What Events Have Affected the Cost of Cancer Care?: Looking Back on 40 Years of Economics in Oncology

In 1985, the direct health services costs of cancer care were $18.1 billion.¹ In 2015, that number was approximately $183 billion.² And by 2030, recent estimates suggest the number will be $246 billion. Between just those referenced costs, that totals almost $450 billion dollars without adjusting for inflation.

If you expand that to the past 40 years and factor in the additional 37 years, assuming at least $28 billion per year was spent, that adds to a number so large that lower estimates put it in the trillions. That is trillions upon trillions of dollars spent directly on both cancer diagnoses and treatments.

Throughout those past 4 decades, the finances of cancer treatment have been anything but static. New policies, breakthroughs, and market entries occur constantly, altering the landscape for better or worse. As treatments have advanced and survival rates have increased, therapies have become more expensive.

From 1986 to 1996, policies were put in place that laid the foundations for 2026; from 1996 to 2006, new transformative treatments entered the market, upheaving pricing standards; from 2006 to 2016, financial toxicity and health reform became dominant considerations; and from 2016 to 2026, further advancements in targeted treatments and continued policy changes occurred. In each decade since the launch of the journal ONCOLOGY, cancer care has evolved, and with it the finances and costs associated with these improving treatments.

1982

Medicare’s Prospective Payment System

Under the Federal Tax Equity and Fiscal Responsibility Act of 1982, the Prospective Payment System was implemented to limit the rate of growth in hospital care expenditures, as well as to set the tone for cancer treatment payments for much of the 1980s and 1990s.³ Before its implementation, hospitals were reimbursed by the US government for the cost of patient care; however, the new system reimbursed hospitals at fixed rates based on each patient admission.

A diagnosis-related group (DRG) coding system was established to aid this process; patients were assigned a DRG based on diagnosis, treatment, age, and severity. However, this system did not account for the fact that patients with cancer require more resources than patients who are admitted to the hospital for a simple intravenous infusion, and DRG 410, the code used for chemotherapy, was the lowest weighted of all the DRGs. Thus, the reimbursement rate for patients who received chemotherapy in inpatient hospitals was lower for hospitals, becoming a “financial liability.”³ Many patients with cancer were filtered out of the hospital setting and into outpatient clinics or physician offices. One problem arising from patients leaving inpatient hospitals was the fragmentation of care.

1983

The Orphan Drug Act

The Orphan Drug Act (ODA) was passed by the US Congress in 1983, and it incentivized pharmaceutical companies to develop treatments for rare cancers through tax credits, FDA fee waivers, and market exclusivity.⁴ Although the act did not apply exclusively to rare cancers, 7 of the top 10 most designated and approved diseases were cancers. From 1983 to 2022, a total of 1122 approvals of orphan-designated products occurred, of which 882 were initial approvals falling under one orphan designation in 392 rare diseases.

Notably, 38% of all designations made under the ODA were in oncology. The top 5 diseases that benefited the most were malignant pancreatic neoplasm (n = 185 designations), acute myeloid leukemia (n = 183), multiple myeloma (n = 130), glioma (n = 129), and metastatic melanoma (n = 120). The FDA continues to assign orphan drug designations; as of the writing of this article, the most recent occurred on January 27, 2026, for CTD402 in relapsed/refractory T-cell acute lymphoblastic leukemia/lymphoblastic lymphoma.⁵

The ODA has also seen increased utilization since its passage, rising from 531 orphan drug designations and 80 initial orphan drug approvals from 1983 to 1992 to 649 and 151 approvals, respectively, from 1993 to 2002. These numbers have continued to increase exponentially, with 3633 orphan drug designations and 470 initial orphan drug approvals from 2013 to 2022.⁴

1983

The 340B Drug Pricing Program

Section 340B of the Public Health Service Act, or the 340B Drug Pricing Program, was enacted in 1992.^6. The program is intended to protect safety-net hospitals from rising drug prices, in turn shielding low-income communities, by enabling eligible hospitals to purchase outpatient drugs at a discount from pharmaceutical companies. In turn, the bill also provided financial incentives to hospital-based oncology centers so they could expand their reach and acquire independent oncology practices in different locations.

Findings from a study in 2022 demonstrated that patients with cancer who received treatment at hospitals included in the 340B program funded 10% of the 340B oncology drug margin, which was the difference between reimbursement and the discounted 340B price offered to hospitals.⁶ Patients also partially funded the remaining 90%, which came from Medicare or private plans. Notably, the higher the cost of the cancer drug, the more a patient paid in cost sharing, such as deductibles and coinsurance.

The 340B Drug Pricing Program has also indirectly contributed to the consolidation of cancer care, as independent cancer centers may struggle to remain independent, given the financial advantages that centers enrolled in the program receive. From 2012 to 2022, 546 340B hospitals added satellite clinics focused on cancer care.

2001

Emergence of Imatinib

Many of the new cancer drugs are notable, but a select few stand out for their contributions to oncology as a whole. Imatinib (Gleevec), when launched for the treatment of chronic myeloid leukemia (CML), marked the beginning of a new era of targeted therapy.

Unlike the standard intensive chemotherapy regimens, which often lasted from 6 to 12 months, imatinib birthed a new model because it was a daily oral therapy that some patients may have been required to take for decades. It changed CML from a fatal disease to a chronic disease, as most survival projections were exceeded.At its launch in 2001, imatinib cost $26,000 per year; by 2016, it cost $120,000 per year. Even adjusting for inflation, that $26,000 was equivalent to approximately $35,000 in 2026, which means the price had increased organically by approximately $85,000 per year.

In an editorial on the cost of CML treatments, a group of CML experts discussed the typical pattern of new cancer drugs being priced 10% to 20% higher than their predecessors.⁷

The experts also stated that, even though the initial yearly price of approximately $26,000 for imatinib was enough to recoup the costs of all research and development, the price of the drug continued to rise.

2003

Medicare Modernization Act of 2003

The Medicare Modernization Act (MMA) was signed in 2003 and created Medicare Part D, which provides prescription drug coverage.⁸ This ultimately altered the cancer drug reimbursement landscape. Specifically, Medicare Part D was a voluntary program that provided drug coverage through private insurance plans rather than the federal government.

Medicare reimbursements for covered outpatient prescription drugs fell from 95% of the average wholesale price to 85%.⁸ Later, in 2005, a new payment system was implemented that reimbursed fee-for-service (FFS) providers for drugs at the national average sales price from the quarter 6 months prior, plus an extra 6%.⁸ These changes reduced profit margins on cancer drugs and influenced prescribing patterns.

Researchers of one study, whose findings were published in the Journal of Clinical Oncology, evaluated this by examining whether patients treated in FFS settings before April 2005 were more likely than patients being treated in integrated health networks (IHNs) to receive chemotherapy regimens that included drugs affected by the MMA, shown by declining reimbursements. The researchers also examined whether the decline in the use of drugs with lowered reimbursement rates after the MMA was greater in FFS settings than in IHNs.

Notably, the odds of receiving an MMR-affected drug were lower in the post-MMA era (OR, 0.73).⁷ After the MMA was passed, patients treated in FFS settings were less likely to receive MMA-affected drugs (OR, 0.73). There were no differences in the use of MMA-affected drugs by patients in IHN settings before and after the MMA was passed (OR, 1.01).

2010

The Affordable Care Act

On March 23, 2010, the US Congress passed the Affordable Care Act (ACA) and signed it into law.⁹ To date, it is a bill renowned for the sweeping effects it has had on the medical landscape of America, having been expanded to cover tens of millions of adults. As such, it has also affected the landscape of cancer care. A paper published in The Cancer Journal argues that these effects take the form of expanded health insurance coverage, health care payment and delivery system reform, and support for clinical research.⁹

The ACA prohibited insurers from denying health care coverage due to preexisting health conditions, which made exchange-based insurance available to cancer survivors who previously would have been considered uninsurable. As of 2017, more than 100,000 patients, those with cancer and survivors, were insured through exchange-based plans.

Following the ACA’s passage, the Center for Medicare and Medicaid Innovation (CMMI) was founded to “test innovative payment and service models to reduce program expenditures…while preserving or enhancing the quality of care.”⁹ In July 2012, the CMMI awarded the Health Care Innovation Awards, which were intended to deliver better health, improve care, and reduce costs. Cancer was 1 of 7 conditions deemed a priority.

The Patient-Centered Outcomes Research Institute (PCORI) was established by the ACA and served as the primary vehicle for distributing ACA-related research funding. As of 2017, the PCORI had distributed $1.6 billion since 2013, with $133 million being directed to 50 cancer-related projects. Though the dollar amount is not as sizeable as that provided by the National Cancer Institute, PCORI’s deliberative processes have led to a distinct research portfolio.

2013

Financial Toxicity

In February 2013, S. Yousuf Zafar, MD; and Amy P. Abernathy, MD, PhD, published a paper in ONCOLOGY.¹⁰ In it, they coined the term financial toxicity, which has endured and is consistently used by researchers, oncologists, and other cancer care providers. Two key components of financial toxicity were identified as being the objective financial burden associated with care and the subjective financial distress of care.

Zafar and Abernathy reported that 13% of patients younger than 64 years had high objective financial burdens compared with 9.7% among those with other chronic conditions. At the time the authors wrote their article, the mean out-of-pocket expenses for cancer care exceeded $5000 per year.

As for the subjective financial distress, patients’ well-being and quality of care were both dependent factors. Nonadherence, for example, often stemmed from higher care costs, as higher co-payments for aromatase inhibitors were associated with higher nonadherence rates. Treatment-related decision-making was also a cause of distress, with 19% of patients believing that the cost of treating their cancer caused their family a great deal of distress.

Now, more than a decade later, many oncologists refer frequently to the strain and burden that “financial toxicity” can place on patients and families dealing with cancer.

2016

The Oncology Care Model

Established by the Centers for Medicare & Medicaid Services on July 1, 2016, the Oncology Care Model (OCM) was designed to reduce the costs of chemotherapy while ensuring high-quality care. According to a review, the OCM reduced episode payments by 2.1% while improving or maintaining similar treatment quality.¹¹ The reductions in episode payments were generally limited to high-risk cancer types, from which 67% of all OCM episodes stemmed. Reportedly, the OCM ultimately resulted in a $600-million loss for Medicare when accounting for performance-based payments to participating practices and Monthly Enhanced Oncology Services payments.

Throughout the OCM, costs for cancer treatment rose by approximately 25% in both OCM and comparison episodes; these increases were primarily due to higher costs of chemotherapies and immunotherapies. When considering health equity, patients who were Black, Hispanic, had dual eligibility for Medicare and Medicaid, or lived in high-disadvantaged neighborhoods had higher adherence to oral treatments; however, no improved care quality was observed.

2017

Emergence of CAR T-Cell Therapy

In 2017, chimeric antigen receptor (CAR) T-cell therapies, such as tisagenlecleucel (tisa-cel; Kymriah) and axicabtagene ciloleucel (axi-cel; Yescarta), emerged as treatments for adults and young children with relapsed/refractory B-cell acute lymphoblastic leukemia and relapsed/refractory large B-cell lymphoma, respectively. As 1-time infusions, they offered patients many benefits; however, they were known to be expensive. The average sales prices of CAR T-cell therapies exceeded $450,000.¹²

Since these approvals, more CAR T-cell therapies have been approved across hematologic malignancies, many of which are top-line treatments. Reportedly, the 1-time infusion model of CAR T-cell therapy fundamentally altered hospital reimbursement dynamics, as the up-front acquisition cost of the treatment far exceeded traditional chemotherapy episode payments.¹² In response, the Centers for Medicare & Medicaid Services created MS-DRG 018, which was designed to partially account for the extraordinary resource utilization associated with CAR T-cell administration.

2022

Inflation Reduction Act

The Inflation Reduction Act was implemented to mandate federal price negotiations for oncology drugs with the highest expenditures. It also capped Medicare Part D out-of-pocket costs at $2000 annually.¹³ This was a notable decrease from the previous costs borne by patients.

Beyond patient cost sharing, the act represented one of the most consequential federal interventions into oncology drug pricing in US history. For the first time, Medicare was authorized to directly negotiate prices for select high-expenditure drugs, several of which were cancer therapies or supportive oncology agents. This policy shift signaled a departure from decades of market-based pricing norms and introduced new uncertainty for manufacturers regarding long-term revenue projections.

As for the $2000 annual cap on Medicare Part D out-of-pocket spending, it represented a substantial reduction in financial exposure for patients requiring long-term oral anticancer therapies. For many patients with metastatic disease, this provision mitigated catastrophic drug spending and directly addressed one of the most visible drivers of financial toxicity in modern oncology care.

Conclusion

The efficacy and tolerability of cancer treatment have greatly improved in the past 40 years. From traditional chemotherapy in the 1980s to CAR T in 2026, the difference between survival rates is vast, as is the patient experience. An unfortunate effect of that is the inflation of costs and finances associated with cancer care.

Though the few events detailed in the ONCOLOGY article were prominent and have left a lasting impact on oncology, it is essential to recognize that there are patients behind these policy changes, financial aid systems, and drug approvals. Even with the aid of insurance, cancer is a crippling disease to be diagnosed with, both for its harmful physical and mental effects and for the drain it places on many patients’ financial resources.

From Medicare’s Prospective Payment System in the 1980s to the Inflation Reduction Act in the 2020s, controls and limits have been enacted to help patients address financial challenges stemming from cancer treatment. However, costs remain high, and although researchers, clinicians, and policy makers are not going to stop pushing to make care more effective and affordable, obstacles remain on the path.

References

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8. Hornbrook MC, Malin J, Weeks JC, Makgoeng SB, Keating NL, Potosky AL. Did changes in drug reimbursement after the Medicare modernization act affect chemotherapy prescribing? J Clin Oncol. 2014;32(36):4042-4049. doi:10.1200/JCO.2013.52.6780
9. Brooks GA, Hoverman JR, Colla CH. The Affordable Care Act and cancer care delivery. Cancer J. 2017;23(3):163-167. doi:10.1097/PPO.0000000000000259
10. Zafar SY, Abernethy AP. Financial toxicity, part I: a new name for a growing problem. Oncology (Williston Park). 2013;27(2):80-81, 149.
11. Trombley M, McClellan S, Chami N, et al. Evaluation of the Oncology Care Model. Abt Global; 2024. Accessed February 4, 2026. https://shorturl.at/tO0V2
12. New CAR-T policies affect access, reimbursement. Avalere Health. September 9, 2025. Accessed February 9, 2026. https://shorturl.at/lyTtl
13. Inflation Reduction Act. Association of Cancer Care Centers. Accessed February 10, 2026. https://tinyurl.com/rvwx2cv4