Medicare at 50: High-price therapeutics put Medicare at a crossroad

High-cost advances in diagnosis and treatment are entering medicine each and every month. As Medicare turns 50 this year, how can the program – with its growing number of beneficiaries and their advancing age – cope with the onslaught?

“When we look at the price of something in health care, very often we just look at one bucket,” Amy Miller, Ph.D., executive vice president at the Personalized Medicine Coalition , said in an interview. “We look at the drug bucket or we look at the diagnostic bucket or we look at the hospital bucket or the doctor visit bucket, but when we are talking about the targeted therapy that is more or less known to work for a particular patient with a particular condition, we need to think about the price more broadly. We need to think about the systemic cost savings of getting that drug to the right patient the first time, without failing first on other drugs.”

For some high-priced drugs, that appears to be the case. Take for example the direct-acting antiviral agents (DAA) recently approved to treat hepatitis C (HCV) infection.

“If you have a drug like [sofosbuvir], which is extremely expensive at face value, it may not have such a big long-term effect because [sofosbuvir] is a cure,” said Dr. Soeren Mattke , senior scientist in RAND Corp. in Boston. “So if you take patients with hepatitis C that have a certain trajectory of spending over the next decade or so – treatment, liver transplantation, and the like – it basically wipes out the infection. In the long run, even though the drug is very, very expensive, it may not be such a bad deal for Medicare.”

And while some physicians would like to see these new DAAs prescribed to all appropriate patients with HCV, even they acknowledge that the high price tag can be fiscally constraining in the long run and can handle some restrictions to ease the financial burden.

“If you have a 70-year-old patient who has no evidence of any liver fibrosis and they have lived with hepatitis C for 30 or 40 years, I don’t think it’s unreasonable to suggest that maybe they wait for their therapy until an even less expensive option comes along,” said Dr. Sean Koppe , director of hepatology at University of Illinois at Chicago. “I think if the payer is going to be a little bit restrictive but still allow us to treat the majority of our patients who are showing some signs of fibrosis, I wouldn’t be too bothered by that approach.”

Oncology, another area where high-priced treatments are prevalent, is not as cut and dried in terms of medical outcomes as HCV.

“Some of the oncology drugs [have a cost of] $50,000-$60,000 per treatment course, but you extend life expectancy of a terminal cancer patient by weeks,” Dr. Mattke said. “So while you are looking at this drug, and they cost practically the same [as some DAAs], the impact is quite different.”

But one bright spot that can potentially help alleviate pricing pressures is the growing emphasis on personalized or precision medicine.

“When we talk about a high-priced therapeutic, we have to remember that not too long ago, when a drug came to market, it was marketed to everyone with a particular condition,” Dr. Miller said. “But when [crizotinib] hit the market, it only treated 4% of those with non–small-cell lung cancer initially based on its approved label.”

Identifying the right users will be key to moderating the impact of high-priced therapeutics.

“But if diagnostics aren’t adequately covered or reimbursed or if a particular therapy is on a higher tier or there’s more risk for the physician, giving that drug to a patient, even if diagnostics indicate it’s the right one, then the models might not work,” Dr. Miller said, adding that she is “encouraged” that the federal government is talking about more active use of precision medicine.

But, according to Dr. Mattke, there are pitfalls to precision medicine, too.

“If personalized medicine means that you are able to design a drug that targets the very specific molecular [structure] of a particular cancer and reverses it, this could be a very, very expensive drug, but it could be totally worth it,” he said. “If personalized medicine means there’s a highly differentiated range of drugs out there that all are so-so effective, you may end up with some marginally valuable drugs at extremely high prices, and yet force Medicare to pay for it because they cannot take cost into consideration.”

When it comes to costly medications and treatments, Medicare’s fee-for-service design isn’t helping either.

“We have a payment system that works through a third party payer, so the person who needs the care is not usually the person who is paying for the care,” said Dr. Jeffery Ward , an oncologist who serves on the clinical practice committee of the American Society of Clinical Oncology. “Prices and the fees are set based on what you do. I don’t get paid better for doing a good job than I would get for doing a cruddy job. [Once,] that served medicine and Medicare well, but now we have a health care crisis.”

Dr. Ward added that incentives are misaligned in a manner that rewards doctors for choosing more expensive drugs and procedures for their patients.

As oncologists, “we are going to have get over our addiction to [being compensated on the] margin on drugs,” Dr. Ward said. “We’re going to have to be able to develop a system and have faith in a system that will pay us fairly for what we do instead of paying us based on what drugs we choose.”

However, Dr. Steven Allen , who chairs the American Society of Hematology committee on practice, said that he doesn’t believe that is a key issue.

“I think you are really only referring to a very small percentage of physicians,” Dr. Allen said. “I think the vast majority of physicians do what’s right for their patients. … They will choose the best drug for their patients regardless of the reimbursement the physician may receive given that drug.”

Dr. Ward said that to address the need to cover these potent, high-cost treatments, “I think what Medicare is going to have to do at its 50th birthday is figure out how to begin to reward physicians for doing the right thing and for providing quality care instead of simply paying for quantity.”

The federal government is moving in that direction. In January, Health and Human Services Secretary Sylvia Burwell announced a new goal for Medicare: Fifty percent of all payments should be value based by 2018 (N. Engl. J. Med. 2015;372:897-9 [ doi 10.1056.NEJMp1500445]). But what exactly does value mean? While that point is debated on a broad scale, one thing that is obvious is that it will require a culture shift on a many levels.