What a $480,000-a-year cancer drug means for employer health coverage

Employers are bracing for another year of higher health costs, according to recent industry reports.

The average health benefit cost per employee is set to rise by 8.2% in 2027, even when taking into account measures businesses may take to contain costs, according to a survey released by consulting firm Marsh on Aug. 31. This represents the steepest hike since 2003.

Similar reports released by Aon and Business Group on Health estimate that employers will see costs rise by upwards of 9% next year.

A new cancer drug recently approved by the Food and Drug Administration could further add to companies’ steep health costs.

The drug, called Rasonque, is designed to treat the most common form of pancreatic cancer. In clinical trials, patients who took Rasonque saw their median life expectancy double, from 6.7 months to 13.2 months.

But the promising treatment also comes with a hefty list price, at nearly $480,000 for a year’s supply (at $663 per tablet). This price falls in line with other cancer drugs, and represents a growing challenge for HR leaders, experts told us.

The good news. Rasonque’s approval is an exciting development in the fight to cure cancer, consultants specializing in employer health benefits told us. It’s the first drug to target the specific genes that cause pancreatic cancer.

“This reflects the incredible progress that we’re seeing made in cancer care,” Eileen Pincay, SVP and national pharmacy practice leader with consulting firm Segal, said. “We now have more targeted, personalized treatment.”

Magda Rusinowski, a VP with Business Group on Health, which represents large, self-funded employers, echoed this sentiment. “It is great that science is progressing and new treatments like this are coming to market,” she said.

“Pancreatic cancer is typically a very devastating diagnosis, and it’s a category that has seen unfortunately little progress in extending survival and little clinical innovation,” Rusinowski continued. The fact that Rasonque extended median survival from seven to 13 months, “has been met with huge excitement, not only by patients but also by providers.”

The challenging news. While treatment innovations are a positive development for workers with cancer, they also present financial challenges for businesses.

Cancer has been the dominant condition driving up healthcare costs for employers for five years in a row, according to Business Group on Health; in the organization’s most recent survey 70% of employers said it was the number one cost driver.

The high cost of research and development, in addition to running clinical trials, are among the reasons pharmaceutical companies cite for charging so much for these medications, Rusinowski said. Manufacturers also make decisions in light of “what the US market can bear,” what they expect commercial payers and Medicare to pay for the drugs, and how long they expect to be the only treatment on the market.

Given the “incredibly challenging” effect cancer can have on employees and their families, employers want to make these treatments accessible, Pincay said. But they have to ensure the medications are being used appropriately, through evidence-based strategies such as prior authorization.

To manage the cost of cancer treatments, some turn to Centers of Excellence, Pincay and Rusinowski told us. Such programs direct “patients to providers with deep expertise in complex cancer areas,” Pincay said. Institutions including Cleveland Clinic and Memorial Sloan Kettering run centers of excellence focused on cancer.

A less common, though potentially effective, strategy for managing cancer-related costs is value-based arrangements, which tie reimbursements to patient outcomes, Pincay noted.

Stop-loss insurance can be another important tool for employers affected by cancer-related costs, Pincay said. Under these agreements, carriers cover costs when they exceed a certain limit, Healthcare Brew previously reported.

To stay ahead of cancer-related cost trends, HR teams should work with their consultants, pharmacy benefit managers, and health plans to understand the “size of eligible population for any of the new therapies” coming to market, Rusinowski said. This may “help them achieve the best financial arrangement on these therapies, and…make sure that patients get the right therapy at the right time for them.”