By Peter A. McCullough, MD, MPH
Please enjoy this brief update with Shemane Nugent for National Cancer Prevention Awareness Month. She was surprised to learn about some of the financial drivers for chemotherapy. Alter AI assisted in these insights.
💰 How U.S. Cancer Centers Profit from Administering Chemotherapy
Cancer treatment in the United States has evolved into a multibillion‑dollar industry where financial incentives deeply influence patient care. The cornerstone of this system is the “buy‑and‑bill” model, in which oncologists purchase chemotherapy drugs from manufacturers at a discount and then bill insurers or Medicare at a higher reimbursement rate. The margin—often 4–6% under Medicare Part B—directly profits the treating center. When applied to drugs that can cost tens of thousands of dollars per dose, this percentage translates into substantial revenue.
This arrangement creates a perverse financial incentive: physicians and cancer centers profit more from using costly, brand‑name chemotherapies than from older or less aggressive alternatives, even when clinical benefit is marginal. Studies published in Health Affairs and the New England Journal of Medicine have documented widespread overuse of high‑priced oncology drugs that yield limited survival advantage.
Federal rules such as the Medicare Modernization Act (2003) and Medicare Part B reimbursement formulas enable this system. The 2003 reform changed oncology reimbursement from “average wholesale price” to “average sales price + 6%”, which seemed modest but still ensured steady profit margins. For hospital‑based cancer centers, 340B drug‑discount program eligibility further multiplies revenue. Under 340B, hospitals can purchase drugs at up to a 50% discount while billing Medicare and private insurers the full rate, pocketing the difference.
Regulatory capture exacerbates the problem. The FDA and Centers for Medicare & Medicaid Services (CMS) rarely challenge these reimbursements, in part due to lobbying by the pharmaceutical and hospital industries. As a result, cancer care financing rewards volume and expense, not efficacy or patient well‑being — transforming treatment decisions into financial transactions rather than medical judgments.
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Peter A. McCullough, MD, MPH
President, McCullough Foundation
References
Bach PB. N Engl J Med. 2009;360(9):913–915.
Conti RM, Bach PB. Health Aff (Millwood). 2013;32(4):654‑661.
Medicare Modernization Act of 2003, Pub. L. No. 108–173.
U.S. Government Accountability Office. “Drug Discount Program: 340B.” GAO‑11‑836, 2011.
