Medicare Fraud Settlement Causes Oncologists to Lose Income

December 7, 2005

Medicare Fraud Settlement Causes Oncologists to Lose Income

CHICAGO—Many oncologists will earn 30 to 50 percent less a year as a consequence of a $1.1 billion Medicare fraud settlement with two leading cancer drug manufacturers, according to a study in the December 1 issue of the Journal of Clinical Oncology.

The study was led by Charles L. Bennett, MD, PhD, professor of medicine, Division of Hematology/Oncology, at Northwestern University’s Feinberg School of Medicine and an investigator at The Robert H. Lurie Comprehensive Cancer Center of Northwestern University.

The cases centered around a major sales promotion effort by two pharmaceutical companies, AstraZeneca and TAP Pharmaceuticals, that encouraged oncologists who received free drug samples to provide the samples to their Medicare-insured prostate cancer patients and bill Medicare the $1,200 charge for the product.

Many oncologists earned an extra $100,000 annually in income with this program, and some of the busier ones earned more than $1 million.

The TAP and AstraZeneca cases alleged that the spread between prices paid by physicians for cancer drugs and the amount reimbursed by Medicare and Medicaid ranged from 12–77 percent of the acquisition prices and was an important factor used in the marketing of the prostate cancer drugs.

TAP and AstraZeneca employees were alleged to refer to the spread between the physician’s purchase price and the Medicare Average Wholesale Price reimbursement as the “return to practice” of “profit” that physicians could anticipate from buying their product.

Before 2005, Medicare reimbursement was based on Average Wholesale Price and included funds designed to cover the acquisition cost of cancer drugs plus administration-related overhead such as rent, personnel costs, and bad debt.

In 2005, as a result of the settlements against the pharmaceutical companies, Medicare shifted to Average Sales Price–based reimbursement to address concerns that marketing incentives were driving pharmaceutical sales.

This change is expected to result in an 8 percent decrease in the mean revenue of oncologists and a decrease in physician reimbursement for cancer drugs.

Dr. Bennett’s collaborators on this study include researchers from the Feinberg School, Jesse Brown VA Medical Center—Lakeside Outpatient Clinic, Mid-West Center for Health Services and Policy Research, Rush Medical College, University of Illinois at Chicago, Louisiana State University School of Medicine, Walter Reed Army Medical Center, and Eastern Virginia Medical School.

The study was supported in part by grants 1R01CA 102713-01 and P 30 CA60553 from the National Cancer Institute.