Ethical and Value Issues in Insurance Coverage for Cancer Treatment

Dan W. Brock
The Oncologist 2010, 15:36-42.
doi: 10.1634/theoncologist.2010-S1-36

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The online version of this article, along with updated information and services, is
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The

Oncologist

Ethical and Value Issues in Insurance Coverage for Cancer Treatment

DAN W. BROCK
Harvard Medical School, Boston, Massachusetts, USA

Disclosures: Dan W. Brock: None.

The content of this article has been reviewed by independent peer reviewers to ensure that it is balanced, objective, and free from
commercial bias. No financial relationships relevant to the content of this article have been disclosed by the author or independent
peer reviewers.

ABSTRACT
Many new cancer drugs provide only limited benefits,
but at very great cost, for example, $200,000 $300,000
per quality-adjusted life year produced. By most standards of value or cost-effectiveness, this does not represent good value. I first review several of the causes of
this value failure, including monopoly patents, prohibitions on Medicares negotiating on drug prices, health
insurance protecting patients from costs, and financial
incentives of physicians to use these drugs. Besides value
or cost-effectiveness, the other principal aim in health

care resource allocation should be equity among the

population served. I examine several equity considerationspriority to the worse off, aggregation and special priority to life extension, and the rule of rescue
and argue that none justifies greater priority for cancer
treatment on the grounds of equity. Finally, I conclude
by noting two recent policy changes that are in the
wrong direction for achieving value in cancer care, and
suggesting some small steps that could take us in the
right direction. The Oncologist 2010;15(suppl 1):36 42

INTRODUCTION

common failure to achieve good value? I often compare our

system for making these insurance decisions with the assessment system in Great Britain, where I believe the National Health Service (NHS) does a better job of evaluating
the value of cancer treatments in making decisions about
coverage in the NHS. But value is only one of the two broad
criteria that should govern cancer treatment coverage decisions and the allocation of resources to cancer care.
The other is equity. We want the distribution of health
care resources to be equitable, both among cancer patients
and within the health care system more broadly, among all
patients [2]. These two broad goals of maximizing value
while treating all participants in the health care system eq-

Here is a definition of what constitutes value in cancer care

and treatment: That the benefits in expected life extension
and improved quality of life are obtained at a reasonable
cost comparable with other typically funded treatments and
at a reasonable cost per quality-adjusted life year (QALY).
This is essentially a cost-effectiveness (CE) standard that
compares cancer treatments with other medical treatments
for the health benefits gained per unit of resources expended [1]. I believe many new cancer treatments, and in
particular many new cancer drugs, fail to meet this standard
for value. I first explain why I believe this is so. What features of the system of cancer care and its funding explain the

Correspondence: Dan W. Brock, Ph.D., Department of Global Health and Social Medicine, Harvard Medical School, 641 Huntington
Avenue, Boston Massachusetts, USA 02115. Telephone: 617-432-5131; Fax: 617-432-3721; email: dan_brock@hms.harvard.
edu Received July 1, 2009; accepted for publication November 4, 2009. AlphaMed Press 1083-7159/2010/$30.00/0 doi: 10.1634/
theoncologist.2010-S1-36

The Oncologist 2010;15(suppl 1):36 42 www.TheOncologist.com

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Key Words. Cancer Cost-effectiveness Equity Rationing

Brock

uitably can and do sometimes conflict, which means that

they must sometimes be balanced or traded off. This implies that a failure to achieve value may in some cases be
ethically justified in the service of achieving equity. After
exploring the value issue, I briefly explore some considerations of equity to see whether they may justify departures
from the value or CE standard in allocating resources to
cancer care and making insurance coverage decisions.

VALUE IN CANCER CARE

www.TheOncologist.com

erage in order to fund new interventions. Because we spend

twice as much per capita on health care as the British, a reasonable cap in the U.S. might be something on the order of
$100,000 per QALY, which would accord with the $6 $7
million value of a statistical life used for health and safety
regulations [6]. A cost/QALY cap in effect represents an
answer to how much should be spent on health care as opposed to other goods and services, as well as which services
should be funded.
Although the cost/QALY of many new cancer drugs is
difficult and controversial to estimate, they often exceed
this $100,000/QALY limit. For example, bevacizumab
used for metastatic colorectal or breast cancer costs probably on the order of $200,000 $300,000 per QALY, and
NICE has recommended that it not be provided in the NHS
[7]. Scott Ramsey quotes a pharmaceutical executive as admitting that we dont have any cancer products in our pipeline that will be priced at $300,000/QALY [8]. These
examples represent a failure to come close to meeting a reasonable value standard.
Before examining the causes of these failures, I want just to
note a systematic challenge to applying standard cost-effectiveness analyses to end-of-life and terminal care. Gary Becker
and colleagues have argued that it is a mistake to assume, as
cost-effectiveness analyses standardly do, that the value of life
years is linear [9]. Instead, they argue that, for a number of reasons, treatments at the end of life, such as much end-stage cancer treatment, have greater personal and social value than do
treatments producing equal QALYs at other times. The issues
here are complex and controversial, and there is not space to
pursue them here. I simply note that I assume here that, for purposes of evaluating ex ante insurance coverage of end-stage
cancer treatments, treatment benefits do not have greater value
just because they come at the end of life. This is a distinct question from whether QALYs should have different value depending on the age of their recipient, an issue I do address
briefly below.
Why do new cancer treatments often fail to meet typical
cost/QALY standards? The first and most obvious cause is
the intellectual property patent protection on new drugs. In
principle, this gives the patent holder exclusive rights to
market the drug for 20 years, though in fact the period is
typically much shorter than that because the clock starts
ticking before the drug reaches the market. Because possible competitors cannot also market the drug during this period, the drug company can set whatever price it wants and
believes it can get. Second, these drugs are often very expensive to develop and produce, and in addition often serve
a relatively small patient population (particularly when they
serve end-stage patients), meaning there is relatively little
volume to recoup high development and manufacturing

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There are several broad value questions that arise in the allocation of health care resources. The first is how much of a
societys resources should go to health care as opposed to
other goods and services? For televisions or computers that
are paid for in full without insurance by consumers, we can
let individuals make choices in the marketplace without the
need to answer how much of societys overall resources
should go to them. But health care is largely secured
through health insurance, and most people are unwilling to
accept willingness, which depends on ability, to pay as the
standard. With a national health care system, this first value
question can be addressed as a political issue, and a global
budget can be set for societys health expenditures. This is
what we do in the U.S. for defense expendituresthe president proposes and Congress votes on a defense budget,
which the Pentagon must live within. But with no national
health system, but rather many heterogeneous and fragmented subsystems, we lack the institutional framework to
ask and implement an answer to this first value question.
We can only add up a year or two later how much we in fact
spent on health care.
Where the value question can be addressed is at the second stage how much of total health care resources should
go to different health care needs and patients? If we are simply concerned with value as I have understood it above,
then in principle we should be comparing all alternative resource uses for their relative cost-effectiveness and using
available funds to maximize health benefits for the population [3]. Of course, we lack the data for such an ambitious
comprehensive comparison. One alternative simplification
is to adopt a limit on the cost/QALY beyond which interventions will not be funded in the health care system. This is
essentially what the National Institute for Health and Clinical Excellence (NICE) has done in Great Britain [4]. They
do cost-effectiveness analyses on new interventions and
drugs and use a cap of approximately 30,000 per QALY
for recommendations to the NHS for coverage. (NICE has
recently relaxed its guideline cap for relatively rare cancers,
which will have a limited budget impact on the NHS [5].)
They do not evaluate already approved interventions and
drugs, nor recommend what should be dropped from cov-

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essary to enable drug companies to invest the very great

resources in research and development needed to bring new
drugs to market; pharmaceutical firms typically cite an average cost of $800 million to $1 billion to bring a new drug
to market. I shall not assess this justification here, though it
is worth noting that the pharmaceutical industry as a whole
spends far more on marketing than it does on research and
development of new drugs [13]. But more recently, a new
justification has sometimes been offered for the high prices
of these new cancer drugsthey reflect the value of the
health benefits the drugs produce. What should we make of
this argument? In a competitive market, if I own land that
now becomes wanted for development, I can raise the price
of that land, but I will be effectively limited in how much I
can raise the price by what competing land owners are willing to sell their land for. With monopoly pricing, competition does not limit pricing in this way. Suppose Medicare
adopted a $100,000/QALY cap on what it would fund,
would this justify a drug company pricing a new drug at that
level on the grounds that it expressed a judgment about
what is good value? I think the answer is clearly nothat
figure would be a cap or a limit on value, not what every
new drug should be priced at. Consider another monopoly
situation. You fall off a dock into the water and cannot
swim. I am the only other person on the dock and you will
drown unless I throw you my life ring. If I calculate that you
will live another 30 years in good health if I throw you the
ring, can I charge you $100,000/QALY, or $3 million, for
the benefit my life ring will bring you? Of course not. That
would be to take advantage of, or exploit, your desperate
situation and my monopoly on the means to prevent you
from drowning. The value of the benefit does not establish
a fair price in these circumstances, and the same is true for
monopoly pricing of cancer drugs for desperately ill patients.

EQUITY IN CANCER CARE

I have suggested a cost-effectiveness account of value in
cancer care and explored briefly some of the main causes of
value failure in that care. But I said above that value is only
one of the two broad goals or standards for health care resource allocationthe other is equity across the population
served by the health care system. Considerations of equity
can come into conflict with concern for value, and can
sometimes justify departures from an otherwise justified
value standard. Are there considerations of equity that
might justify these expensive new drugs, even if they do not
represent good value? I cannot give a full treatment of this
issue here, but I will explore briefly several considerations
of equity for their implications on this question.

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costs. Whether the price of a particular cancer drug can be

justified must take into account all these factors. Third,
Medicare, which is the biggest purchaser of cancer drugs in
this country, is precluded from refusing to cover the drug on
grounds of its high cost, or low cost-effectiveness. Instead,
Medicare is required to make coverage decisions under the
reasonable and necessary standard for the diagnosis or
treatment of disease or injury [10]. The result is that pharmaceutical firms know that these very expensive new cancer drugs will not be denied coverage by Medicare on the
grounds of cost, and so they have no incentive to price them
to meet any cost-effectiveness standard. Nor do they have
an incentive to not develop new drugs that are anticipated to
not meet any cost-effectiveness standard. And once developed, aversion to denying patients available treatments may
lead to their noncost-effective use. Fourth, Medicare is explicitly prohibited from negotiating drug prices under Part
D, the prescription drug benefit of Medicare; the Obama administration has indicated a desire to remove this prohibition, but it remains in place today. Fifth, many private
insurance companies tend to follow Medicare in their decisions about coverage of new drugs, meaning that costs and
cost-effectiveness again get little attention. Sixth, because
most cancer patients have health insurance that pays most
of the costs of their cancer care, in making utilization decisions they have an incentive to look only at their out-ofpocket costs, not the full costs of their care to the health care
system. Finally, this combines with two incentives of oncologists to ignore the cost-effectiveness of the treatments
that they provide to their patients. The first is the fact that
many oncologists make substantial portions of their income
by providing cancer drugs to their patients [11]. The second
is the professional norm that physicians first and foremost
responsibility is to do what will be best for their patients,
without regard to costs. This norm has eroded significantly
in the face of the ever-increasing growth of health care costs
and attempts to control that growth, but it still influences the
practice of many oncologists [12].
What is the upshot of these various causes of the value
failure in cancer care? Neither oncologists nor their patients
have significant incentives to consider the true costs of care
in making treatment decisions, and whether that care constitutes good value for money. Pharmaceutical firms have
monopoly pricing power to charge as much as they can get
for their products. And payers and insurers are unable to
make much use of their purchasing power to negotiate
lower costs with the drug companies.
I want to make one further point regarding the intellectual property protection of patents for new drugs, and the
monopoly pricing it makes possible. The traditional justification for this intellectual property system is that it is nec-

Ethical and Value Issues in Cancer Treatment

Brock

PRIORITY TO THE WORSE OFF

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have had many fewer years of life than patient A if he

doesnt receive the transplant. I believe this shows that the
typical elderly cancer patient does not deserve any special
priority we give to the worse off that might justify providing
him with high-cost, marginal-benefit treatment that fails the
value standard [16]. This is not to deny that the need of the
more urgent patient may exert greater psychological pull on
us, only that being more urgent does not provide a separate
moral reason for priority.
Most people will at some point become among the most
urgent patients in the sense that their medical condition
makes them near death. Often there will be little, but not
nothing, that can be done for them to extend their lives. If
urgency justified abandoning reasonable standards of
value, the result would be the use of much very high-cost,
low-benefit care near the end of life. This is arguably what
we in fact do in much end-of-life care, including cancer
care, today. But I believe it is neither a rational nor ethical
use of limited resources. There are too many other uses to
which that money could be put, both within and without the
health care system, that would bring much greater benefits;
the opportunity costs of securing that treatment are much
too great. From an ex post perspective, when one knows one
is near death and there is only one possible treatment, selfinterested patients would spend all their resources on the
treatment. But this is not the proper perspective for an individual or a society to decide what treatments will be covered by insurance. So giving special priority to the worse
off for reasons of equity or justice does not justify extra resources for elderly, dying cancer patients.

AGGREGATION AND SPECIAL PRIORITY TO

LIFE EXTENSION
What has come to be called the aggregation problem in
health resource allocation is whether small benefits to a
great many persons should have priority over large benefits to a few, so long as the aggregate benefits of the
former are greater than those of the latter. Most people
prefer to give priority to big benefits to a few, for example, life saving, even if in the aggregate they are less than
the small benefits to many. Might this justify special priority to these very high-cost, marginal-benefit cancer
drugs? The state of Oregon faced this problem when it
sought to revise its Medicaid program nearly 20 years
ago [17]. It initially ranked all treatment condition pairs
then covered by Medicaid by essentially a cost effectiveness standard. One result of that process was that capping
teeth was ranked just above appendectomies in costeffectiveness. This meant that if Oregons Medicaid resources ran out after capping teeth, appendectomies
would not be funded. This result was widely rejected

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One important equity consideration, common to many

different accounts of equity and justice, is priority to the
worse off [14]. It is often said that one can tell the justice
of a society by how it treats its least well-off members,
and many religious traditions share this commitment to
the worse off. Would giving priority in health care allocation to the worse off justify additional spending beyond a value cap on cancer patients near deathfor
example, $100,000 for an average of 4 months life extension? To answer this, we need to determine who are
the worse off for purposes of this resource allocation.
The typical cancer patients treated by so-called last
chance therapies are among the worst off patients in
terms of the urgency of their situation and need. They
will die very soon in the absence of this treatment. But I
believe that is not the morally relevant sense of worse off
for our question. I will assume here that we should focus
on who are worse off in the good that we are distributing.
In one sense, that good is of course a cancer treatment,
but the good of that treatment is additional months/years
of life; that is the benefit the treatment is intended to produce (for simplicity, I set aside here quality of life benefits). Those who are worst off are then those who will
have had least of the good we are distributing if they are
not treated. Assume, again for simplicity, that the average age of the cancer patients in question is 70; then, if
we do not provide them with this expensive treatment,
they will die at 70, close to the average lifespan in our
society today. They are not the worst off in terms of the
years of life they will have had if not treated. The worst
off are much younger patients who are also faced with a
life-threatening illnessif they die for lack of treatment,
they will have had many fewer years of life than the 70year-old cancer patient [15].
So the dying cancer patient may have the most urgent
needshe will die very soon without treatment but the
most urgent patients are not, in the relevant sense, the worst
off patients. Let me illustrate the point with an example
from liver or heart transplantation, for which the scarcity is
of organs, not money, and the scarcity is persistent. Because
of this scarcity, patients will inevitably die on the waiting
list for the transplant they need; we know we will not be
able to provide a transplant for all in need on the waiting
list. Suppose, again for simplicity, that we know we will
only have this one liver or heart in the next 6 months. Patient A is 65 years old and is expected to die in 1 month
without a transplant, whereas patient B is 30 years old and is
expected to die in 5 months without a transplant. Who
should get the one scarce organ? Patient As need is more
urgent, but patient B is the worse off of the two he will

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RULE OF RESCUE
The so-called rule of rescue was proposed some years ago
by Albert Jonsen as a psychological fact about people: We
are very reluctant to let an identified person in peril lose her
life or suffer great harm when we could prevent that loss or
harm, even if only at great cost [18]. This rule is related to
the issue of urgency discussed above and is used to explain,
for example, why after a mine collapse that leaves identified miners trapped in the mine, a no-holds-barred effort to
rescue them is undertaken without regard to its cost, although more deaths could have been saved by earlier safety
measures that were not undertaken because of their costs. It
is important that this was proposed by Jonsen as a fact about
human psychology, not a normative principle that we ought
to follow. But drugs like bevacizumab used for colorectal or
breast cancer do not rescue a dying patient in the way the
trapped miners might be rescued. Instead, they may delay
death on average for a very short period of time, and although the period may be 4 months for some, it will necessarily be less for others; the drug will not cure the
patients cancer, but only slow its progression by a few
months. This means that the psychological force of the rule
of rescue should be much weaker in the context of this can-

cer careit should not make it impossible for us to resist

providing the treatment.
One feature of the rule of rescue identified by Jonsen
was the greater weight we typically give to saving identified, as opposed to so-called statistical, lives. This is important for cancer prevention. There are cases in which
improving the rates of cancer screening will produce more
QALYs than providing last chance, expensive treatments to
dying cancer patients. But in screening programs, we often
will not know who was saved who otherwise would have
died; we only have statistical analyses that show fewer
deaths with the screening alternative. Whether an ethical
case can be made for giving more importance to identified
over statistical lives is controversial; because statistical
lives saved are no less real than identified lives, many regard this preference as irrational. A similar downgrading of
cancer prevention programs, as opposed to acute care treatment, arises from the standard practice of temporal discounting of health benefits within cost-effectiveness
program evaluation. But at the least, whether we should
prefer to use our resources to save fewer lives with acute
care treatment of cancer now than we could save in the future by spending those resource now on prevention programs is problematic and in my view mistaken. If resource
allocation in cancer care is determined by standard costeffectiveness that employs temporal discounting, we will
give undue weight to treatments for the acutely ill, dying
patient when we could have used the same resources in prevention programs that would have produced more QALYs
and lives saved.

RECENT POLICY CHANGES

So the upshot of my brief examination of several important
considerations of equity in resource allocation and insurance coverage in cancer care is that equity does not justify
exceeding usual value standards of cost-effectiveness for
last chance, very high-cost, low-benefit treatments. Recently announced policy changes by Medicare appear to
have moved in the wrong direction. Medicare has expanded
its coverage of a number of cancer drugs for nonapproved
uses, that is, for uses for which the drug company has not
provided evidence to the U.S. Food and Drug Administration of the drugs safety and efficacy. Medicare has expanded the reference guides that can be used to justify
coverage decisions for nonapproved uses, guides that are in
some cases subject to influence from industry and to conflicts of interest. In effect, this is a step away from evidencebased medicine by weakening the requirement for evidence
of benefit in order for the drug to be reimbursed by Medicare. This change will allow Medicare coverage of additional nonapproved uses for which adequate safety and

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ordinary peoples priorities are typically formed by a

one-to-one comparison, and an appendectomy is clearly
more important than a tooth capping. But the one-to-one
comparison ignores the great difference in cost of the two
proceduresOregon estimated that it could provide over
100 patients with a tooth capping for the cost of one appendectomy. So cost-effectiveness will permit small
benefits to many to have priority over large benefits to a
few, as it did here, if they are greater in the aggregate. In
the face of this and similar results from a ranking of services by cost-effectiveness, Oregon adopted what was
essentially a relative effectiveness or benefit standard
that largely ignored difference in costs; it in effect ruled
out aggregation.
The aggregation problem is highly complex and controversial, but would a limitation or rejection of aggregation
justify special priority to end-stage cancer patients, even if
their care is not cost-effective? I think the answer is no. An
appendectomy typically produces a very large benefitit
saves the patients life and gives him or her many more
years of healthy life. But the cancer treatment that extends
life, on average, for 4 months at a cost of $100,000 does not
produce an at all comparably large benefit. The period of
life extension is short, and the patients quality of life during this period is typically poor. This is not a benefit that
should trump the other greater benefits that would have to
be foregone to provide it.

Ethical and Value Issues in Cancer Treatment

Brock

41

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10 Fox J. Medicare should, but cannot, consider costs: Legal impediments to a

sound policy. Buffalo Law Rev 2005;53:577 633.
11 Jacobson M, OMalley AJ, Earle CC et. al. Does reimbursement influence
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12 Levinsky NG. The doctors master. N Engl J Med 1984;311:15731575.
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I believe the most fundamental need is a professional and

public willingness to ration even last-chance therapies at
the end of life for cancer and other patients. We should not
be using societal resources for very high-cost, marginalbenefit interventions and treatments. Because these are not
no-benefit interventions and treatments, needless to say this

willingness will not come easily or soon. If willingly

adopted, this will require major cultural changes by both the
medical profession and the public. If forcibly adopted by
insurance companies and the government, it will generate
great conflict and resistance. If limitations on the use of
very high-cost, marginal-benefit interventions and treatments are to be done fairly, this will almost certainly require
some form of national health care system. Our current very
heterogeneous and fragmented system would almost certainly preclude fair and equitable implementation of such
limitations.
Finally, there are some more modest steps that could
help move us in the right direction. Here are three examples.
First, if these last chance therapies are to be covered, then
cover them only in clinical trials or for cancer registry patients; this would at least help improve the evidence base
about their use. Second, authorize CMS to negotiate prices
under Medicare with the pharmaceutical companies. There
is an ethical case for the U.S. subsidizing pharmaceuticals
for poor developing countries, but there is no case for our
doing so for other developed countries, which is what we in
effect do at present by paying higher prices than do other
developed countries. Third, and most important, move forward the comparative effectiveness program for which
there is $1.1 billion in the Obama budget. This could be an
important step in improving the evidence base about the relative effectiveness of different interventions, and in turn a
step in the direction of evaluating the cost-effectiveness of
these interventions. This would be a move in the direction
of a more rational and ethical health care system, not just a
cancer care system.

effectiveness have not been established, much less costeffectiveness. Moreover, the Centers for Medicare & Medicaid Services (CMS) apparently did not do cost analyses of
these policy changes, but there seems little doubt that they
will increase the overall costs of cancer care.
A second troubling development is the addition of a
fourth tier to standard prescription drug benefits in many
health insurance plans [19]. Standard prescription drug
benefit plans typically require something like a $5 copay for
generic drugs, a $15 copay for nongenerics on the formulary, and a $50 copay for nongeneric, nonformulary drugs.
For extremely expensive drugs, like many of the new cancer drugs, some insurance plans have added a fourth tier of
coverage, which typically requires a copay on the order of
20% or 25% of the cost of the medication. For a drug costing $100,000 per year, that is a copay of $20,000 $25,000,
which will be prohibitively expensive for many patients.
This may result in less use of some cancer drugs that do not
meet a reasonable value standard, but it will do so in an ethically indefensible way. Poorer patients who cannot afford
the copays will be denied the drugs, while better off patients
will still obtain them, an unacceptable form of ability to pay
rationing.

Ethical and Value Issues in Cancer Treatment

42
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meets the rule of rescue. JAMA 1991;265:2218 2225.
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Citations

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