Then there was another major New York Times article by Reed Abelson, back in January of 2003 that brought it to my attention again. I sent a copy of that article to Dr. Larry Weisenthal of the Human Tumor Assay Journal. I found out that he first raised this issue of conflict of interest (i.e. oncologists having a financial incentive to select certain forms of chemotherapy over others because they received higher reimbursement) in official, recorded testimony at a Medicare Executive Committee meeting in Baltimore in March, 2000. He was one of the very first medical oncologists in America to expose this and advocate its change. This issue addressed one of my biggest concerns about my wife's cancer care by my local community hospital.

Each and everytime I think why our local community oncologists coerced my wife into receiving chemotherapy seven months after the surgeon at Fox Chase Cancer Center specifically stated that further treatment with chemotherapy was "not" indicated, I just have to remember the "Chemotherapy Drug Concession".

Each and everytime I think why our local community oncologist gave my wife the heavy neurotoxic combination of taxol/carboplatin, instead of the previous first-line chemotheropeutic agent she received for the orginal cancer in 1972, I just have to remember the "Chemotherapy Drug Concession".

This was the "beginning" of her demise!

I began posting the information on as many web sites that I visit on the internet, to see that it got some needed public scrutiny. I even got a call from a CBS producer who was doing a story on it and saw all my information on the internet. I got her in touch with Dr. Weisenthal.

It apparently it was receiving some public scrutiny. Centers for Medicare & Medicaid Services (CMS) was going to force steep reductions in Medicare drug reimbursement to oncologists for chemotherapy infusion procedures. That triggered Congress to act with pressure from cancer doctors. What resulted was the introduction of H.R. 1622 by Representatives Charlie Norwood of Georgia and Lois Capps of California, The Quality Cancer Care Preservation Act of 2003. It would increase Medicare reimbursement for practice expenses while reimbursing chemotherapy drugs at rates closer to cost.

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 was corrupting. If it's finally going to go -- good riddance.

I drink a toast, in honor of my deceased wife and a hundred thousand other cancer patients, when it's finally gone!

Drug Sales Bring Huge Profits, and Scrutiny, to Cancer Doctors

By REED ABELSON (New York Times)

Among cancer doctors, it is called the chemotherapy concession. At a time when overall spending on prescription drugs is soaring, cancer specialists are pocketing hundreds of millions of dollars each year by selling drugs to patients - a practice that almost no other doctors follow.

The cancer specialists can make huge sums - often the majority of their practice revenue - from the difference between what they pay for the drugs and what they charge insurers and government programs. But some private health insurers are now studying ways to reduce these profits, and the issue is getting close attention in Congress.

Typically, doctors give patients prescriptions for drugs that are then filled at pharmacies. But cancer doctors, known as 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 also creates a potential conflict of interest for these doctors, who must help patients decide whether to undergo or continue chemotherapy if it is not proving to be effective, and which drugs to use.

Cancer specialists have successfully resisted most government efforts to take the drug concession away, arguing that they need the payments to offset high costs in the rest of their practices. An attempt by the Clinton administration to change reimbursement practices was strongly opposed by doctors, and by George W. Bush, who was then governor of Texas, among others. But support for change is growing, and some changes are beginning to take place.

"This has gotten out of hand," said Dr. William C. Popik, the chief medical officer for Aetna which is exploring different approaches to the concession, including taking it away in some regions.

Health insurers say they can buy these drugs much less expensively themselves and have the drugs shipped directly to doctors' offices. Some also want to keep better track of how the drugs are used.

Critics say 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.

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. Under the current system of determining what the appropriate prices for these drugs are, the government is paying, by some estimates, more than $1 billion over what the drugs actually cost. Many private insurers say they are also overpaying for these drugs.

In some cases, patients may even be paying a much larger co-payment for the drug than a cancer doctor is paying to buy it. Some patients paid about $150 out of pocket for Toposar, a cancer drug, for example, while doctors appear to have paid closer to $60 after various discounts from Pharmacia the manufacturer, according to the Minnesota attorney general, who is suing Pharmacia, accusing it of pricing fraud.

The General Accounting Office, which studied federal payments for cancer drugs in late 2001, discovered that doctors, on average, were able to get discounts as high as 86 percent on some drugs. Doctors paid less than $3 for a single dose of leucovorin, for example, while patients paid them around $3.50 out of a total reimbursement of about $17.50.

"We think it's a bad system that creates bad incentives that creates bad medicine," said Robert M. Hayes, president of the Medicare Rights Center, a consumer group, who testified before Congress last fall on the issue.

Dr. Thomas J. Smith, an associate professor of oncology at the Medical College of Virginia Commonwealth University, has estimated that oncologists in private practice typically make two-thirds of their practice revenue from the chemotherapy concession.

The concession echoes the system in Japan, where doctors make money by dispensing drugs. Drug spending per capita in Japan is among the highest in the world, higher than in the United States.

"This is our little corner of Japan," said Joseph P. Newhouse, a health policy professor at Harvard, who has been asked by the government to look into how the Medicare reimbursement system may affect how doctors prescribe chemotherapy.

The concession may also lead some doctors to recommend chemotherapy when patients may not benefit. In a 2001 study of cancer patients in Massachusetts, conducted by a team of researchers led by Dr. Ezekiel J. Emanuel of the National Institutes of Health, the authors found that a third of those 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.

"We know there is not all appropriate use," said Dr. John Gillespie, medical director of Blue Cross Blue Shield of Western New York.

But oncologists say they are only trying to respond to their patients' wishes. And they say they need the profits from the drugs to make up for high costs in the rest of their operations. They say they spend enormous sums to have the facilities and employees that enable patients to receive chemotherapy outside a hospital, under close supervision.

"It seems to be a wash right now," said Dr. Larry Norton, an oncologist at Memorial Sloan-Kettering Cancer Center in New York and a former president of the American Society of Clinical Oncology. He and his colleagues argue that oncologists treat patients who demand more care and therefore have higher expenses.

"We're just trying to break even," Dr. Norton said.

Oncologists also argue that patients may suffer if doctors do not buy chemotherapy drugs directly. They point to a case in Kansas City, Mo., in which a pharmacist was sentenced in December to 30 years in prison for diluting chemotherapy drugs he then sold to doctors who administered the drugs in their offices. Dr. Norton argued that the case illustrated why he and his colleagues were worried. "Some potential problems could arise," he said.

The health plans, and some of the specialty pharmacies that sell to both doctors and insurers, say this concern is unfounded.

Earlier this month, Representative Pete Stark, Democrat of California, introduced legislation that would slightly increase what Medicare pays oncologists for their services but pay doctors closer to what the drugs actually cost. The government is also looking into how the concession is affecting prescribing patterns.

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 other specialists, like urologists, also profit from chemotherapy drugs, but they administer them only to some of their patients.)

Over the course of the 1990's, 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, surpassing obstetricians and general surgeons, according to data from the Medical Group Management Association. In 2001, the median compensation for an oncologist in a large practice was $274,000.
While compensation for specialists has increased 19 percent, on average, since 1997, oncologists' compensation has risen slightly more than 40 percent.

Dr. Norton dismisses the notion that cancer doctors' compensation has risen faster because of income from chemotherapy drugs. "Oncologists are extremely busy," he said, because more people have cancer and more treatments are available.

But the idea that these doctors make money from the drugs worries some. "All the evidence suggests that doctors do respond to money," said Dr. Susan D. Goold, an associate professor at the University of Michigan Medical School.

Some oncologists acknowledge that the current system creates a perverse incentive. The potential for conflicts of interest "is troubling," said Dr. Edward L. Braud, the president of the Association of Community Cancer Centers, whose members treat more than half of the nation's cancer patients.

In several prominent cases, drug companies have also been accused of using discounts to influence doctors. For example, in the Minnesota lawsuit, brought last year, 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."

Pharmacia said it could not comment because the matter was still in litigation.

But others say doctors are solely motivated by what their patients want - a chance, no matter how slim, of living longer or suffering less. Dr. Norton, for one, dismissed the idea that oncologists would be motivated to give too much care or the wrong kind, and said undertreatment is a much greater risk.

Some insurers are getting oncologists to forgo profits from chemotherapy drugs, often by paying the doctors more for administering them. While oncologists may not make as much under the new system, and some have objected vehemently, it is "palatable," said Dr. Abraham Rosenberg, an oncologist in South Florida, where the new system is prevalent.

Last year, inspired by Florida's example, the Blue Cross Blue Shield plan in western New York began negotiating new contracts with oncologists.

The UnitedHealth Group is also in discussions with doctors in New York and expects to begin a pilot program this year. It plans to give oncologists a choice: they can allow UnitedHealth 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. The plan is also talking with doctors in cities including Cleveland and Dallas.

Aetna is trying different approaches. In the Northeast, the insurer wants to reimburse doctors at prices that are much closer to what the doctors are actually paying, while in the Southeast and Southwest, it is looking to buy the drugs directly.

Richard H. Friedman, the chief executive of the Mim Corporation, which operates a specialty pharmacy that supplies chemotherapy drugs to doctors, predicted that the chemotherapy concession may not last. The health plans, he said, "are all starting to take a much harder look."

Medicare law provision would trim drug profits
Monday September 29, 2003

By Bill Walsh
Washington bureau

WASHINGTON -- 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 it should belong (A hospital setting would have lower costs).

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.

Summary of H.R. 1622

The key points of H.R. 1622 are listed below.

Payment for Drugs

Medicare payment for drugs administered in physician offices would be set at 120% of the manufacturer's average sales price (ASP). The increase over the manufacturer's ASP accounts for the wholesaler's markup and drug-related expenses incurred by physicians, such as wastage, opportunity cost of investment in inventory, procurement costs, and bad dept. If a state or locality imposes a sales tax or gross receipts tax on drugs, Medicare would also pay that amount.


ASP would be calculated by considering all discounts and rebates. Prices offered to hospitals, nursing facilities, hospices, HMOs, govermental entities, and charitable organizations would be excluded, since those prices are not necessarily indicitave of the prices available to physicians.


Manufacturers would report their ASPs to the Centers for Medicare & Medicaid Services (CMS) each calendar quarter, and the amounts would be used to calculate Medicare payments for the second subsequent quarter.


CMS would have the option of setting a payment amount for each drug by the specific drug or, as under the current system, grouping all versions of a multiple-source drug together and paying the same amount for all of them.


If a physician actually pays more than the Medicare payment amount for a drug, Medicare would pay the full amount if the physician documents the purchase price, unless CMS finds that the payment amount was unreasonable.

Payment for Drug Administration Services

Medicare would pay the full costs of drug administration services. To estimate these costs, CMS would be required to use the estimates of clinical staff time, suppliers and equipment expenses developed in the clinical practice expert panel process. CMS would use the latest available data on staff salaries and supply costs to update those estimates. Direct costs (clinical staff, supplies, and equipment) as so determined would be deemed to be 33.2% of the total costs. That figure is based on CMS data on the ratio of total to direct costs for all physicians, as published in the Federal Register on Aug. 2, 2001 (66 Fed. Reg. 40272, 40377).


CMS would be required to make additional payment when more than one chemotherapy drug is administered by push technique during the same encounter.

Payment for Chemotherapy Support Services

Medicare would make a payment for chemotherapy support services, such as nutrition counseling, psychosocial services, and social worker services, furnished incident to the physician's services.


The payment would be made on a weekly basis with respect to each patient receiving chemotherapy and would be based on the costs of furnishing chemotherapy support services as they are provided in oncology practices that provide these services in a manner that is considered high quality care.

Cancer Therapy Management Services

Medicare would be required to establish a new payment amount for physician's services related to the treatment of cancer patients. This amount would pay for the extra work that physicians treating cancer patients must perform before and after seeing the patient. The current visit and consultation codes assume only a small amount of such work because the codes are used by all specialists and for all types of patients.

Other Services without Physician Work Relative Value Units

In addition to drug administration services, there are a number of other services, including radiation oncology services, that do not have a physician work component and therefore are subject to the special "zero physician work pool." payment methodology. This was adopted as an interim payment methodology, but CMS has not yet adopted a final payment method. The bill would require CMS to develop a revised payment methodology that fully pays for the costs of furnishing these services to Medicare patients.

Physician Supervision of Services

This provision would clarify how services can be billed to Medicare when "direct supervision" by a physician is required. Direct supervision means that a physician must be present in the office suite while the nurse or technician is furnishing the service, but the physician is not required to be with the patient. Drug administration services are subject to the direct supervision requirement.


When direct supervision is required, Medicare allows a physician to provide the supervision. Recently, Medicare has indicated that the Medicare claim form should show the billing number of the supervising physician when different from the ordering physician. This creates difficulties for many physician practices. The bill's provision would permit use of the ordering physician's billing number, provided that the medical records identify the supervising physician or physicians.

Institute of Medicine Study

The bill would require a two-part study by the Institute of Medicine. The first phase would study the current system for delivery of services to cancer patients, prior to the provisions of this bill going into effect. Study elements would include an assessment of acess to care; the range of services, including support services, that are and that should be provided to cancer patients; appropriate practice standards; the role of oncology nurses; and development of a framework for assessing the effects of this legislation.


The second phase of the study would use that framework to analyze the effects of this legislation after it has been implemented.

Effective Dates

The revised payment rates would go into effect on January 1, 2004. Pharmaceutical manufacturers would begin reporting average sales by October 30, 2003.


The clarification of the policy on billing for services supervised by another physician would be effective upon enactment.

Write your representatives!

Greg Pawelski

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