs are variable. Bundling and case rates could be on the horizon.

Modalities that deliver radiation more precisely have limited the indirect costs of radiotherapy, although the risk of secondary cancers resulting from earlier radiation exposure remains a concern. Indirect costs, or lack of incremental revenue, may stifle innovation or may limit treatment options, he suggested.

Newer targeted technologies may be creating new opportunity costs, because their value is largely unclear. “The challenge is that, once a physician has a particular machine, there’s a slot available for the next patient,” Mr Hennessy remarked.

Premium and out-of-pocket costs are not much of an issue with radiotherapy; however, third parties continue to try to manage this area. Quality-of-life costs, by contrast, are significant. “You’ll be alive, but lose the ability to taste and smell,” he commented.

Value
In closing, Mr Hennessey maintained that “value” must be part of the conversation regarding costs, although the translation of cost into value and utility remains challenging. “Although it may be hard to engage patients in a cost discussion,” he said, “it may be appropriate to have a value discussion. Somewhere down the line, the rubber will meet the road.”

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