Chemotherapy Drug Concession

Drug Concession Profits are Hugh for Cancer Doctors

Cancer doctors have the financial incentive to select certain forms of chemotherapy over others because they receive higher reimbursement.

Medical Oncologists are pocketing hundreds of millions of dollars each year by selling drugs to patients, a practice that almost no other doctors follow. These cancer specialists can make huge sums from the difference between what they pay for the drugs and what they charge insurers and government programs.

Typically, doctors give patients prescriptions for drugs that are then filled at pharmacies. But Medical Oncologists buy the chemotherapy drugs themselves, often at prices discounted by drug manufacturers trying to sell more of their products and then administer them intravenously to patients in their offices.

The practice creates a potential conflict of interest for these doctors, who must help cancer patients decide whether to undergo chemotherapy or continue if it is not proving to be effective and which drugs to use. The money these doctors make from selling medicine is contributing to the nation's high health care bills and adding to the waste and inefficiency in the health care system.

Over the course of the 1990's, Medical Oncologists have been able to rely on the sale of chemotherapy drugs as an important source of revenue. They are now among the best-paid doctors. In 2001, the median compensation for an oncologist in a large practice was $274,000, surpassing obstetricians and general surgeons, according to data from the Medical Group Management Association. All the evidence suggests that doctors do respond to money.

These cancer specialists have successfully resisted most government efforts to take this drug concession away. Medicare, which does not cover most prescription drugs, does pay doctors about $6.5 billion a year for drugs they personally administer, largely cancer drugs.

According to the General Accounting Office, doctors on average, were able to get discounts as high a 86% on some drugs. Medical Oncologists in private practice typically make two-thirds of their practice revenue from chemotherapy concession.

Joseph P. Newhouse, a health policy professor at Harvard, has been asked by the government to look into how the Medicare reimbursement system may affect how Medical Oncologists prescribe chemotherapy. The drug concession may lead some doctors to recommend chemotherapy when patients may not benefit. A 2001 NIH study found that a third of patients received chemotherapy in the last six months of their lives, even when their cancers were considered unresponsive to chemotherapy. Those findings strongly suggested overuse of chemotherapy at the end of life.

The government is also looking into how the drug concession is affecting prescribing patterns. Medical Oncologists began selling drugs directly more than a decade ago, after they persuaded insurers that it would be less expensive to administer the drugs in their offices than in hospitals. This was part of a trend of doctors' being paid much more to perform services and treatments in their offices than in hospitals.

Some oncologists acknowledge that the current system creates a perverse incentive. The potential for conflicts of interest is troubling. In several prominent cases, drug companies have been accused of using discounts to influence doctors. For example, Pharmacia is accused of having induced physicians to purchase its drugs, rather than competitors' drugs, by persuading them that the wider "spread" on the defendant's drugs would allow the physicians to receive more money and make more of a profit, at the expense of the Medicaid program and Medicare beneficiaries. Medical Oncologists would be motivated to give too much care or the wrong kind.

This kind of chemotherapy concession may not last. Health plans are all starting to take a much harder look. Some insurers are getting Medical Oncologists to forgo profits from chemotherapy drugs, by paying the doctors more for administering them. Other insurers plan to give Medical Oncologists a choice: either they can allow health plans to buy the drugs at a lower price and pay the doctors for administering chemotherapy or they can accept a lower payment for the drugs if they continue to buy them.