A few days ago the New York Times ran yet another article exploring the deep financial conflicts in oncology drug prescribing. This one described two facts. First, even though Medicare has limited the profits of oncologists who prescribe drugs, Medicare’s total cancer care expenditures keep rising because oncologists have found new treatments and procedures to bill for.

Second, the rules guiding Medicare reimbursement for cancer and drug rebates are complex, compromising the financial abilities of some oncologists—particularly those in smaller practices—to administer drugs to their patients. As a result, those patients often must receive the drugs in more costly and possibly less-friendly hospital settings.

Over the last year, the Times has been on this topic like white on rice. Last month, it ran an article on conflicts in anemia drugs, which demonstrated just how much money was available to doctors who prescribe them. A just-fired practice administrator of a six-oncologist group in the Pacific Northwest presented the Times with papers from Amgen. They showed that, over the past year, physicians in that practice had written $9 million in prescriptions for the two anemia drugs Aranesp and Epogen. Amgen returned the favor with $2.7 million in “rebates”. These numbers work out to $1.5 million/physician in prescriptions, with returns of $450,000 (30%) per physician and profits of $300,000 (20%). The Times also ran a chart showing that dosing levels in the U.S., where rebates that encourage more prescriptions are standard practice, are as much as three times higher than in other countries where the rebates aren’t permitted. (Whether outcomes are better here is not clear.) These drugs were only two of many that oncologists prescribe, and there are rebates associated with many of those others as well. Of course, oncologists also make money, though far less, for actually being doctors.

I distributed the anemia drug rebate article to my network, which includes a number of cancer professionals. One response, from a nationally known oncologist, said, “If I don’t have the rebates, my income will go down!

I first became interested in oncology drug practices about a year ago when the Times reported on a study that had been published in Health Affairs showing that oncologists prescribing behaviors were influenced away from best practice and toward the incentives provided by their rebate arrangements. The study had been conducted by highly credible health services researchers using a large sample of Medicare claims data from 1995-1998.

While the study’s findings were interesting, they were hardly news. After all, financial conflicts permeate every area of healthcare. Far more interesting was the righteously indignant response from the Community Oncology Alliance, a professional group that represents private practice oncologists. In the opening sentence of a remarkable email distribution to its membership, Steve Coplan, the administrator of the West Clinic in Memphis, called the report “incredibly outrageous and unsubstantiated” and “an unbelievable rehash”. Sentence two referred to “incomprehensible statements by government bureaucrats, so-called oncology advocates, well-paid consultants, non-practicing physicians, payers, and specialty pharmacies”. In other words, only community oncologists can understand or question the deep complexities inherent in the practice of cancer care. Everyone else is infused with malevolent intent.

Many oncologists will tell you that rebates cover the costs of drug administration and are necessary because 1) Medicare doesn’t pay for office administration and 2) Office administration costs far less than it would in a hospital setting. In effect, the drug companies convinced Congress to let them pay for these services, though the compensation is far more than Medicare would ever pay. This gave them significant influence over the practice patterns of the nation’s community oncologists.

Medicare could correct this situation by outlawing drug rebates to oncologists (and other physicians) while paying doctors a reasonable rate to administer the drug. Medicare and commercial plans could offset the additional cost by reducing reimbursement to the drug companies by about 20%, or the amount of the doctors’ rebates.

The recent exposure in the Times, the Wall Street Journal, and other major papers has shone a bright light on the uncleanliness of these practices, and many oncologists have complained to me that they’re feeling picked on. I’m sure the drug companies aren’t crazy about it either. The typical oncologist now makes about twice as much from drug rebates as from practice. Of course, they’re not happy at the prospect of losing any of that income. We can be certain there’s a great deal of maneuvering going on behind the scenes by pharma and the oncology lobby as Medicare reassesses its approach.

It’s a fascinating problem. Oncologists (correctly) see themselves as righteous practitioners, caring for very sick and sometimes terminal patients and families in the most distressed periods of their lives. It appears very difficult for them to confront the fact that the way the money works maybe isn’t so healthy. They argue that they’re simply following the incentives that have been set up for them, without acknowledging that their complicity compromises patient care, their own position, and the stability of the larger health system.

I have an article in the journal Community Oncology this month (which is no longer available) that calls on oncologists to look squarely at this problem, understand the damage it’s doing to their credibility and reputation, and work with the various payers to remedy it. The rebuttal article (which is also no longer available), by the prominent and dedicated Linda Bosserman MD, raises all kinds of peripheral questions involved in drug rebates that were, to me, obfuscatory and beside the point. And there lies the rub. Ultimately, she argues for the same things I do—for changes to the reimbursement mechanisms that keep clinical decision-making detached from financial consideration. But it is difficult for her to directly confront the financial conflict inherent in the current system.

As Dr. Michaeli has argued in this blog before, a new transparency is uncovering excesses in every healthcare sector. People outside the industry are shocked by what they see as egregious behaviors, and hopefully, their recognition will eventually have a cleansing impact on how healthcare is supplied, delivered, and financed in this country.

We know that half or more of healthcare cost is wasted, inappropriate, or unnecessary, largely the result of the behaviors discussed here. Until financially conflicted healthcare is addressed in oncology and elsewhere, we don’t have the remotest chance of re-establishing stability and sustainability to American healthcare.


  1. Emerging data is showing that there is a continuing problem with the Chemotherapy Concession. A system which rewards medical oncologists for being pharmacists. Choosing drugs for cancer patients based on profits to the medical oncologist. The kaisernetwork.org’s Daily Health Policy Report lists two recent New York Times articles that indicate this is precisely how chemotherapy drugs are being selected in the real world of cancer medicine. The Chemotherapy Concession was first brought to attention at a Medicare Advisory Panel meeting in 1999 in Baltimore, Maryland. There was a gastroenterologist in attendance who complained that Medicare had cut his reimbursement for colonoscopies from $400 to $108 and how all the doctors in his large, multi-specialty internal medicine group were hurting, save for two medical oncologists, whom he said were making a killing running their in-office retail pharmacies. Typically, doctors give patients prescriptions for drugs that are then filled at pharmacies. But medical oncologists bought chemotherapy drugs themselves, often at prices discounted by drug manufacturers trying to sell more of their products and then administered them intravenously to patients in their offices. Not only do the medical oncologists have complete logistical, administrative, marketing and financial control of the process, they also control the knowledge of the process. The result is that the medical oncologist selects the product, selects the vendor, decides the markup, conceals details of the transaction to the degree they wish, and delivers the product on their own terms including time, place and modality. A joint Michigan/Harvard study authored by Drs. Joseph Newhouse and Craig C. Earle, entitled, Does reimbursement influence chemotherapy treatment for cancer patients, confirmed that before the new Medicare reform, medical oncologists chose cancer chemotherapy based on how much money the chemotherapy earned the medical oncologist. A survey by Dr. Neil Love, Patterns of Care, showed results that the Medicare reforms still were not working. It was still an impossible conflict of interest. The government wasn’t reducing payment for cancer care under the new Medicare bill. They were simply reducing overpayment for chemotherapy drugs, and paying cancer specialists the same as other physicians. The government can’t afford to overpay for drugs, in an era where all these new drugs are being introduced, which are fantastically expensive. Although the new Medicare bill tried to curtail the Chemotherapy Concession, private insurers still go along with it. What needs to be done is to remove the profit incentive from the choice of drug treatments. Medical oncologists should be taken out of the retail pharmacy business and let them be doctors again.http://www.kaisernetwork.org:80/daily_reports/rep_index.cfm?DR_ID=45527

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