The Tipping Point: It’s Time for Oncologists to Prepare for Change

Burt Zweigenhaft
CEO, OncoMed
Manhasset, NY

As community oncology practices across the nation grapple with diminishing reimbursements, rising overhead costs, and a “buy-and-bill” system that has become increasingly less profitable and more difficult to navigate, clinicians are seeking new, cost-effective strategies for providing high-quality care. Moreover, today’s new economic reality has forced policymakers to scrutinize every branch of medicine to cut costs. Not surprisingly, oncology has taken center stage in this debate.

The editors of ONCOLOGY spoke with Burt Zweigenhaft, CEO of the oncology pharmacy company OncoMed, to get his thoughts on the rapidly changing face of oncology practice, and how the cancer community can reduce costs while still delivering high-quality care.

P&P: What are some of the changes that are forcing oncologists to rethink the way they practice?

MR. ZWEIGENHAFT: Historically, oncology drugs have been a large contributor to the profitability of practices. We’ve done some analysis over the years, and prior to the Medicare Modernization Act (MMA) of 2003 and the reduction reimbursement, the average oncologist drove about $1 million of revenue per year. About $675,000 was derived from buying and billing drugs-pre MMA, and pre Average Sale Price (ASP) reimbursement.

So the cumulative result of moving from an “average wholesale price minus 5%” basis, which was how costs were computed before the MMA reform, to an ASP environment meant a reduction of about $750,000 to $300,000 in drug margin. Thus, drug revenue has dropped from $675, 000 before the MMA to about $375,000 today.

At the same time, average inventory costs have gone up because over the years, the biotech industry has done a tremendous job of bringing new-albeit very expensive-products to market. So along with the escalation of drug costs, carrying costs have also gone up, and reimbursement and profitability have plummeted.

The buy-and-bill model that oncologists have always worked under is no longer viable. Physicians can’t run an office on a 6% margin. Under buy-and-bill, “ASP plus 6%” can very quickly go to ASP plus 4%, 2%, or even -2% if the practice runs into any reimbursement obstacles.

Since the passage of the Medicare Modernization Act, about 40% to 50% of oncologists have been affected by the steep drop in drug reimbursement. Consequently, about 50% to 70% of community oncologists in smaller hospital centers and centers of excellence are under the water based on the cost of purchasing drugs and rising overhead expenses.

What oncologists need to do is readjust their business model-which is a goal OncoMed helps them achieve. They need to abandon the complexity and the cost of buying and storing drugs, re-engineer their practice for the future wave of new patients coming in, expand their capacity to treat, and not get bogged down in the administrative, capital-intensive, time-consuming task of buying and billing drugs, which don’t make any real contribution to the profitability.

OncoMed helps doctors re-align their practice model to meet the challenges of the changing environment. We do this by delivering ‘just-in-time-for-treatment-day’ oncology pharmaceuticals and care management services.

More importantly, the evolving role of the oncology pharmacist is to partner with the doctor’s office. This we do by assisting with critical clinical thinking during the regimen selection process. And perhaps most important, we maximize the clinical yield of these expensive drugs through the elimination of drug waste-which is achieved by compounding the patient-specific orders and then delivering them in treatment-day doses. That is our role in the cancer community.

P&P: Does OncoMed also help practices with the burden of prior authorization and reimbursement procedures?

MR. ZWEIGENHAFT: Absolutely, it’s part of our core services package. One of the things that sets OncoMed apart from specialty pharmacies that concentrate on more than one class of pharmaceuticals is the ability of the OncoMed care management support team to work with insurers to get the authorizations that patients need. OncoMed’s team includes patient care navigators and patient reimbursement specialists who have extensive experience working with insurers, oncology drug manufacturers, and medical foundations. These specialists always know where to go to search for needed funding for patients who are banking on that expertise for their recovery.

So our model is really an alternative solution and option for those practices that are struggling both with the high cost of drugs and with acquisition reimbursement administration. We, as a contractor for oncology practices, get the orders in–usually by fax or electronically; we then have our clinical pharmacist review them, we work out all the details with the insurance companies and patient and financial assistance programs, and we collect the co-pays from the patient. We verify all that, and we confirm that the order will be delivered by the treatment cycle that the physician wants to follow during the course of therapy. That’s a big part of our role.

P&P: With the upcoming addition of baby-boomers to Medicare, we’re facing a workforce shortage in oncology. Can pharmacists help bridge some of that shortfall?

MR. ZWEIGENHAFT: If a doctor needs more time to treat a growing number of cancer patients, wouldn’t it be great to have a partner who could concentrate on managing, optimizing the drug treatments, lowering toxicity, and using genetic tests to target the therapies and personalize the treatment approach.

So we see a huge expansion in the role of oncology pharmacists who have been appropriately trained. However, it is a tough, tough clinical area. Currently, I think there are only about 675 board-certified oncology pharmacists. So it’s an area that needs attention.

OncoMed is actually investing in growing the number of oncology pharmacists. Right now we have four facilities and plan to open a number of others in the near future. At our satellite facilities we have trained oncology pharmacists and oncology technicians who help manage cancer patients and who become synergistic partners to practicing oncologists.

And in our Buffalo pharmacy site we also have a teaching venue and a curriculum that, working in conjunction with the University of New York and the Buffalo School of Pharmacy, will be graduating PharmDs with a concentration in oncology. That way, we’re able to develop the talent pool that will be needed to help over-stretched doctors deal with the onslaught of new patients flooding the system. Having oncologists supported by pharmacists is a viable way to deal with the workforce shortage.

P&P: Any last thoughts?

MR. ZWEIGENHAFT: There is an awful lot of uncertainty in today’s healthcare market. The government understands that our burgeoning healthcare costs are untenable. But the only way policy makers know of to deal with this impending crisis is to cut providers’ fees, which in many cases is a death sentence for medical practices. The reality is, we have an aging population, and unfortunately an awful lot of those people will be diagnosed with cancer.

Hopefully one day CMS and Medicare wake up and resolve the problems that are affecting the physician community-problems that the government has created through ASP and some other crazy alignments that have come about as a result of the MMA changes.

Eventually, a program will emerge that blends cost-effectiveness and quality with higher payment to physicians, that preserves physician income at current levels by changing the focus of payment to patient care, and that may eliminate the effect of drug selection on income.

We have to find ways to treat patients with cancer, and the old ways of doing that are just not sustainable. We need new ideas and new approaches in this dynamic economic environment. It’s something that keeps me awake at night. My mission is to find ways in which we can provide high-performing cost effective therapies to the all the people who need them.