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Cancer medicine: new, improved, expensive and exploited?

October 6, 2014

Two studies published in the October issue of Health Affairs by a University of Chicago health economist examine spending on oral anti-cancer drugs as well as a federal program designed to help the poor, which may instead helps hospitals boost profits.

The first study, by Rena M. Conti, PhD, and colleagues, examines recent trends in spending and use of oral cancer drugs. Their findings showed average spending on the 47 available oral oncolytics -- cancer medication taken specifically by mouth -- increased from $940 million in the first quarter of 2006 to $1.4 billion in the third quarter of 2011.

Conti's second study examined the federal 340B program, which provides deep discounts on outpatient drug purchases. She found hospitals and clinics that joined the program since 2004 currently serve more affluent and well-insured communities than those that qualified for the program in previous years.

"This study provides the first nationally representative empirical evidence suggesting that the program's original intent is being eroded by the actions of certain hospitals," Conti said.

In the first article, National trends in spending on and use of oral oncologics, first quarter 2006 through third quarter 2011, Conti, an assistant professor of pediatrics and population health sciences at the University of Chicago Medicine, and coauthors Adam Fein, PhD, president of Pembroke Consulting in Philadelphia, PA, and oncologist Sumita Bhatta, MD, a former oncology fellow at the University of Chicago Medicine, document the rapid growth in spending on new oral drugs for cancer care.

"This is an exciting time, an era of breakthrough cancer drugs," she said. "Some of these medications have extended the lives of many people with certain types of cancer. Other new drugs may provide cures for patients suffering now. However, spending on these brand-name oral oncologics is outstripping national spending on all pharmaceuticals and all medical care spending generally."

The increase in oncolytics spending during the study period was driven by brand-name, patent-protected drugs. Despite the hefty increase, the use of these drugs climbed a comparatively small amount. That suggests price increases are partially driving spending trends.

Despite the high and increasing costs, there is good news. First, many newer oral oncologics are targeted agents, a class of drugs that represent significant therapeutic advances with milder side effects than traditional chemotherapy. U.S. spending on such drugs increased from 35 percent of all oral cancer drugs in 2006 to nearly 60 percent in 2011.

Second, Conti and her colleagues discovered that when oncologic drugs of all types lose patent protection, patients and society benefit. Even though use of newly off-patent drugs increased by 16 percent, average quarterly spending on those drugs fell by 65 percent.

Findings from the second study are less heartening.

The article follows work by Conti and Peter B. Bach, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center, published last year in JAMA. That study explained how 340B-qualified hospital-affiliated clinics can boost profits thanks to discounts on the expensive, anti-cancer drugs. The facilities receive the discounts under the expectation that the savings will be passed on to poor patients.

"Hospitals qualify for the program based on the poverty of their inpatient census only," Conti said. "The affiliated clinics are the only 340B institutions not required to pass the discounts off to patients or their insurers. Nor do they have to report to the government exactly how these profits are used to serve the poor. Insurers' and their patients' payments for outpatient drug treatment don't reflect the discounts the hospital receives."

The 340B program, which began in 1992, was designed to help selected hospitals and their outpatient clinics serve low-income and uninsured patients by providing discounts of 30 to 50 percent on outpatient drugs. About a decade ago, however, enrollment in 340B began to explode. Now more than one-third of the 4,375 U.S. non-federal hospitals are 340B qualified. Recent Congressional and news reports suggest that for selected hospitals, profits off the 340B program can be significant.

For their new study, The 340B drug discount program: Hospitals generate profits by expanding to reach more affluent communities, Conti and Bach examined the populations served by hospitals and clinics qualifying for 340B before and after the decade-long growth spurt. They matched data for all hospitals and clinics registered with the 340B program with socioeconomic data from the U.S. Census Bureau. The results showed communities served by hospital-affiliated clinics joining the program in 2004 or later tended to have higher household incomes, much less unemployment and higher rates of health insurance.

"Our findings are consistent," the authors add, with recent complaints that the 340B program has been converted "from one that serves vulnerable communities to one that enriches participating hospitals and the clinics affiliating with them."

The National Cancer Institute funded both research projects.

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