US Value-Based Management of Oncology Drugs: An Explorative Study of Payer and Provider Tools to Manage the Rising Spending on Oncology Drugs

J Clin Pathways. 2021;7(5):42-47. doi:10.25270/jcp.2021.06.00002

The percentage increase in worldwide spending on oncology medications increased by double digits every year between 2013 and 2018, and reached nearly $150 billion in 2018.¹ This spend is expected to reach between $200 and $230 billion by 2023, and is largely driven by US spending on oncology drugs, which increased 64.0% from $23.7 billion to $56.7 billion between 2015 and 2018.¹

There have been significant innovations in immuno-oncology in recent years, which are defined as “treatments that take advantage of the body’s immune system to fight cancer,”² using the body’s own immune system to fight the disease. For example, the first anti-PD-L1 agent, pembrolizumab (Keytruda), became available initially in 2014 for unresectable or metastatic melanoma, with a label extension for metastatic non-small cell lung cancer (NSCLC) in 2015.³ Today there are a total of five PD-1/PD-L1 inhibitors available with an indication in NSCLC.^4-7 These products have significantly improved the outlook of the disease, with one study citing a 5-year survival rate of more than 15% with both nivolumab and pembrolizumab.^8,9 At the same time, these medicines have increased the cost of treatment. The average price of PD-1/PD-L1 inhibitors in NSCLC is $159,603 per year.¹⁰ 

In many non-US markets, centralized health technology assessment (HTA) bodies and national price negotiations exist to control spending,¹¹ however differences in decision making priorities mean this is unlikely to be implemented in the United States,¹² which is further supported by the working experience of the authors. This raises the question of what changes, if any, will occur in the United States to manage the increasing price of oncology drugs. Specifically, will US payers, as fragmented as they are, move toward a model where there is a higher burden to demonstrate both clinical and cost-effectiveness to obtain market access?

A study conducted in 2017 and published in 2019, by Runyan et al,¹³ established that the price of oncology drugs in the United States was continually increasing and explored whether changes in US payer management were being implemented. The study found that payers were still primarily using traditional management tools in oncology, even though these tools were ineffective at managing cost. The study explored innovative tools such as clinical pathways (“clinical pathways” as defined by the American Society of Clinical Oncology¹⁴) and shifting financial risk to providers but found that these tools were not widely adopted.¹³ 

The present study explored which payer management tools are being utilized today and how payer management decisions may influence physician prescribing, aiming to understand whether the US system is moving toward a value-based approach to oncology care management. 

For this study, two online surveys were created to gain insight from payers and from physicians. The payer survey included 124 questions and opened on April 2, 2020; the last response was received on April 23, 2020. The physician survey opened on March 30, 2020, and the last response was received on April 30, 2020; it included 8 screening questions, and if eligible, respondents were taken to the main 25-question section.

Payer respondents were recruited through a panel of payers provided by Two Labs Market Access, formerly MKO Global Partners, a life science consulting firm. Physicians were recruited through a panel provided by Medefield, a health care professional market research and recruitment company. 

Payer Survey

The payer survey was developed to investigate the tools payers implemented to manage oncology at the time of fielding: (1) traditional management tools; (2) oncology-specific management tools; and (3) systemic management tools. 

The first set of tools, traditional management tools, are used broadly across all disease areas in the United States. These tools include managing products to label through prior authorization, quantity limits, split-fills, reauthorizations, preferring products through tiering, step therapy for products in line with National Comprehensive Cancer Network (NCCN) guidelines, step therapy more restrictive than NCCN guidelines, and blocking agents from formularies. 

The second set of tools, oncology-specific management tools, are designed specifically to manage oncology. These include clinical pathways with and without risk, and buy-and-bill incentives to favor certain infused drugs over others, based on their price or value. 

Finally, this survey explored systemic management tools. These are nonproduct-specific tools, such as shifting financial risk to providers, participating in oncology care models, and restructuring provider networks to reduce cost. 

The payer survey used within this study is identical to the study developed in Runyan et al,¹³ where definitions of each management tool are further outlined.

Physician Survey

The physician research survey contained questions about how each management tool—traditional, oncology-specific, or systemic—influenced prescribing decisions. It also explored the extent to which physicians feel financial pressure when making prescribing decisions. 

A total of 25 payers representing 112.6 million lives responded to the payer survey, covering 66.0% commercial lives, 20.0% Medicare lives, 11.0% Medicaid lives, and 3.2% health care exchanges and other sources. Of these payers, 25.0% and 33.0% of respondents were from national and regional managed care organizations, respectively; 29.0% were from pharmacy benefit manager organizations; and 13.0% of respondents were from integrated delivery networks.  

A total of 120 oncologists and hematologists responded to the physician survey. There were 60 oncologists, 29 hematologists, and 31 respondents with combined experience in hematology and oncology. Forty respondents were specialists at large academic hospitals; 19 worked at regional hospitals; 17 worked at hospital affiliated clinics; and 44 worked in standalone private practices.

Traditional Management Tools

Managing products to label with prior authorization and quantity limits were reported to be the predominant oncology management tools in the United States. In 2020, 96.0% of payers representing 97.7% of covered lives managed oncology products to label and 88.0% of payers representing 88.2% of covered lives utilized quantity limits (Table 1).

Only 40.0% of payers representing 38.3% of covered lives utilized split fills. Reauthorizations were common among respondents, being used by 76.0% of payers representing 75.2% of covered lives (Table 1).

Step edits for products in the same line of therapy as NCCN guidelines were used by 44.0% of payers representing 48.7% of covered lives. Step edits more restrictive than NCCN guidelines were used only by 8.0% of payers representing 10.2% of covered lives (Table 1). 

The use of copay tier differentials were used by 36.0% of payers representing 46.0% of covered lives. 

Payers do consider blocking agents from their formulary with 28.0% of payers representing 34.4% of covered lives
saying they do so (Table 1).

Each traditional management tool explored in the research had a moderate influence on physician prescribing (Table 1). 

Oncology-Specific Management Tools

Clinical pathways without risk were reported to be used by some payers, with 24.0% of payers saying they utilized this type of tool. However, it is notable that the use of clinical pathways with downside risk to providers were used by only a small portion of payers, with 16.0% representing 16.6% of covered lives reporting that they utilized clinical pathways with risk (Table 1).

The use of buy-and-bill incentives to influence preference toward generic agents may increase in the future, likely due to the entrance of biosimilars. In the survey 20.0% of payers representing 34.8% of covered lives said they used buy-and-bill incentives. This indicates a willingness to choose preferred brands in a category where physician choice has traditionally remained open (Table 1).

Systemic Management Tools and Shifting of Financial Risk

When asked about whether payers shift financial risk to providers through payment systems, 24.0% of payers representing 29.5% of covered lives said they did so (Table 1). Conversely, when asked a similar question of whether physicians think financial risk is being shifted to their hospital practice in recent years, 74.1% of physicians responded “agree” or “strongly agree”. This indicates a disparity between the perceived financial actions of payers and its impact on physicians.

Further, 12.0% of payers representing 17.5% covered lives said they are restructuring provider networks based on ability to save cost (Table 1).

The use of care models such as the Oncology Care Model (OCM) was found to be used by 20.0% of payers representing 18.8% of covered lives (Table 1). While the OCM appeared to be an important step toward more value-based care delivery, participation has actually decreased over the past 3 years. Secondary research findings show that as of June 2020, the Center for Medicare & Medicaid Innovation reported 175 practices and 10 payers were participating inthe model whereas in 2017, there were 190 providers and 16 payers participating in the model.¹⁵

Physician responses confirm that insurance companies are shifting financial risk to providers. The most common way that payers are shifting financial risk is through bundled payments (55 mentions). In some cases, they are also imposing both upside bonuses (25 mentions) or cost penalties (34 mentions). In an open-ended question, one provider noted that narrow formularies play a role in restricting access, and another cited the mandated use of certain specialty pharmacies. The remainder of physicians did not provide a response to the open-ended question. This confirms a distinctive disparity between responses of physicians and payers in their perception of who the risk has been shifted to (Table 2). 

Clinical Pathways and Value Frameworks

As insurance companies shift financial risk to providers, new mechanisms are emerging for providers to assess the cost and benefit of specific therapeutics. When asked to think about specific high-price, novel drugs, 65.8% of providers indicated that they follow clinical pathways without risk at least some of the time; 67.5% indicated that insurance companies impose clinical pathways with risk at least some of the time (Table 3).

Payers and providers indicated that clinical pathways were most often developed by hospital systems or insurance companies but could also be developed by third-party pathway vendors. Clinical pathways often follow NCCN guidelines, but it is becoming increasingly common for pathways to be more restrictive than guidelines (Table 3).Drug price is an important factor when deciding on product placement in pathways. Of the providers in the survey sample who were directly involved in developing pathways, 84.6% indicated that drug price was at least a moderate factor in decision making and 68.2% indicated that cost-effectiveness analysis is often done to inform clinical pathways development. Providers indicated that they are often juggling up to three pathways. 

Value frameworks are also emerging as a way to capture clinical and cost-effectiveness in the United States. However, despite both payers and providers being aware of these tools at the time of this research, value frameworks reportedly only had a moderate influence on payer and provider decision-making. 

Based on two surveys of payers and oncologists/hematologists in the United States, traditional management tools, which are generally ineffective at managing spending, remain the most widely used payer tools in the United States.

Having exhausted the effectiveness of traditional management tools, payers have begun to experiment with tools that shift financial risk to providers. For example, they are becoming more likely to implement clinical pathways wherein providers face a downside financial risk if there is unwarranted deviation from the pathway. Furthermore, it appears that payers are beginning to drive preference toward specific agents. Physicians perceive that financial risk has been shifted to them, even if this is not reflected to the same degree by payers. Two examples of this are the increased use of buy-and-bill incentives to influence preference toward preferred branded agents by payers and the fact that physicians indicate that, at least some of the time, clinical pathways recommend certain therapies over others. 

Systemic management tools that shift financial risk to providers are also a tool implemented by payers and providers. The OCM has not become as important as payers may have expected it to be, and therefore financial risk is routinely shifted through bundled payments and restructuring provider networks to reduce cost. 

Physician responses suggest that payers are increasingly shifting financial risk to providers. This creates a difficult situation for providers who are not prepared to factor drug price into their treatment decisions. Tools such as clinical pathways and value frameworks, which have emerged as tools to guide treatment decisions in the face of increased financial pressure, can pose a solution, however, they are not without challenges. For example, while pathways are aimed at standardizing treatment decisions, they can be challenging for providers because oncology patients often require individualized treatment approaches.

Limitations

There are several limitations to this research. The payer and physician samples were extracted from a Two Labs proprietary panel, and though attempts were made, they were statistically nonrandom and may not have been representative of all covered lives or all practitioners. The payer and physician samples included only respondents willing to participate in market research and able to complete online surveys. Furthermore, the physician study was not powered to prove statistical significance across different responder groups. 

Future research should continue to monitor payer management trends over the next 3 to 5 years. In addition, further research on a more robust physician sample should be considered. 

Despite the increasing cost of oncology in the United States, payers’ willingness, and ability to manage oncology drugs remains limited. Today, they are primarily using the same tools adopted in other high spending areas, which are ineffective in oncology. There are many potential reasons for this, including legal constraints, public relations considerations, lack of direct head-to-head evidence between products, and complexity of the patient population. Overall, payers remain hesitant to limit physician decision-making in this highly sensitive category.

 In the United States, it seems unlikely that either commercial or government payer will adopt value-based tools similar to those seen in other markets. Due to political resistance, it appears even more unlikely that a formalized and centralized HTA and price negotiation system will emerge.¹¹

However, the shifting of financial responsibility to providers may require that provider networks become more aware of the real value and net price of oncology products. Clinical pathways are already emerging as tools to standardize the quality of care and control spending. In the future it is possible that the organizations that develop pathways, wary of the financial risk assumed by providers, will also begin to adopt value frameworks or value assessments similar to those conducted by HTAs to decide if and how to incorporate a product in a specific pathway. 

Authors: Anne Runyan, BA¹; Daniele Severi-Bruni, MS²; Kolajo Salako, BS¹; Oliver Walker, PhD³

Affiliations: ¹Two Labs, San Diego, CA
²Two Labs, San Francisco, CA
³Two Labs, London, UK

Correspondence: Anne Runyan, BA
Phone: (858) 848-4430
Email: anne.runyan@twolabs.com 

Disclosures: The authors work for Two Labs, a company that provides consulting services to the pharmaceutical and biotech industries. As such, clients in these industries pay Two Labs for their services. This study was funded independently by Two Labs.