“An independent analysis shows that payments for cancer care will be slashed by close to 45% causing cancer clinics to close and massively raising your healthcare costs”
A radio ad sponsored by the Community Oncology Alliance, Nov. 29.
An advertisement from the Community Oncology Alliance, part of a $1.6 million campaign running both on radio airwaves and in print, attacks a proposal in the Democratic-backed Build Back Better package approved by the House last month and now headed to the Senate.
The ads, which started on Nov. 29 and are set to run through Dec. 12, say parts of the legislation would have “serious unintended consequences” for cancer patients — specifically, that “an independent analysis shows that payments for cancer care will be slashed by close to 45%, causing cancer clinics to close and massively raising your healthcare costs.” The alliance is an advocacy and lobbying organization representing physicians and clinics involved with cancer care.
The Build Back Better plan is the Biden administration’s legislative proposal that includes an array of provisions, from plans to curb prescription drug costs to expansion of Medicare coverage. The provision targeted by the alliance’s ad would empower the federal government to negotiate prices for a small set of yet unnamed expensive drugs, including cancer treatments, with the aim of lowering prices, an important campaign promise issued by both President Joe Biden and numerous congressional Democrats.
That got us wondering: Would the plan really result in reduced payments for cancer care and higher health care costs, as the ads claim?
Because drug pricing and negotiations — as well as the Senate action on the proposal — are such hot news, we took a closer look.
The experts we talked to expressed no doubt that certain provisions of the Build Back Better proposal, if passed into law, would reduce some payments to oncology offices. But we found that the advertisement leaves out key details about the scope of those cuts, an omission that could mislead people who hear or see the ads.
About That Cut
The oncologists’ ad is just one of many ads in recent weeks seeking to sway opinions as Congress considers legislation that would allow Medicare to negotiate drug prices, something it currently cannot do.
At the root of the ad’s claim is the way Medicare pays for drugs administered in doctors’ offices. These payments are particularly important to some specialists, including oncologists. Lower prices paid by the government for these drugs also result in less administrative revenue for physician offices.
Oncologists and other specialists provide injections or infusions in a medical office, covered by Part B of Medicare. Medicare reimburses physicians for the cost of the drug based on its average sales price, plus a 6% “add-on” payment, which is meant to cover the cost of overhead, staffing and the effort that goes into purchasing the drug. (Pre-pandemic, those payments were reduced to 4.3% under a complicated budget sequester process but were reinstated at the higher level for the duration of the health emergency.)
The percentage-based payment formula has the unintended consequence of incentivizing expensive drugs over lower-cost options: A 6% add-on to a $10,000 drug translates to a lot more money than for a $1,000 drug.
Over the years, pharmaceutical companies and physician groups, including the Community Oncology Alliance, roundly criticized attempts to change the formula and succeeded in killing proposals.
The Build Back Better Act, as passed by the House, would have Medicare negotiate prices for a small number of high-priced drugs, including those used by oncologists under Part B, starting in 2025. At first, only 10 drugs would be selected, rising to 20 in 2028.
There would be an upper limit on price, called the Maximum Fair Price, which is expected to be lower than average sales prices. That would save Medicare and taxpayers money on those drugs.
Patients, too, might save money because their copays are set as a percentage of the cost of the drug. Oncologists would still get a 6% add-on fee for overhead and administration, but that 6% would be on a lower price, hence the decrease in revenue that concerns the doctors.
What the Oncologists Say
We reached out to the Community Oncology Alliance to ask about the ad’s assertions that payments for cancer care would be cut by 45%. It provided a number of reports, including one it commissioned by consulting firm Avalere Health, that calculated the possible revenue loss, and a separate study that tracks mergers, acquisitions, closures and financial matters affecting oncology practices.
For its report, Avalere chose 10 drugs it thought were likely to make the administration’s list, then calculated the likely negotiated price and the resulting add-on payments.
While it varies by specialty, the overall average reduction in add-on revenue would be 39% for those specific 10 drugs, with physician offices seeing a 44.2% drop, and hospitals seeing a 36% decline, said Milena Sullivan, a principal with the health policy team at Avalere and the report’s lead author.
But the wording in the ad — “payments for cancer care will be slashed by close to 45%” — glosses over the specifics of that finding. It seems to suggest overall revenue for community cancer clinics would be cut 45%, whereas the reduction identified in the study affects only a segment of their revenue: the add-on payments for some such drugs that clinics and physicians provide.
“They commissioned an analysis that did not look at the total impact on community oncology practice finances. They looked just at drugs affected, which wildly inflates impact,” said Peter Bach, director of the Center for Health Policy and Outcomes at Memorial Sloan Kettering Cancer Center and an expert on drug costs.
Without details on what percentage of a practice’s revenue comes from the add-on payments for a specific set of drugs that has yet to be defined, “we don’t know how much this is going to reduce oncologists’ income,” said Paul Van de Water, a senior fellow in health care policy at the Center on Budget and Policy Priorities.
Ted Okon, executive director for the alliance, defended the wording, saying, “You can only say so much in an ad.”
“Those are the biggest drugs out there,” Okon said. “If you take a hit of 42.9% on 70% of your practice, or even 60%, you are dead in the water.”
However, the alliance didn’t have specific data on the overall percentage of revenue that the add-on payments represent.
Will Cancer Clinics Close?
Okon argues that the revenue hit will be substantial enough that it would lead some practices to close, others to merge and still others to be sold to hospitals. The new maximum prices in Medicare would also affect how private insurers calculate their payments, he said, possibly adding to the revenue woes.
Already, financial pressures have led to closures, mergers or financial difficulty for more than 1,700 community practices over the past 12 years, shifting a portion of cancer care “from independent practice settings to hospitals,” he said.
He thinks that reduces patient choice and could also lead to higher costs for Medicare and patients, because they then seek care at hospitals, which are more expensive.
Joseph Antos, a senior fellow at the American Enterprise Institute, expressed doubts. He said that the Avalere analysis looks correct and that practices will lose a chunk of revenue from add-on payments.
“The impact would be pretty substantial,” he said. “But that doesn’t mean this business about clinics closing is right.”
The advertisement says an independent analysis shows that under the Build Back Better bill as it’s currently written, “payments for cancer care will be slashed by close to 45% causing cancer clinics to close and massively raising your healthcare costs.”
The advertisement leaves out important context about the analysis.
For one, the cuts it cites are to an unspecified portion of oncologists’ revenue, the add-on revenue for administering certain drugs. Secondly, it isn’t yet known which drugs will be affected. The cuts may well prove substantial for some practices, particularly those that use a lot of the treatments ultimately selected for price negotiation.
As to closures, even without this change, some clinics will face financial stress leading to mergers, or sales to hospitals, mirroring what is happening in other sectors of the health industry.
The argument that fewer clinics could lead more patients to get cancer care in hospitals — at higher costs to them, to Medicare and to private insurers — is economically plausible. But lower cancer drug costs in Medicare would mean savings for patients, since the program limits copayment amounts for patients who don’t have supplemental insurance to cover those costs.
We rate the ad Half True.
Fierce Pharma, “Advocates Roll Pricey Ad Campaigns as Biden, Congress Push for Medicare Drug Negotiations,” Aug. 17, 2021
Community Oncology Alliance, “New Analysis Shows Build Back Better Act Will Result in 42.9% Payment Cuts to Cancer Providers,” Nov. 19, 2021
Community Oncology Alliance, comment letter “Medicare Program; Part B Drug Payment Model [CMS1670-P], May 9, 2016
Avalere Health, “Part B Drug Negotiation Under BBBA Would Reduce Payments to Providers,” Nov. 18, 2021
Community Oncology Alliance, “2020 Community Oncology Alliance Practice Impact Report,” April 24, 2020
Community Oncology Alliance, “Examining Hospital Transparency, Drug Profits, and the 340B Program,” Sept. 14, 2021
The Washington Post, “This Controversial Rule Could Change How Doctors Profit From Using the Most Expensive Drugs,” April 11, 2016
KFF, “Explaining the Prescription Drug Provisions in the Build Back Better Act,” Nov. 23, 2021
Phone interview with Paul N. Van de Water, senior fellow at the Center on Budget and Policy Priorities, Dec. 3, 2021
Phone interview with Joseph Antos, senior fellow and Wilson H. Taylor Scholar in health care and retirement policy at the American Enterprise Institute, Dec. 3, 2021
Phone interview with Milena Sullivan, principal with the health policy team at Avalere Health, Dec. 2, 2021
Phone interview with Ted Okon, executive director, Community Oncology Alliance, Dec. 3, 2021