Pressure on providers to reduce costs and deliver more personalized treatments seems likely to grow more intense, as the nation’s spending on cancer drugs is expected to rise just as public funding for medical care approaches a funding crisis. According to a report from IQVIA Institute for Human Data Science, the U.S. has doubled its spending on cancer drugs since 2012, and drug costs are expected to double again by 2020. Drug spending reached nearly $50 billion in 2017, a significant share of the $133 billion global price tag.
On the heels of this report, the board of trustees for Medicare announced that the Medicare Hospital Insurance Trust Fund will be depleted by 2026—3 years earlier than projected in the trustees’ 2017 report. By 2026, Medicare revenue will only be able to pay 91% of its hospital costs, declining to 78% in 2039. The combined cost of Social Security and Medicare already equals 8.6% of the nation’s gross domestic product (GDP), and the trustees project the programs’ share of GDP will increase to 11.7% by 2035.
The cost of entitlements comes at a difficult time for the federal government. The Congressional Budget Office projects the federal deficit will grow to $1 trillion per year by 2020, with the deficit for 2018 already expected to be $804 billion, a 21% increase over last year.
The peril of a depleted federal government coffer has not slowed the pace of drug development. IQVIA’s research found that the pipeline of new drugs is growing. More than 700 molecules were in late-stage development in 2017, a 60% increase over 10 years.
Significantly, 34% of oncology trials in 2017 used biomarkers to identify patients most likely to respond, marking a shift toward personalized therapies that rely on companion diagnostics. Top among a new generation of drugs are more than 200 immunotherapies currently in phase I or phase II clinical trials, which are being tested against 27 tumor types. The IQVIA report emphasizes that cancer drugs are becoming more targeted, with most new drugs aimed at small patient populations. Some 87% of cancer drugs were used by fewer than 10,000 patients each in 2017.
Administration Launches Association Health Plan Expansion
Under a final rule from the Department of Labor, the Trump administration is significantly expanding which employers can form association health plans (AHPs). AHPs allow sole proprietors, small businesses, and trade groups to band together and negotiate insurance coverage for their employees across a metropolitan area, within a state, or even nationwide. The administration argues that AHPs will allow individuals and small businesses to get better deals on insurance.
AHPs are controversial because of their more flexible rules and their potential to affect the individual marketplace established by the Affordable Care Act. AHPs do not have to cover the same essential benefits that individual marketplace plans must cover, but instead will be regulated like large group plans. Rules on large groups cover employers with 50 or more employees. While large groups must cover certain preventive care, like screenings with a grade A or B from the U.S. Preventive Services Task Force, the list of required benefits is not as comprehensive as those in individual plans.
Critics also worry that AHPs will destabilize the marketplace if they draw healthy people out of the individual market seeking to save money. A report from Avalere Health estimated that more than 3 million people would enroll in AHPs over 5 years, and the Congressional Budget Office estimated that 400,000 previously uninsured people would gain coverage under expanded AHPs.
The future of AHPs likely will be determined by states, which retain regulatory authority over any AHP that is underwritten by a third-party insurance carrier.