The Value of Specialty Oncology Drugs

Objective To estimate patients' elasticity of demand, willingness to pay, and consumer surplus for five high-cost specialty medications treating metastatic disease or hematologic malignancies. Data Source/Study Setting Claims data from 71 private health plans from 1997 to 2005. Study Design This is a revealed preference analysis of the demand for specialty drugs among cancer patients. We exploit differences in plan generosity to examine how utilization of specialty oncology drugs varies with patient out-of-pocket costs. Data Collection/Extraction Methods We extracted key variables from administrative health insurance claims records. Principal Findings A 25 percent reduction in out-of-pocket costs leads to a 5 percent increase in the probability that a patient initiates specialty cancer drug therapy. Among patients who initiate, a 25 percent reduction in out-of-pocket costs reduces the number of treatments (claims) by 1-3 percent, depending on the drug. On average, the value of these drugs to patients who use them is about four times the total cost paid by the patient and his or her insurer, although this ratio may be lower for oral specialty therapies. Conclusions The decision to initiate therapy with specialty oncology drugs is responsive to price, but not highly so. Among patients who initiate therapy, the amount of treatment is equally responsive. The drugs we examine are highly valued by patients in excess of their total costs, although oral agents warrant further scrutiny as copayments increase.