Cancer drugs and MediShield Life: In search of long-term sustainability

THE MINISTRY of Health's recent announcement of the creation of a "positive'' list of cancer drugs and the restriction of MediShield Life coverage - and eventually also Integrated Shield (IP) plans - to this list will surely evoke mixed emotions.

Cancer today remains a dreaded disease and with reason. While early detection helps to mitigate the disease's worst outcomes, it remains largely impervious to a cure. In Singapore, cancer is the top cause of death, and according to the Singapore Cancer Society one in four people may develop cancer in his or her lifetime.

Last week, the MOH said that in an effort to rein in runaway claims, it has created a list of clinically proven and cost-effective outpatient cancer drugs. From September next year, only drugs on this list will be eligible for claims under MediShield Life. It will also set more granular claim limits of between S$200 and S$9,600 "to be better aligned to the different costs of different cancer drug treatments". Currently the limit on cancer drug claims under MediShield Life is set at up to S$3,000 a month.

IPs are given until April 2023 to comply. For now riders are left unaffected. Insurers at the moment are studying the changes, but it seems fair to expect that for the sake of consistency, riders would fall in line with the base plan. But more on that in a while.

For background, the incidence of cancer has been rising in Singapore, alongside claims. On a national level, spending on cancer drugs has been growing at a compound annual growth rate of 20 per cent compared to 6 per cent for non-cancer drugs. In 2019, cancer drugs accounted for a quarter of total drug spending at S$375 million. If left unchecked this is expected to hit S$2.7 billion by 2030.

The number of MediShield Life claimants for outpatient cancer drug treatments has risen by 29 per cent between 2017 and 2020 to around 29,100. Payouts for claims have grown by more than 50 per cent in the same period to around S$168 million in 2020. The changes are based on recommendations by the MediShield Life Council, which the Government has accepted.

Major impacts

Here are some perspectives on the major impacts:

Precedents for pre-selection of drugs by governments: In recommending a "positive" list of cost-effective and clinically proven drugs, the Council looked to advanced healthcare systems in countries such as the UK, Australia and South Korea. Under the national schemes of these countries, funding is extended only to drugs which meet standards of safety, quality and efficacy as set by the regulatory authority.

In Singapore, clinically proven drugs meet the Health Science Authority's standards of safety, quality and efficacy. On seeking cost-effective drugs, the Council said this does not mean that all low-cost drugs are cost-effective and all high-cost drugs are not. "A low-cost drug that does not provide much more health benefit than the existing standard of care may not be cost-effective, while a high-cost drug that significantly improves the quality of life for patients may be cost-effective. Based on the evidence, MediShield Life should be prepared to pay more for the cost-effective high-cost drug, given the health benefits."

The Agency for Care Effectiveness (ACE) will assess cancer drugs for inclusion in the "positive'' list.

Finally, negotiations on drug prices: This must be one of the most positive developments in the quest for the long-term sustainability of MediShield Life, with ripple effects on IPs. This move is long overdue. Commonly used cancer drugs in Singapore cost up to twice as much as in countries like Taiwan, South Korea and Australia. The current 'blunt' limit of up to S$3,000 a month for all outpatient drug treatments and related services has had the unintended effect of raising cancer drug prices to maximise claims. The Council said that while the limit was sufficient to cover most bills when MediShield Life was launched in 2015, it "does not incentivise drug manufacturers to offer better prices or encourage the use of clinically proven and cost-effective treatments, as MediShield Life pays up to the claim limit for all cancer drugs, regardless of health benefit or price".

Bearing fruit

Over the past few months, negotiations have borne fruit: the average price reduction is around 30 per cent, and over 60 per cent for some cancer drugs.

Joanne Yoong, senior economist and director, Center for Economic and Social Research, University of Southern California, says drug price negotiation reflects a country's market structure - whether, for instance, the government plays a big role in the healthcare system.

"What makes a negotiation more likely is whether the market in the country for the drug is significant. This is a function of people's income and/or willingness to pay, disease pattern and total size. For some drugs, pharmaceutical companies do price discriminate between high- and low-income countries, so pricing in lower-income countries is lower. This is a widely-accepted humanitarian practice. Singapore is small and high income, and so it is not well-placed inherently in negotiation.''

Jeremy Lim of the NUS Saw Swee Hock School of Public Health says the practice of negotiations may extend more widely to other drugs. "Securing as much value as possible is the rightful role of payers including the government; hence robust price negotiations are not only acceptable but strongly desired... Ensuring expensive medicines and procedures are used only as appropriate and clinically indicated is necessary for not just cost control but good clinical governance. Singapore should start with oncology but the same principles can apply to other specialties. MOH/ payers should examine the data and do likewise with other (drugs) which impose a large financial burden on MediShield Life."

• IP impact: IP base plans are to fall in line and restrict coverage of outpatient cancer drugs to the positive list in April 2023, and to set claim limits. This is a major change as currently the drugs are covered on "as charged'' basis subject to the annual limit. As with any change in benefit terms, patients may feel the rug has been pulled from under them.

The big question is the co-payment riders, where policyholders co-pay 5 per cent of the bill. Under current terms, the balance of 95 per cent of the bill will be covered, which would allow cancer drugs not on the list. Insurers' cancer claims experience is understood to be in line with the MediShield Life's experience. The Life Insurance Association has said IP insurers will study the changes and bring their plans "into alignment" with MOH requirements.

Dr Lim says the ripple effect on IPs and riders is by design. Allowing a "massive difference" in coverage for a major illness like cancer would lead to an "equity imbalance" that may be hard for the public to tolerate.

"Given that 70 per cent of the population have IPs, if there is no reform for IP and riders, the overall policy objective of checking and reining in costs will not be achieved. Hence we should expect that the clinical treatments offered - whether paid for through MediShield Life, IPs or riders - will get more and more similar. The terms of MediShield Life and IPs are very clear - subject to annual review, and it is well within the legal rights of insurers to amend the premiums and terms as necessary from time to time. Premiums should come down if there are fewer or smaller payouts given these changes."

• Silver linings: More granular claim limits enable more targeted coverage and higher claims, depending on the drug. This should provide a degree of comfort to cancer sufferers.

The MOH has said that about 90 per cent of existing cancer drug treatments used in the public sector will be included in the positive list. But inevitably there will be cases that are excluded.

The Council said oncologists can request the ACE to evaluate treatments for potential inclusion on the list "if there is sufficient clinical evidence to support their use''.

An example is rare cancers where the treatment is approved by a reputable overseas regulatory authority but not submitted for HSA approval due to Singapore's small patient pool.