The Model for Acquiring Oncology Drugs Must Change, Say Kaiser Permanente Experts


Under the approach used by Kaiser Permanente, say the authors, in which oncologists have salaried incomes and are not reimbursed on a relationship to drug price, far higher generic uptake has been observed.

There is no question that the cost of oncology drugs is a contributor to untenably high healthcare spending in the United States. While lower-cost generics and biosimilars may appear to be a natural solution to the problem of high prices, these agents have struggled to gain ground in cancer care.

In an editorial published on the Health Affairs blog, Sharon Levine, MD; Anthony Barrueta; and Polly F. Webster, all of whom are affiliated with Kaiser Permanente, argued that the US market needs to realign its incentives in order to promote the use of these agents and help bring down the cost of anticancer therapy.1

The authors recounted a recent report on UnitedHealthcare’s 2007 to 2016 effort to encourage the use of common generic anticancer drugs by offering providers a voluntary incentivized fee schedule with higher generic drug payments (and higher profit margins) than those issued for brand-name drugs.2

The incentivized fee schedule, said UnitedHealthcare, did not have a significant impact on the use of generics or on spending. Furthermore, those practices that did adopt the schedule were those that already had a high use of generics.

One of the challenges with generics in oncology, the authors of the blog post point out, is that these subsequent entry drugs have not provided substantial cost savings due to shallow discounts, and the fact that buy-and-bill reimbursement has led to the use of drugs with higher average sales prices (ASPs). Buy-and-bill reimbursement originated in the 1980s as a way to help practices pay for infrastructure needed for cancer care to be delivered in the community setting rather than in the hospital setting, but many critics fear it creates misaligned incentive to use high-priced drugs rather than those with more sustainable costs.

Under the approach used by Kaiser Permanente, say the authors, in which oncologists have salaried incomes and are not reimbursed on a relationship to drug price, far higher generic uptake has been observed.

“This rational payment arrangement avoids the perverse incentives driving the use of brand agents when quality generics are available,” write the authors. “It also lessens enthusiasm for switching to industry-promoted, higher-priced, second- and third-generation agents in the absence of clinically meaningful improvement.”

Making a shift away from buy-and-bill at a large scale would not be easy, the authors acknowledge, saying that it will be important to prevent the economic dislocation of oncologists while pursuing a model that removes any incentive to use more costly therapies than necessary. “Even a transitional approach that holds oncologists harmless by paying them in aggregate roughly the same in the near term as they are making under ASP plus [6%] would be highly rational from a long-term fiscal perspective,” they write.

The authors point to their success with biosimilars in inflammatory conditions—while use of biosimilar infliximab Inflectra is 3.2% for the rest of the US market, it is more than 80% within Kaiser Permanente—as an example of the utility of delinking physician reimbursement from prescribing.

Other recent papers have also called for changes to reimbursement for high-cost drugs; a recent white paper from Millman said that that fixed reimbursement, a system in which providers would be reimbursed the same amount no matter whether prescribers selected a reference drug or a biosimilar would create an incentive to prescribe the lowest-price product. Differential reimbursement, meanwhile, would allow a larger markup on biosimilars so that providers would be safeguarded from a loss in profits.


1. Levine S, Barrueta A, Webster PF. Realigning incentives to optimize generic and biosimilar prescribing [published online June 13, 2019]. Health Aff (Millwood). doi: 10.1377/hblog20190611.58590.

2. Yasaitis L, Gupta A, Newcomb C, Kim E, Newcomer L, Bekelman J. An insurer’s program to incentivize oncology drugs did not alter treatment patterns or spending on care [published online May 6, 2019]. Health Aff (Millwood). doi:

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