Breakthroughs in research over the past decade are fueling investment toward the development of pharmaceuticals aimed at treating rare diseases, including many cancers. These new agents, often referred to as “specialty drugs” by health plans, are making their way through manufacturer pipelines and into practice at a steady pace.

By utilizing molecular profiling technologies, many of these new targeted therapies represent a substantial portion of the pipeline. According to PhRMA’s 2012 Medicines in Development Report, more than  1,000 cancer agents are now being pursued by biopharmaceutical researchers—many of which involve cutting-edge approaches to fighting cancers or use existing medicines in new ways.1

Among these new approaches in the fight against cancer are oral oncolytics. Approximately 25% to 35% of all antineoplastic agents in today’s pipeline are being developed as oral drugs.2 Although oral chemotherapy has existed for decades, oral oncolytics are becoming a more popular therapeutic option than intravenous (IV) chemotherapy for a number of cancers. In addition to providing patients with a more convenient form of administration, many of these new agents target specific biologic processes in cancer cells and exhibit a higher degree of safety and effectiveness compared to traditional chemotherapies, which usually indiscriminately attack both cancer and healthy cells. This is good news for oncologists and their patients; however, it comes with its own set of challenges, namely patient access and adherence. 

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As health plans press for stronger cost containment measures amid rising health care expenditures, patients prescribed oral oncolytics are burdened with high out-of-pocket costs. This is negatively impacting treatment access and adherence for many cancer patients and has stakeholders rightfully concerned. 

Pharmacy Benefit Designs: What’s Changing?

The vast majority of cancer patients in the United States are insured by Medicare. For decades, the delivery and administration of chemotherapy has fallen under the public insurer’s medical benefit (Medicare Part B). In this instance, patients often have supplemental insurance (Medigap) to cover the 20% coinsurance required by Medicare. This arrangement has kept out-of-pocket costs relatively low for the majority of cancer patients. 

With the exception of a few older oral cancer drugs with coverage that is still part of the medical benefit, the newer oral drugs fall under the pharmacy benefit of Medicare (Medicare Part D). This is significant because the financial risk for the cost of the drug now lies primarily with a private Part D plan.  As such, Part D plans have strong incentives to keep costs under control. While the pharmacy benefit is actually the third largest expenditure among all other managed health plan spending (following both hospital and outpatient medical), they remain highly visible and are aggressively managed to control for costs.3 To accomplish this goal, plans employ a variety of cost management tools, each designed to influence the behavior of entities on both the supply and demand side of pharmaceuticals. On the supply side, plans negotiate contracts with drug manufacturers and pharmacies for discounts; on the demand side, it’s about guiding patient and physician utilization toward lower-cost therapies.