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July 17, 2013

Reforming the Payment System for Medical Oncology

Author Affiliations
  • 1Memorial Sloan-Kettering Cancer Center, New York, New York
JAMA. 2013;310(3):261-262. doi:10.1001/jama.2013.8127

Infusion of chemotherapy has long been a profit center for medical oncologists. Under the current system, oncologists purchase cancer drugs at one price, then bill insurers at a higher price after they administer the drugs. However, the profits available to oncologists from this practice have been under serious pressure from the pharmaceutical industry and insurers. Pharmaceutical companies have rapidly increased drug prices while insurers, including the Medicare program, have systematically decreased the reimbursement they provide above the cost of the drug. Even though rising drug prices mean, in general, larger absolute profits to oncologists when they administer more expensive drugs (because the amount of profit is proportional to the purchase price of the drug), the decline in profit margins has made running oncology practices more financially challenging. Increases in drug prices mean increasing costs of inventory, and the resulting lower margins mean less financial flexibility when patients or insurers do not pay their bills on time or in total.

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