Chemotherapy, Profits and Oncologists

Posted on Wednesday, June 13, 2007
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The Chemotherapy Concession is still with us and still affects the drugs some cancer patients receive.

A recent article published in the New York Times (Incentives Limit Any Savings in Treating Cancer by Alex Berenson, Published: June 12, 2007) has demonstrated that oncologists are still making money from the chemotherapy concession and that these reimbursements continue to influence prescribing patterns and can affect the treatment a cancer patient receives. 

Unlike other doctors, medical oncologists (doctors who prescribe chemotherapy) can profit directly from prescribing certain drugs when they administer them in their offices.  Oncologists can purchase chemotherapy at lower prices than the amounts that Medicare and other private insurance companies pays them.  Then they can pocket the difference.  This mark-up, which historically can be as high as 86%, is called the chemotherapy concession.  

A study published last year by Health Affairs (Does Reimbursement Influence Chemotherapy Treatment For Cancer Patients?) revealed that this type of reimbursement prompts some oncologists to use more expensive drugs with better mark-ups for the doctor.  For example, the study found that for breast cancer patients, a one-dollar increase in a physician’s reimbursement resulted in the use of chemo drugs that cost $23 more.  The authors said, “Although reimbursement seems to have little effect on the primary decision to administer palliative chemotherapy to patients with advanced solid tumors, it appears to affect the choice of drugs used.”

As reported in the April 2006 edition of CancerWire, the chemotherapy concession can harm patients in at least three different ways: 1) it creates a potential conflict of interest; 2) it may expose patients to more experimental drugs; 3) and it may deplete a patient’s insurance benefits (i.e. drug coverage).

Medicare has tried to crack down on the windfall profits that oncologists make.  For example, according to the New York Times article, “cancer doctors billed about $4.4 billion for chemotherapy and anemia medications in 2005, down from $5.6 billion in 2004, with Medicare covering 80 percent of the bills in each year. The difference mostly represented profit that doctors had made on the drugs.”  But, according to this article, some oncologists are still enjoying these windfalls and others are lobbying Medicare officials and members of Congress to raise the prices the government pays for drugs in order to increase their profits.

Here are some excerpts from the New York Times article:

•  In general, oncologists make money by providing chemotherapy, even when it has little chance of success.

•  “There’s pretty good evidence at this point,” said Dr. Richard Deyo, professor of medicine at the University of Washington and an expert on health care spending, “that there are plenty of patients for whom there’s little hope, who are terminally ill, whom chemotherapy is not going to help, who get chemotherapy.”

•  Ari Straus, the chief operating officer of Aurora Healthcare Consulting, which works with doctors to increase their profits, said Medicare’s changes had squeezed oncologists. “Five years ago, many physicians were earning over $1 million per year on drug sales alone,” Mr. Straus said.

•  Dr. Robert Geller, who worked as an oncologist in private practice from 1996 to 2005 said that as long as oncologists continue to be paid by the procedure instead of for spending time with patients, they will find ways to game the system, however much money they make or lose on prescribing drugs. “People go where the money is, and you’d like to believe it’s different in medicine, but it’s really no different in medicine,” Dr. Geller said. “When you start thinking of oncology as a business, then all these decisions make sense.”