Medicare law provision would trim drug profits

Cancer doctors say a provision in Medicare overhaul legislation pending in Congress would shrink federal financing for their services so dramatically that they would be forced to close clinics and turn away patients.

But lawmakers say the doctors' emotional outcry is obscuring a shocking financial loophole that for years has fattened oncologists' wallets: They have been collecting from Medicare many times what they paid for their patients' drugs.

The Bush administration estimates that Medicare profits collected by oncologists last year amounted to $700 million and projects it will reach $1.7 billion in 2004 unless changes are made.

"We clearly have been overpaying them in this area," U.S. Sen. John Breaux, D-La., said.

Unlike most prescription medications, doctors order cancer drugs from manufacturers directly and then bill Medicare. The program pays 95 percent of the average wholesale price. The problem, as noted by a General Accounting Office report last year, is that the average wholesale price is neither "average" nor "wholesale."

"It is simply a number assigned by the product's manufacturer," the GAO wrote.

Cancer doctors frequently pay far less than the average wholesale price -- the administration estimates 13 percent to 34 percent less -- because they negotiate private purchasing arrangements with manufacturers.

Sometimes the discounts are much deeper. U.S. Rep. Billy Tauzin, R-Chackbay, whose House Energy and Commerce Committee investigated Medicare overpayments for cancer drugs, said the difference between what some doctors paid and what they were reimbursed by the government was vast.

The average wholesale price for etoposide, a Breast Cancer drug, was $638.76 for 500 milligrams. The price paid by a national group purchasing company was $28.22, according the committee.

Calcium leucovorin, which is used to treat some colon cancers, was listed at $18.44, according to figures from the Bush administration. With Medicare paying 95 percent, doctors would get $17.52. They can purchase it on the open market for $2.77.

Not only are lawmakers concerned Medicare is paying inflated drug prices, but that seniors, who must fork over a 20 percent co-payment, also are getting overcharged.

"No one on the committee is unsympathetic to the plight of cancer patients," said Ken Johnson, spokesman for Tauzin, whose mother has undergone three cancer surgeries. "But bilking senior citizens can't be the answer."



Seeking a balance

The oncologists don't dispute that they have been making a substantial profit on Medicare-subsidized drugs. But they say they have good reason: It is to compensate for woeful underpayments from the federal government for their other services.

The American Society of Clinical Oncology estimates that Medicare covers about 25 percent of the clinical, administrative and labor costs associated with administering chemotherapy drugs. It doesn't cover, the group says, specially trained chemotherapy nurses, costs of billing and collection, malpractice insurance, overhead for clinics where the drugs are administered, intravenous fluids and tubing, or pharmacy costs for mixing the medications for each patient.

"We take the money from drugs to pay for administration," said Dr. John Rainey, president of the Oncology Society of Louisiana. "All we're asking for is to be paid fairly for what we do."

It's not that cancer doctors are pleading poverty. A recent issue of ModernHealthcare magazine published a nationwide study showing that oncologists earn between $213,855 and $325,000 a year. Still, they say it's not fair for them to have to subsidize patient costs.

Congress had proposed fixing both problems at once, something oncologists have been pushing for years: cutting drug payments to cancer doctors while raising the pay for their services. But doctors object to the balance House and Senate negotiators have struck.

Although the legislation is in flux, the doctors say that one plan would cut about $700 million next year from what doctors are paid for the drugs but raise the pay for their services by about $200 million.



Trickling down

If Congress follows through, doctors say patients will be hurt the most. In a survey of 2,900 of its members, the American Association of Clinical Oncology found that 19 percent said they would stop treating Medicare patients altogether, 42 percent said they would stop conducting clinical trials in their offices and nearly three-quarters said they would send chemotherapy patients to a hospital instead of administering their drug regimen, often an hours-long procedure, in their offices.

Rainey, the Lafayette oncologist, said he would close four satellite chemotherapy units and predicts the worst for elderly patients.

"They won't drive 60 miles to get care." He said. "They will go on and die."

Dr. William Stein, co-founder of the largest cancer-care group in metropolitan New Orleans, didn't predict that any of the area's 11 infusion units would close. But, he said, he wouldn't administer drugs in the pleasant environs of his office to patients whose only source of insurance is Medicare. Instead, they would be sent to the hospital, where he said they would face long waits.

Floyd Hendricks, 79, a retired thoroughbred horse breeder, has been getting chemotherapy at East Jefferson Medical Center to treat lung cancer once a week since July. He said that he calls in advance and that the drugs are ready for him when he shows up. He spends several hours at the hospital and called the nurses "the nicest bunch of people I've ever been around."

But Mary Ellen Kilgore, 64, said a hospital setting can't compare to Stein's clinic. Chemotherapy patients at the Covington facility are able to look out at a fountain and butterfly bushes in the "healing gardens" as they get their drug treatment. Kilgore knows her nurse's home phone number and said the staff is like family.

"It's a really positive atmosphere, and that is essential to a cancer patient," said Kilgore, who has leukemia.

The cancer provision is a small piece of the entire Medicare legislation and only one of many controversial elements. Even if the bill fails, the fight over cancer treatment is far from over. The Bush administration has proposed rules to change, without Congress, the cancer drug payments system, and cancer doctors have vowed to fight it.

"The concept of creating a system which rewards doctors for giving chemotherapy, and doesn't reward them for spending a half hour talking to a patient to explain why chemotherapy won't help is a bad system. But money will always corrupt. And the chemotherapy reimbursement system is corrupting. If it's finally going to go -- good riddance."