Where have all the drug profits gone?

May 1, 2008

An oncologist called me recently and said, “I am mad as heck and I am not taking this anymore.” He is not making 6% on the chemotherapy agents he administers; he is making 2%.

An oncologist called me recently and said, “I am mad as heck and I am not taking this anymore.” He is not making 6% on the chemotherapy agents he administers; he is making 2%. He believes the drug distributors are taking too much of a margin on the drugs.

Another issue that is of major concern: Why are the group purchasing organizations (GPOs) owned by the distributors? Is this not a conflict of interest? Note that when you switch, two white shirts show up at your door. One represents the distributor and the other represents the GPO.

How can one impose savings if the physician is paying for two salespersons, two distribution systems? It is apparent we need some transparency in the game of drug purchasing.

I believe it is time for oncologists to demand some transparency and demand a 6% margin on drug purchases. I would think an investigation is needed to identify what margin of profit the distributor takes and what margin of profit the GPO takes. If they are one and the same company, then we have a double dip. Instead of simply giving you the best price, the GPO offers many gimmicks and trickery into thinking you’re getting the best price.

It is time to eliminate our current drug pricing methodology. Since 2001, our drug distribution system has convinced oncologists that it is okay to accept a 2% margin, or in many cases a 2% negative margin, on the drugs they purchase.

Here’s another issue: Contrary to what should be happening in the industry, drug representatives are still encouraging physicians to use their drug more frequently.

And the current drug rebate programs being offered to oncologists (if your volume is high enough) are an abomination that promotes the mentality of “use our drugs and treat like crazy so you get a rebate.” Forget patient care and the best drug for the patient.

Not only are many oncologists tied into the drug distributors and GPOs for hundreds of thousands of dollars, they are also trapped and are now paying excessive interest for the 75-day hold.

As we consider all this, it is important to realize that the perception in Congress is that oncologists are still making excess profits on drugs. Where are the needed dollars to provide the excellent care patients demand? Oncologists aren’t seeing them.