I sometimes worry that my wife Paula won’t be able to see me grow old. Not that I expect to outlive her. She is four years my junior and has the blood pressure of a 17-year-old track star. It’s her eyesight I’m worried about, because she is at risk for a form of blindness called macular degeneration. Paula is the youngest in a long line of redheads, several of whom have been diagnosed with this illness. Her fair-haired grandmother developed macular degeneration and was eventually unable to see her bridge hand and had to give up her golf game, just when she was threatening to score below her age. Fortunately, Paula should be able to avoid her grandmother’s fate, because we now have outstanding treatments for this disease.
Too bad these treatments are costing us billions more than they should. The price of some macular degeneration treatments is staggeringly high, and both doctors and the pharmaceutical company making the treatments are motivated to keep it that way. If we as a country want to forestall blindness in people like my wife, without going bankrupt in the process, we need to pressure our government to do some hardball negotiating.
By way of background, my grandmother-in-law suffered from what ophthalmologists call “wet” macular degeneration. Frail little blood vessels began proliferating in the back of her retina. It’s not unusual to have lots of blood vessels back in the retina. It’s that red blood, after all, that causes so many of us to look possessed in family photos, with red eyes staring demonically into the lens. But in wet macular degeneration, there’s even more blood vessels than normal in the back of the eye, and they are more inclined to leak than typical blood vessels. This leaking fluid damages the nerve cells we depend upon to see light and darkness. For years, there was little doctors could do to slow these leaks.
Then along came Avastin.
Some of you may recognize Avastin as being a cancer drug. That’s true. Avastin works by disrupting a chemical our body makes to promote blood vessel growth. Tumors that depend on new blood vessels to grow are thereby thwarted by the drug. So, too, is macular degeneration. No new frail blood vessels means no blood vessel leakage!
Many ophthalmologists treat wet macular degeneration by injecting Avastin directly into the back of patient’s eyeballs. (Under local anesthesia, of course!) And the drug isn’t even terribly expensive. By one estimate, Medicare pays about $50 a pop for monthly Avastin injections. There is a problem with this effective and affordable treatment, however. Avastin has never been approved by the FDA to treat macular degeneration. Physicians are allowed to use it as an off-label treatment, but because it is off label, it needs to be reformulated by pharmacies into an injectable form, and before standards for such reformulation were bolstered, some patients experienced eye infections from contaminated vials.
Fortunately, there is a second drug to treat macular degeneration, one very similar in its chemical composition, another blood vessel-blocking drug called Lucentis. Unlike Avastin, Lucentis is FDA-approved to treat the disease. That means it is made by the manufacturer in a ready-to-inject formulation, and there is no need for pharmacies to do any additional prepping. Lucentis is just as good as slowing the progression of macular degeneration as Avastin. There’s just one little problem with Lucentis, however. Instead of costing Medicare $50 per pop, it costs up to $2,000.
$2,000?! With Avastin’s contamination issue largely resolved, surely ophthalmologists aren’t prescribing Lucentis. Right?
Wrong. Lucentis — Ranibizumab in the picture below — holds about 1/3 of the market share for macular degeneration treatments. (Avastin is also known as Bevacizumab.)
Medicare alone could save $18 billion over the next 10 years if physicians switched to Avastin:
Why don’t all doctors switch to Avastin? Some no doubt have had patients who experienced infections. Fool me once, they probably think. But such infections were quite rare, and few ophthalmologists believe Avastin is a risky treatment now. Some ophthalmologists continue to use Lucentis because they have close connections to the manufacturer, and by close connections I mean—they make lots of money “consulting” for Genentech. According to the New York Times, physicians consulting for Genentech disproportionately prescribe Lucentis over Avastin.
Once again, however, such consultants make up but a small proportion of practicing ophthalmologists, and can’t explain why Lucentis accounts for 1/3 of macular degeneration treatments. To explain that figure, we must turn to the bizarre way that Medicare reimburses physicians for the medications they inject or infuse into their patients. To be able to treat macular degeneration, ophthalmologists must first purchase and store either Avastin or Lucentis. This contrasts with, say, a primary care physician like me prescribing a blood pressure pill, which the patient picks up at their local pharmacy. When eye doctors treat macular degeneration, they act like a pharmacy. Same is true when cancer doctors, oncologists, provide I.V. chemotherapy in their clinics. They purchase, store and handle the drugs before giving them to patients. Such efforts cost the doctors and clinics money. So Medicare gives extra money to clinicians, beyond the purchase price of the drugs, to reimburse them for this effort.
How much money? A 6 percent markup from the purchase price. Do you see the problem here? Inject $50 of Avastin into a patient, and the eye clinic will receive an extra $3 from Medicare. Inject $2,000 of Lucentis, however, and it will receive an extra $120.
Imagine you are an ophthalmologist in private practice. You’ve noticed that Medicare reimbursement for cataract procedures has been getting stingier lately. In addition, many patients are cutting back on routine eye visits, in the aftermath of the great recession. As a result, the 6 percent markup is becoming a critical part of your bottom line, of being able to maintain your take-home income without laying off available office staff. On top of that, you believe that the risk of injection from Avastin will never be 0. Wouldn’t you be tempted to use Lucentis? It’s pretty impressive, in fact, that ophthalmologists are only using Lucentis 1/3 of the time.
As for that injection risk, it could be avoided if the manufacturer made a version of Avastin already formulated for ophthalmology use. But the company making Avastin doesn’t plan to do this. Probably because that company is Genentech, the same one making Lucentis. What sane company, appropriately motivated to maximize returns to its shareholders, would purposely undercut its more lucrative product?
In short, two powerful interest groups — eye doctors and a leading pharmaceutical company — have very good reason to hope Lucentis will stay expensive and popular. As a result, the rest of the American population suffers. We spend billions of tax dollars that we shouldn’t have to spend. And many Medicare recipients, who pay out-of-pocket for a portion of their medical care, suffer financial distress from the unnecessarily high cost of their macular degeneration treatment.
Here are a few simple ways we can fix this problem.
1. Replace the 6 percent markup with a flat fee. We should not incentivize doctors and medical clinics to use expensive drugs over less expensive ones. A study of oncology treatments showed that when choosing between two equally effective chemotherapies, many oncologists prescribed the more expensive one and then, when it went generic (and their 6 percent markup plummeted), they shifted to an alternative treatment, which was now relatively expensive. Medicare should jettison the 6 percent markup and consider offering health care providers a flat payment to cover administrative costs. Then no matter what chemotherapy or macular degeneration drug they use, they would get the same amount of extra money.
2. Bundled payments for macular degeneration treatment. Medicare should consider giving ophthalmologists a fixed amount of money per month to treat macular degeneration, and let physicians decide how to care for their patients. This policy would basically limit the use of Lucentis to patients, or insurance companies, willing to pay the difference in price.
3. Reference pricing for macular degeneration treatment. In reference pricing, insurance companies tell patients the maximum amount of money they will give them for specific health care services, and patients shop around for providers with the understanding that they will pay any of the cost above and beyond the maximum price. Reference pricing works a lot like bundling, by giving people a price up front that’s supposed to cover the cost of all her services. But under bundling, it is health care providers who are in charge of trying to control expenditures. With reference pricing, the onus is on patients to control how much they spend.
4. Negotiate prices with Genentech. If Lucentis really is better than Avastin, Medicare could negotiate prices with Genentech, and then either agree to pay the negotiated price for Lucentis or make Avastin the standard of care for macular degeneration. It would be up to the company to convince Medicare that Lucentis was worth more than Avastin, and price it at a figure commensurate with its added value.
5. Just say no to Lucentis. Finally, Medicare could simply decide Avastin is an excellent and affordable treatment, and tell providers it won’t pay for Lucentis.
Administratively speaking, all these approaches are relatively simple. But politically? Not so easy. Nevertheless, with billions of tax dollars at stake, we need to overcome these political barriers. One way to do this perhaps would be to throw a bone to physicians. Medicare could raise the fees it pays for ophthalmologists to make up for some of the revenue they lose from the macular degeneration treatments. I don’t think Medicare should throw a bone to Genentech. I don’t think they’re going to approve any policy that shifts people from Lucentis to Avastin. But Medicare is not a welfare program for pharmaceutical companies. As a country, we need to scrutinize medical spending, or we will be bankrupted by health care costs.
I am ecstatic that Genentech has developed two drugs likely to help people like my wife maintain their eyesight into old age. And the company deserves to make decent profits on its wonderful treatments. And Medicare ought to cover the expense of these treatments for patients with macular degeneration. But that doesn’t mean it should give Genentech a blank check.
Peter Ubel is a physician and behavioral scientist who blogs at his self-titled site, Peter Ubel and can be reached on Twitter @PeterUbel. He is the author of Critical Decisions: How You and Your Doctor Can Make the Right Medical Choices Together. This article originally appeared in Forbes.
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