Lee N. Newcomer, MD, MHA
EQRx is an economics professor’s dream company. It is the perfect example of the principle of substitution. EQRx provides quality, lower-cost drugs in high-cost categories that may substitute for the higher-priced options. Although the profit margin for each drug unit is smaller than the competition, the company intends to capture a large share of the market. Multiplying small margins by thousands of patients produces meaningful profits. The economics work for the manufacturer, and those lower-cost drugs benefit patients.
The concept isn’t a win for everyone.
Physicians and hospital systems realize a significant portion of their income from the markup of cancer drug treatments. The EQRx pricing strategy will produce less income for providers if the markup percentages remain constant. It’s a simple equation—multiplying a smaller number by the same percentage yields fewer dollars than starting with a larger number. That is a significant barrier to adoption.
Payers can provide incentives to overcome the barrier. Compensation programs that share total savings with oncologists will encourage the use of lower-cost alternatives like EQRx products. Payers may need to adjust their compensation for fee-for-service oncologists to reward cost-efficient prescribing. Payers have successfully used programs that add the profit lost from not using the leading brand drug to the average sales price of the substitute. It is unlikely these programs can completely compensate for the losses incurred by switching to the lower-cost EQRx alternative medications. If the nation is serious about access for patients with cancer, every stakeholder will have to take a reduction, and oncologists shouldn’t be an exception.
Payers will realize significant savings—a 50% cost reduction in key drug categories is a windfall. That money should be utilized to reduce or eliminate deductibles and co-insurance for cancer therapies and to reduce insurance premiums. Both changes are possible with savings of this magnitude.
However, patients will continue to incur significant costs because the costs of surgery, radiation therapy, and hospitalization won’t change. There are also dozens of costs that aren’t covered by medical insurance, such as child care, transportation to cancer centers, lost spousal income, and caretakers. The underinsured may still face deductibles or co-insurance.
A Key First Step
Too many Americans are poor; we live in a society that has its own third world. The National Bureau of Economic Research reported that 25% of Americans cannot come up with $1,000 with a 30-day notice. Another 19% would have to sell possessions, like a car, to do so.1 An EQRx drug may save $50,000 a year for treatment, but these Americans cannot afford to pay $50 without compromising a basic need. Don’t expect medical bankruptcies to decrease with lower drug costs alone. It’s a multifactorial problem. These challenges are daunting.
The EQRx philosophy and business is an important key first step to meeting the challenges. The other stakeholders in cancer therapy now can do their part in expanding access for patients.
Dr. Newcomer is Principal of Lee N. Newcomer Consulting in Minneapolis.
DISCLOSURE: Dr. Newcomer has served as a consultant for Apricity, Aqtual, Cancer Expert Now, GNS Healthcare, Mirvie, OncoHealth, Siris, and UnitedHealth Group; and has served on the board of directors for Coherus Bioscience, Myriad Genetics, and Cellworks.
1. Lusardi A, Schneider DJ, Tufano P: Financially fragile households: Evidence and implications. Available at https://www.nber.org/system/files/working_papers/w17072/w17072.pdf. Accessed August 10, 2022.
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