Overspending driven by oversized single dose vials of cancer drugs

Drug Pricing Lab
May 1, 2016

Waste in Cancer Drugs Costs $3 Billion a Year, a Study Says

Frequently Asked Questions

1.What is the main finding of the BMJ research analysis?
Package size choices by pharmaceutical companies for expensive cancer drugs result in enormous waste in the U.S., but will produce excess revenue for the drug companies of $1.8 billion this year.

2.How does that happen? How is there so much waste?
The extra size and cost is the result of U.S. drug companies choosing package sizes for expensive cancer drugs that do not match the amount of their drug patients need. The left-over drug–most of which is thrown away–is billed at the same rate as the drug given to patients, producing multi-billion dollar waste.

3.Is the $1.8 billion going to the drug companies for wasted product the full extent of it? Are there other costs associated with the waste?
When you add in mark-ups on the waste which can be applied by doctors and hospitals administering the drugs, it adds around an additional $1 billion, so the total is around $2.8 billion.

4.Do the drug companies make packaging decisions with knowledge of the waste that will be produced, and the extra revenue they can realize by causing waste?
Drug companies are likely aware of the impact of their packaging decisions on waste. They are intimately familiar with the profile of the patients being treated with their drugs. They have detailed knowledge of the average dose based on clinical trials and requirements for FDA approvals.

5.Can’t the leftover medicine from one patient be given to another patient?
Yes and many providers try to do that in a safe and effective way through treatment scheduling practices. Between six and 36 percent of vials appear to be shared based on the data. But a vial must be shared within six hours, there are other safety standards, and there are not always patients to use the leftover on a timely and safe basis, which is why most of the leftover is thrown away.

6.What can be done to reduce the waste?
Drug companies could sell package sizes that can be combined to produce the least waste. It is that simple. We estimate that only one additional package size would be required for eighteen of the 20 drugs we studied to save around $2B in 2016.

7.What if drug companies won’t voluntarily offer additional package sizes?
Government and private payers should compensate drug companies only for the amount of drug actually given to the patient in the most effective minimum dose, and then drug companies could take in return (physically or virtually) and refund the costs of the leftover drug.

8.How is wasted drug reimbursed?
Doctors and hospitals (i.e. “providers”) purchase single-dose vials of infused drugs and then bill the patient and their insurance for the full contents of the vial. In this way, pharmaceutical companies are reimbursed for the cost of used drug as well as leftover drug.

Infused drugs are reimbursed by unit weight, so that a vial with 50mg of drug costs twice as much as one with 25 mg of drug.

9.How much do doctors and hospitals profit from wasted drug?
Although it is difficult to have a precise number for this, across all the different insurance systems and discounts, a conservative estimate is that mark-ups on a blended basis are around 60 percent. This means that on top of the $1.8B in excess drug company revenue in 2016 from leftover drug doctors and hospitals will tack-on another $1B in mark-up meaning the cost to the healthcare system will be on the order of $2.5 to $3B in 2016.

10.How do we know that part B drugs are reimbursed for their whole vial, not just the portion administered to patients?
Extensive research was conducted to find various guidelines on reimbursement of partial vials, the results of which are displayed in the table below. All listed payers state they reimburse for all of the drug contained in the vial, regardless of how much medication was administered to the patient and how much was discarded.

Payer Payer Type Policy Source
Fee for Service Medicare Federal Government …the program provides payment for the amount of drug or biological discarded as well as the dose administered View
Washington State Medicaid State government with federal government match For single dose vials, bill the total amount of the drug contained in the vial(s), including partial vials. View
Alabama state Medicaid State government with federal government match If a physician must discard the remainder of a single dose vial (SDV) … the Agency will cover the amount of the drug discarded View
Tufts Health Plan Commercial Payer Tufts Health Plan will reimburse for the amount of drug or biological discarded as well as the dose administered View
Harvard Pilgrim HealthCare Commercial Payer Harvard Pilgrim Reimburses: Single use vial medication – discarded drugs View
Blue Cross Blue Shield Oklahoma Commercial Payer You can bill for the entire vial size of the single-use vial, even though the actual dose administered is less than the entire package size. View
Blue Cross Blue Shield North Carolina Commercial Payer BCBSNC will pay for both the administered and discarded drug and biological. View
Blue Cross Blue Shield Rhode Island Commercial Payer BCSRI provides payment for the amount of drug or biological discarded, as well as the dose administered View

11.What about vial sharing?
Vial sharing refers to the practice of using the drug that is leftover either for the same patient at a later time or a different patient. The practice has strict USP standards and appears to be rare. In our analysis we looked at Medicare claims for incidents where the billed for amount did not add up to the total drug available in marketed vials. Between 6% and 36% of doses appear to include some vial-sharing, the amount varies by drug. Hospital outpatient departments are more likely to vial-share than physician offices. In our analysis we adjusted for vial sharing frequency.

12.How does the amount of waste change with the sensitivity analyses, assuming 1) 10% lower body weight of cancer patients and 2) the highest approved dose?
*has an approved higher dose 2016E Waste, in $m (using 10% reduced body weight) 2016E Waste , in $m (using highest indicated dose)

Drug10% lower body weight of cancer patientsthe highest approved dose
Abraxane $ 82.59 $ 76.72
Adcetris $ 31.57 $ 29.15
Alimta $ 60.89 $ 54.64
Avastin* $ 315.82 $ 100.55
Cyramza * $ 31.60 $ 22.92
Erbitux*$ 31.86 $ 29.18
Erwinaze $ 15.34 $ 14.13
Halaven $ 26.46 $ 21.85
Jevtana $ 34.28 $ 26.89
Kadcyla $ 27.43 $ 23.66
Keytruda $ 119.38 $ 197.94
Kyprolis*† $ 273.43 $ 134.58
Neupogen* $ 120.45 $ 46.56
Onivyde $ 7.88 $ 9.43
Opdivo $ 77.31 $ 68.93
Rituxan* $ 282.52 $ 195.45
TOTAL $ 2,003.79 $ 1,432.32
Treanda* $ 9.12 $ 5.81
Vectibix $ 20.71 $ 18.72
Velcade $ 383.71 $ 308.74
Yervoy$ 51.43 $ 46.47

In January 2016, the FDA approved a 58mg per meter-squared dose of Kyprolis that was not considered in our analysis.

13.How do available vial sizes compare between Europe and the United States?
Extensive research was conducted to find various guidelines on reimbursement of partial vials, the results of which are displayed in the table below. All listed payers state they reimburse for all of the drug contained in the vial, regardless of how much medication was administered to the patient and how much was discarded.

Payer Payer Type Policy Source
Fee for Service Medicare Federal Government …the program provides payment for the amount of drug or biological discarded as well as the dose administered View
Washington State Medicaid State government with federal government match For single dose vials, bill the total amount of the drug contained in the vial(s), including partial vials. View
Alabama state Medicaid State government with federal government match If a physician must discard the remainder of a single dose vial (SDV) … the Agency will cover the amount of the drug discarded View
Tufts Health Plan Commercial Payer Tufts Health Plan will reimburse for the amount of drug or biological discarded as well as the dose administered View
Harvard Pilgrim HealthCare Commercial Payer Harvard Pilgrim Reimburses: Single use vial medication – discarded drugs View
Blue Cross Blue Shield Oklahoma Commercial Payer You can bill for the entire vial size of the single-use vial, even though the actual dose administered is less than the entire package size. View
Blue Cross Blue Shield North Carolina Commercial Payer BCBSNC will pay for both the administered and discarded drug and biological. View
Blue Cross Blue Shield Rhode Island Commercial Payer BCSRI provides payment for the amount of drug or biological discarded, as well as the dose administered View

14.Would it be easy to come up with different vial sizes that reduce waste?
Yes, we believe it would be possible to reduce waste substantially if companies marketed additional vials that contained smaller amounts of drug. In the paper we show that adding just one additional vial size for 18 of the 20 drugs in our analysis would reduce the amount of waste by ~75% (see Table 3 in publication.), reducing 2016 spending by more than $2B.

15.In the paper, you discuss Merck’s move to dosing pembrolizumab in 100mg vials instead of 50mg vials. What happened?
Yes, Merck announced their decision to replace the 50mg vials with 100mg vials. In addition, advertisements for Keytruda showed the replacement of the older vial size. The 50mg vial size was approved in Europe, according to the European Medicines Agency.

16.What was Merck’s reasoning behind the increase in vial size?
Merck has not publicly released an explanation regarding their decision to switch from 50mg vials to 100mg vials.

The 50mg product was available in lyophilized powder for reconstitution, while the 100mg product is available in solution form. They might argue that the solution is easier to use. Although this is to some extent true, we are unaware of a reason why they could not market a vial with 50mg of pembrolizumab in solution.

Moreover, many other chemotherapy agents and other infused drugs are available as powders, just as Merck was originally selling in the US and currently sells in Europe. This list includes several of Merck’s other pharmaceutical products.

Examples of chemotherapy agents that are currently available in powder form:

  • Ado-trastuzumab emtansine (Kadcyla)
  • Albumin bound paclitaxel (Abraxane)
  • Azacitidine (Vidaza)
  • Asparaginase (Elspar)
  • Bleomycin
  • Bortezomib (Velcade)
  • Cabazitaxel (Jevtana)
  • Carboplatin
  • Carfilzomib (Kyprolis)
  • Carmustine
  • Cyclophosphaime
  • Elotuzumab (Empliciti)
  • Gemcitabine
  • Ifosfamide
  • Ixabepilone (Ixempra)
  • Leucovorin
  • Melphalan
  • Pentostatin
  • Temsirolimus
  • Thiotepa
  • Liposomal vincristine
  • Aldesleukin
  • Blinatumomab
  • Siltuximab
  • Trastuzumab (Herceptin)
  • Interferon alpha-2b (intron A)
  • Peginterferon alfa-2b (sylatron)

Examples of Merck products available in powder form:

  • Caspofungin acetate (Cancidas)
  • Daptomycin (Cubicin)
  • Fosaprepitant dimeglumine (Emend)
  • Interferon alfa-2b (Intron A)
  • HCG (Pregnyl)
  • Imipenem/cilastatin (Primaxin)
  • Peginterferon alfa-2b (Sylatron)
  • Temozolomide (Temodar)
  • Ceftozolane/Tazobactam (Zerbaxa)

17.What are the implications of Merck’s decision to move to a 200mg fixed dose of Keytruda?
We are aware of Merck’s intention to move Keytruda to 200-mg fixed dosing, which they announced in their Q3 2014 Earnings call. Using Defined Health projections for Keytruda sales from 2016-2020, we calculated the increase in revenue from moving to 200mg flat dosing vs. no wasted drug (see table below.)

YearKeytruda Revenue: No Waste ($M) Keytruda Revenue: 200mg Fixed Dose ($M)
2016$762 $943
2017$1,335 $1,652
2018 $1,991 $2,465
2019 $2,346 $2,904
2020 $2,687 $3,326
Sum (2016-2020) $9121 $11,291
Additional Revenue due to Flat Dose -$2,170

While this move to fixed dosing at 200mg for all patients appears to eliminate waste, all that is actually occurring is that drug that would have been discarded will now instead be infused into patients amounting in most cases to doses substantially higher than the FDA has approved. We estimate that fixed dosing will lead to 85% to 90% of patients getting doses higher than those shown to be effective.

18.Could a fixed dose of Keytruda be better for patients than a body-sized dose?
We have not heard an argument that safety and/or efficacy is superior with a 200mg fixed dose. In fact, comparative studies of different doses of Keytruda do not show significant differences in outcomes.

19.Could a fixed dose of Keytruda be better for patients than a body-sized dose? Compare the solution you propose of adding a vial volume (in the case of Keytruda, a 10mg vial) to Merck’s decision to fixed dosing at 200mg.
To demonstrate how these decisions, as well as the previous 50mg dose and current 100mg dose, impact treatment cost and waste, please see the diagram below, which shows cost and waste for the average patient:

20.What would it take for a pharmaceutical company to add an additional vial size of smaller drug volume for a sterile drug?
In order to decrease the vial size and volume of a sterile drug, the pharmaceutical company would have to conduct experiments to confirm that the change does not affect the safety (including stability) of the drug and that all aspects of the drug and its manufacturing conform to the specifications in the approved marketing application. The results of such experiments would then have to be submitted to the FDA for review and, potentially, approval before drug product manufactured with the change may be distributed. In some instances, the change may be implemented if FDA does not object within 30 days of submission; in others, FDA may require about four months to review the submission and approve (or reject) the change.

21.Can companies afford to sell vials with the volume sizes you propose?
We do not know how much it costs to make and package these drugs, but the average dollar value in the vials we propose is $462, and the lower limit is $77. Below are some other less expensive cancer drugs available in powder and liquid form, and how much drug (in dollars) is contained in their smallest available vials. We do not know about the economics of the companies that produce these either, but it seems safe to assume the companies can afford to manufacture and distribute them and still make a profit, where the dollar amount of drug in each vial is a small fraction of the amounts we propose.

Generic Name Smallest Powder Vial Price Smallest Liquid Vial Price
Paclitaxel $4.50
Methotrexate sodium $2.31
Oxaliplatin$38.70 $38.70
Cytarabine HCl $0.88
Cisplatin $7.76
Doxorubicin HCl $3.10 $3.10
Dacarbazine $7.56

22.Are there examples of non-cancer drugs that exhibit similar waste due to vial packaging?
Yes, this problem is not limited to oncology. The asthma drug omalizumab (Xolair, Genentech) has approved doses of 150mg, 225mg, 300mg and 375mg, doses that could be reached using 75mg vials. But the company only sells the drug in 150mg vials even though the FDA has approved a vial of 75mg. Infliximab (Remicade, Janssen), the fifth highest drug by spending in Medicare’s Part B benefit in 2010, is only available in a single 100mg single-use vial.