>>>>>>>>>>>>>>>>>>>>>>>>>
     Evolution of
     the Oncology

   GPO
     >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
      It’...
>>>>>>>>>>>>>>>>>>>>>>>>>>>>
                                 In November 1993, as oncologists con-
                      ...
Evolution of
 the Oncology

>>GPO>>>>>>>>>>>>>>>>>>>>>
    Four companies: Oncology Therapeutics           societies were ...
>>>>>>>>>>>>>>>>>                                                                        >>>>>>>
                     Ente...
Evolution of
 the Oncology

>>GPO>>>>>>>>>>>>>>>>>>>>>
    Summit Cancer Care, a practice with seven
 physicians located i...
>>>>>>>>>>>>>>>>>                                                                                              >>>>>>>
   ...
Evolution of
 the Oncology

>>GPO>>>>>>>>>>>>>>>>>>>>>
 surgical supplier that started in 1999 with a                  be ...
>>>>>>>>>>>>>>>>>                                                                                   >>>>>>>
  tinue to evo...
MOB
                                                                  I
                                                  ...
Upcoming SlideShare
Loading in …5
×

Evolution of the Oncology

1,245 views

Published on

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
1,245
On SlideShare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
40
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Evolution of the Oncology

  1. 1. >>>>>>>>>>>>>>>>>>>>>>>>> Evolution of the Oncology GPO >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>> It’s more than price. As oncology GPOs become more integrated into the economic management of the practice, GPO-distributor relationships play a key role in the oncology practice’s drug acquisition decision. We looked > back in time and tracked the shifting GPO strategies to see if history’s lessons could help meet the unique needs of today’s oncology practice. >>>>>>>>> By Bryan Cote 28 ONCOLOGY BUSINESS REVIEW • WWW.ONCBIZ.COM • NOVEMBER 2007
  2. 2. >>>>>>>>>>>>>>>>>>>>>>>>>>>> In November 1993, as oncologists con- tinued to migrate into community-based practices, a group of North Carolina practice managers lead by Fran Black set out to collec- tively negotiate better prices on the emerging slate of chemotherapy agents and support- ive cancer care drugs. The pioneering efforts of these managers marked the first of three pivotal shifts in the evolution of the oncol- ogy group purchasing organization (GPO). Each shift carried with it lessons that can be applied to what currently appears to be an emerging fourth shift in the oncology distri- bution industry. State Society Leverage: The 1st shift In 1991, GPOs did not exist in community oncology practices and very few oncology >> >>>>>>>>>>>>>>>>>>>>>>>>>>> drugs were available. National wholesalers, such as Cardinal Health, were set up to ser- vice hospitals, but the wholesalers had little financial incentive to ship drugs by the vial to community doctors. Even though pharmaceu- tical manufacturers sold directly to doctors, the manufacturers weren’t equipped to sup- port the emerging class of community-based practitioners. cont. on pg 30 >> >>>>>>>>>>> NOVEMBER 2007 • WWW.ONCBIZ.COM • ONCOLOGY BUSINESS REVIEW 29
  3. 3. Evolution of the Oncology >>GPO>>>>>>>>>>>>>>>>>>>>> Four companies: Oncology Therapeutics societies were the early innovators in the GPO Network (OTN), Oncology Supply of Alabama, evolution and their entrepreneurism allowed Florida Infusion, and PRN, a regional dis- oncology practices to improve their overall tributor from the upper Midwest, entered the bottom line. market as oncology’s first distributors. The The new model satisfied each player in the companies’ pitched a niche service to com- community oncology supply chain, includ- munity-based practices: next-day, on-time ing doctors, who were thrilled to have access medication delivery. to great prices, which allowed them to deliver Then, in hopes of leveraging their buying high quality care even when patients did power, the pioneers at the North Carolina not have appropriate reimbursement. The Oncology Managers Society privately invited payers praised the cost savings of the com- these companies to bid on being the sole drug munity-model and more cancer drugs became distributor to oncology practices in North available. Carolina. OTN prevailed. GPO-Distributor Pairing: The 2nd shift At the time, OTN and PRN were among a handful of companies pitching the niche ser- With the success of the GPO model, part- “From my nerships and acquisitions began to emerge in vice to community practices; and Warren Dodge, who provided OTN’s services to phy- the mid to late 1990s and change the land- perspective scape of the distribution model. Among these sician offices, reflects back stating, “From my perspective this was the first GPO event acquisitions were: this was the in community oncology.” Currently, Dodge is president of Oncology Metrics, a data and ser- • Cardinal acquiring PRN around 1994 • AmerisourceBergen (which was Bergen first GPO vice company for community oncology in Fort Worth, Texas. Brunswick at the time) buying Oncology Supply in 1996 event in OTN spread the news of the North • BMS acquiring OTN in 1996 community Carolina arrangement to other state prac- tice administrator-run societies, including • McKesson offering an oncology distribu- tion business to doctors oncology.” the Southern Oncology Alliance of Practices, the Pennsylvania Oncology Hematology In 1997, OTN held about 56% of the distri- Managers’ Society, and the Michigan Society bution market share, according to Dodge, and for Hematology Oncology; and thus, con- pharmaceutical manufacturers were skeptical tracting activity quickly escalated into the of the BMS/OTN partnership. Manufacturers mid 1990s. questioned how they could distribute their Manufacturers began negotiating drug con- oncology products to community physicians tracts directly with these societies and paid through a business that was owned by BMS— them an administrative fee for choosing their a primary competitor. This conflict opened drug; the societies, in turn, offered their col- the door for an alternative to the BMS/OTN lective volume to the distributors. These model. 30 ONCOLOGY BUSINESS REVIEW • WWW.ONCBIZ.COM • NOVEMBER 2007
  4. 4. >>>>>>>>>>>>>>>>> >>>>>>> Enter the Indian Oncology Network (ION), cancer agents, also began to buy specialty which developed a new model by aggregat- pharmacies. ing drug purchasers and for the first time AmerisourceBergen, which had scooped up aggressively contracting with pharmaceutical both Oncology Supply and ION, bought US companies. ION, founded by pharmacist Raj Bioservices to handle the distribution of oral Mantena, also leveraged relationships with cancer drugs. US Oncology, which had part- the large national contingent of oncologists nered in 1999 with Cardinal Specialty to form of Indian decent, who began to get offers and Select Plus, severed its relations with Cardinal better contracts from ION than the state soci- and launched its own distribution business eties could afford. in 2005. One year later, the company started ION eventually re-named itself the OncologyRx Care Advantage, a specialty International Oncology Network and pharmacy. approached OTN to see about creating a dis- For a brief period, NOA and OTN were tribution partnership. “OTN said no,” Dodge paired, but that relationship ended in 2005 recalls. ION then partnered with Oncology when BMS sold OTN to One Equity Partners, Supply, and under Bergen Brunswick’s owner- a private equity firm. The selling gave OTN ship, eventually became the biggest player in the financial backing to launch its own GPO, the distribution business. Onmark, in mid 2005. In addition, OTN pur- Oncology “[OTN’s decision] was probably a mis- chased ivpCare to handle oral cancer drugs take,” Dodge believes. “I had the mentality at and later acquired Cardinal’s specialty dis- practices the time that we [OTN] were the biggest and tribution business, which it still owns today. because of that we didn’t need another middle All of this activity left NOA as a free agent. In must stop man. All I saw was someone who was going 2005, McKesson, which had a specialty phar- to hurt our margins. Today’s leading players macy and specialty distribution business in chasing the could probably learn something from this.” place to handle oral cancer drugs, bought NOA. buy side and Consequently, OTN eventually teamed with the National Oncology Alliance (NOA), an Value Added Services and Data: The 4th shift look more independent, specialty oncology GPO that had formed in 2001. For community oncologists, all of this jock- eying has produced one fundamental lesson: intently at Oral Demand Creates Reorganization: practices need to carefully assess their drug acquisition decisions and GPO-distributor The 3rd shift how economic As time moved on, in 2005, the promise of relationships based on much more than price alone. Oncology practices must stop chasing a robust oral cancer pipeline spurred another factors affect reorganization of the distributor-purchaser the buy side and look more intently at how economic factors affect their regimen deci- pairings. As more than 40% cancer drugs in their regimen development are targeted oral agents, the sions including patient mix and prescribing patterns. Importantly, they need to invest in big distributors bought the oncology GPOs; decisions... and because of the volume of expected oral tools to manage these factors. cont. on pg 32 >> NOVEMBER 2007 • WWW.ONCBIZ.COM • ONCOLOGY BUSINESS REVIEW 31
  5. 5. Evolution of the Oncology >>GPO>>>>>>>>>>>>>>>>>>>>> Summit Cancer Care, a practice with seven physicians located in Savannah, Georgia, mon- “We prefer to work with one GPO, rather than cherry pick for the best price on every drug,” “...it’s the itors distributor pricing along with Medicare’s average sales prices; however its emphasis said Bromley. value in Unlike GPOs of the early to mid 1990s, is on managing protocol costs and evaluat- ing the economics of each regimen in order to today’s GPO-distributor teams offer a menu of working with value-added services, including tools to help a avoid having to move patients to alternate therapies or settings. For example, Summit: practice identify and stop its reimbursement partners leaks (see Table 1). For example, tools are • Evaluates the clinical profiles for each of available to help a practice identify if one of that meet their preferred regimens its key payers has adjusted a contract signifi- • If they find that any 2 doublets (i.e. prod- cantly below other contracts, such that some everything payers reimburse above Medicare for a certain uct pairings) will produce clinically simi- lar response rates with manageable toxicity regimen, while others pay below the govern- you need.” ment’s rate. levels, they don’t automatically go looking for a better price on one of the two drugs “It’s not so much the GPO you choose today,” says Bromley, “as I think it’s the value “We evaluate opportunities to use differ- in working with partners that meet every- ent regimens,” says Sharon Bromley, Summit’s thing you need.” administrator, noting how markedly different costs may be associated with each drug. The Evolution Continues At one time, Summit contracted with multi- With more practices like Summit Cancer ple GPOs, but with shrinking reimbursements Care integrating economics into their clinical they have recently changed their approach and business processes, a new service model is and currently work with just one company. developing in the almost $30 billion distribu- tion market for a kind of hybrid GPO. Table 1. GPO Management Tools GPO Management Tool Onmark: https://www.onmarkservices.com/onmarksite/onmark.portal?_nfpb=true&_pageLabel=page_regimenprofiler Regimen Profiler US Oncology: http://www.usoncology.com/OurServices/EfficientPrograms.asp Regimen Insight Program ION: Protocol Analyzer http://www.iononline.com NOA: NOAcompare http://www.noainc.com/noa/practice-solutions/noa-compare.aspx 32 ONCOLOGY BUSINESS REVIEW • WWW.ONCBIZ.COM • NOVEMBER 2007
  6. 6. >>>>>>>>>>>>>>>>> >>>>>>> “Can they The launch of the online price shop- ping marketplace called OneOncology is “The promise [OneOncology is] making of a 6%-8% discount on drugs doesn’t seem pos- really get similar to the pooled demand Fran Black’s North Carolina group created in 1993. The sible,” says Millie Widmer, office manager for a five-doctor practice in Louisville, Kentucky. big savings OneOncology site says is can pull together all the drug prices that doctors pay, leverage “Can they really get big savings for us on expensive branded drugs?” for us on the collective volume, and then use an open- auction model so distributors can bid on “It’s a good question,” says Steven Kirchoff, OneOncology’s CEO. “We don’t know what expensive providing the lowest price. will happen until practices aggregate their vol- As of October 2007, more than 200 prac- ume in large numbers, but there may be more branded tices were registered on the OneOncology site elasticity in pricing than one would originally for the first so-called reverse auction, which believe.” drugs?” is expected to occur December 11. The groups Reverse auction models have not always are at least willing to take a shot that sav- succeeded in healthcare. Bromley points to ings on both branded and non-branded drugs MedPool, a medical- cont. on pg 34 >> are possible. The Oncology GPO Evolution 1991 1996-97 1999 2001 2003 2005-06 2007 OTN captures BMS acquires US Oncology NOA Oncology AmerisourceBergen buys 200 practices register market share OTN partners with founded Supply Oncology Supply—ION and for price auction with as first national Cardinal, forming partners US Bioservices to handle OneOncology GPO Select Plus with ION oral cancer drugs Bergen Bruns- AOR and PRN OTN part- BMS sells OTN to a private First auction slated for wick (later merged to form ners with equity firm. OTN launches December 11, 2007; Amerisource- US Oncology NOA Onmark, purchases ivp- results unknown Bergen) buys Care and buys Cardinal’s Oncology Supply specialty division ION founded; US Oncology launches its McKesson purchases ABC enters into distribution model, a year OTN and Onmark arrangement later launches Oncology- with ION CareRx McKesson starts McKesson buys NOA small GPO NOVEMBER 2007 • WWW.ONCBIZ.COM • ONCOLOGY BUSINESS REVIEW 33
  7. 7. Evolution of the Oncology >>GPO>>>>>>>>>>>>>>>>>>>>> surgical supplier that started in 1999 with a be an independent alternative to the BMS/OTN arrange- priceline.com approach, but failed, in her opinion, in ment. Like ION’s efforts to provide better contracts for part because it did not provide any value to its suppliers. physicians by aggregating drug purchasers, OneOncology “I’m not sure about the reverse auction model,” she says. has attempted to aggregate pricing information in hopes “I’m going to wait and see how other practices fare.” of getting doctors a better deal on drugs. OneOncology has approached national distributors including OTN, Oncology “There’s some hesitation right now just like 10 years Supply, US Oncology, McKesson, and Curascript, and hopes ago,” Dodge says, “but I believe what we might be seeing to include regional distributors as well. “We’re an impartial with OneOncology is the beginning of another shift. The market maker, not a GPO,” says OneOncology co-founder average oncologist purchases over $2.5 million a year in Ben Favret. drugs and with reimbursement continuing to decline, a small price discount on expensive drugs can have a big AmeriSourceBergen Corp, which controls half the can- effect on the bottom line.” cer-product distribution market today, does not plan to participate as a distributor of drugs to OneOncology cus- Clark Avery, General Manager for OTN’s GPO Onmark, tomers, in part, because paying fees to the online group believes there are many shortcomings to the model. would mean cutting into already tight margins, a spokes- “Onmark and OTN will not participate unless there is person said. There are other concerns as well, such how will demonstrated value provided above the current, highly they get discounts on branded drugs, or why would a dis- efficient, distribution model.” tributor collaborate only to erode their own bottom line? Pricing, Avery says, tends to be customized to a prac- “I believe history may be repeating itself,” Dodge tice’s patient mix. “This is difficult to accomplish with a says, noting the similarities in how market leader one-size-fits-all solution. Practices have got to focus on AmerisourceBergen has publicly said it won’t work with incremental value. If you don’t manage the decision pro- OneOncology, just like OTN said almost a decade ago cesses the way your data tells you to, price discounts about ION. matter little to your business and you will likely fail.” OneOncology’s efforts to be an independent online CMS is Likely to Drive the Next Evolutionary Step market in some ways parallel ION’s move in the 1990s to As practices adjust, GPOs will invariably need to con- Who’s Aligned with Whom? Parent Company Wholesaler/Distributor GPO Specialty Pharmacy McKesson McKesson National Oncology Alliance (NOA) McKesson OTN Onmark IvpCare AmerisourceBergen Oncology Supply International Oncology Network (ION) US Bioservices US Oncology Holdings US Oncology Oncology Pharmaceutical Services (OPS) OncologyRx Care Advantage 34 ONCOLOGY BUSINESS REVIEW • WWW.ONCBIZ.COM • NOVEMBER 2007
  8. 8. >>>>>>>>>>>>>>>>> >>>>>>> tinue to evolve to match the range of outcomes and before it, “this could be a bellwether event that brings the data-response needs. With the current pairings that exist commercial payers and pharmacy benefit managers more today the major players are all no doubt motivated and to the forefront of managing oncology benefits,” Avery interested in retaining and adding customers. This has led says. “The GPO will have to think of how to put services, to very aggressive pricing. Practices, at least, must look at technology and programs in place that make it easy for the their entire portfolio and not simply the price they’ll get physician to justify use of the drug and adapt.” BC on a highly utilized drug. Look to Medicare policy as a key driver to future shifts in the oncology group purchasing space. Recent Medicare reimbursement changes limiting use of growth factor agents, for example, illustrate the government’s interest in instituting pay for justification in oncology. Like the shifts How the Auction Model Works Does OneOncology’s reverse auction model work for the oncologist’s business? Officials for the online drug price aggregator do not consider their model group purchasing; still, OneOncology enters the market at a time when practices are more aggressively seeking to improve their economic position in the face of reimbursement pressure. More answers may emerge after the first auction, and in the ensuing months. Here’s a primer on how the model works: • Doctors go to the OneOncology site (oneoncology.com), register for free, and then enter the lowest price that they pay for any oncology drug: brands, injectables, supportive medications, oral cancer agents • One Oncology says it will review prices and send the lowest price as a single bid to distributors • Wholesalers/distributors can then bid to fill orders and must respond to one bid • Winning bidders will be named by drug and must supply all participating clinics at a fixed price for approxi- mately 2 months before those drugs are re-auctioned • Practices can order drugs directly from OneOncology, but doctors are not obligated to accept the winning dis- tributor bid if the price for the drug is higher than what they currently pay • Each line item is scheduled to come up for auction every 60 days How the Money Flows • Doctor offices pays the winning distributor • Distributors pay OneOncology a fee for the volumes they deliver NOVEMBER 2007 • WWW.ONCBIZ.COM • ONCOLOGY BUSINESS REVIEW 35
  9. 9. MOB I NOW LE VERS AVAI IO L ABL N E! Don’t wait for approval... SUBSCRIBE TO OBR DAILY. IT’S 100% FREE AND TAKES SECONDS TO REGISTER. ” KED Y PULS E” HOO R “I’M IS MY INDUST ILY “ OBR DA “IF IT ISN’T ABOUT ONCOLOGY, I DON’T WANT TO READ ABOUT IT” WHAT EVOKES THIS MUCH PASSION? OBR daily is the only news service of its kind. Every day we provide the most extensive oncology business and clinical news headlines along with a top-line summary of Pharma/Biotech news. We filter and prioritize for you, and deliver it right to your inbox. Subscribing is quick and easy on our website. Join the OBR community. Subscribe to OBR Daily at www.oncbiz.com now.

×