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

By REED ABELSON
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.