The Classic Cancer Model

Before immunotherapy, there was chemotherapy and radiation. These treatments built modern oncology — not just medically, but economically.

Understanding how the classic model works explains why oncology practices operate the way they do, why certain treatments get recommended over others, and why the system was already optimized for revenue before immunotherapy made it even more lucrative.

The immunotherapy model didn't invent profit-driven oncology. It inherited it.

The Economics of Chemotherapy

Chemotherapy drugs are where oncology practices make their money. Not from consultations. Not from your doctor's expertise. From the drugs themselves.

How it works:

Oncologists buy chemotherapy drugs at one price and bill insurance at a higher price. This is called "buy and bill." The spread between what they pay and what they collect is profit.

The math:

For Medicare patients, reimbursement is typically ASP (Average Sales Price) + 6%. That means:

The more expensive the drug, the more profit per infusion. This creates an incentive to prescribe expensive drugs over cheaper alternatives — even when outcomes are similar.

The Shift to Practice-Based Infusion

In the 1980s and 1990s, most chemotherapy was administered in hospitals. Then practices discovered they could do it themselves — and keep the margin.

The result:

By 2010, roughly 65% of chemotherapy was administered in physician offices rather than hospitals. Oncology became one of the most profitable medical specialties — not because of physician fees, but because of drug profits.

The 340B Complication

Then hospitals found a way to compete: the 340B Drug Pricing Program.

What it is:

340B requires drug manufacturers to provide outpatient drugs at significantly reduced prices to eligible healthcare organizations — typically hospitals serving low-income populations.

The arbitrage:

Hospitals buy drugs at 340B prices (sometimes 25-50% below ASP) but bill commercial insurers at full rates. The spread is enormous.

The acquisition strategy:

This is why hospitals have aggressively acquired oncology practices over the past 15 years. When a hospital buys a private oncology practice:

• • The practice gains 340B pricing
• • The hospital adds facility fees to every visit
• • Drug margins increase dramatically
• • The same care costs the system more

Why Expensive Drugs Get Prescribed

The buy-and-bill model creates a direct financial incentive to prescribe expensive drugs.

The evidence:

A landmark study found that when Medicare cut chemotherapy reimbursement from ASP + 6% to ASP + 4.3% for certain drugs, oncologists shifted prescribing toward drugs with higher absolute margins.

This wasn't about patient outcomes. It was about protecting revenue.

The Duration Question in Chemo

Unlike immunotherapy, chemotherapy has natural limits. The toxicity creates a stopping point.

Standard protocols:

Most chemotherapy regimens are defined in cycles:

• • 4-6 cycles for adjuvant chemotherapy (after surgery)
• • 6-8 cycles for many first-line regimens
• • Treatment until progression for metastatic disease

Why it ends:

Cumulative toxicity forces stopping:

• • Neuropathy (nerve damage)
• • Cardiotoxicity (heart damage)
• • Nephrotoxicity (kidney damage)
• • Bone marrow suppression
• • Cumulative fatigue

The patient's body calls a halt — even if the oncologist might continue.

Radiation: The Fixed-Cost Model

Radiation oncology operates differently from chemotherapy. It's a fixed-cost business.

The economics:

Radiation equipment costs $3-5 million or more. The mortgage on that equipment must be paid regardless of how many patients are treated. This creates an incentive to maximize utilization.

The patterns:

Studies have found:

• • Physicians who own radiation equipment recommend radiation more often
• • More treatment fractions (sessions) get prescribed than evidence supports
• • Hypofractionation (fewer sessions, higher doses per session) is underused despite equivalent outcomes — because more sessions mean more billing

The Quality Gap

More expensive treatment doesn't mean better outcomes.

What the data shows:

A 2014 study of Medicare patients with metastatic cancer found no association between chemotherapy spending and survival. Patients in regions with high chemotherapy spending didn't live longer — they just spent more.

The variation problem:

Treatment patterns vary dramatically by geography, by practice, by individual oncologist — far more than disease characteristics would explain. This suggests that factors other than evidence are driving decisions.

What Changed With Immunotherapy

The classic cancer model — buy-and-bill, infusion centers, expensive drugs over cheap ones — was already in place when immunotherapy arrived.

Immunotherapy just made it more lucrative:

The same incentive structures that shaped chemotherapy prescribing now operate at much higher dollar amounts — with even less pressure to stop.