What is Buy and Bill?
Amanda DeMarzo
Mar 22, 2021
6 minutes read
Buy-and-bill is a process for physician offices to acquire medications that providers can administer in the office. The “buy” part refers to providers who are responsible for ordering and purchasing the drug. The “bill” part refers to providers billing directly to third-party payers for reimbursement.
In addition, through this system, the provider also takes on similar functions to a pharmacy. They manage drug inventory and collects copayments or coinsurance from the patient. This is in addition to prescribing therapy and administering medications.
Many buy-and-bill medications are costly, require administration by a healthcare professional, and may have certain restrictions as per the manufacturer. Frequently, buy and bill specialty medications have an administration fee. Typically, this is for injections, infusions, and implantations. This administration fee is a separate charge for the medication itself.
Oncology medications compose the largest share of buy and bill spending. But other specialties such as rheumatology, neurology, and dermatology also have many products falling into the buy and bill category.
Role of Stakeholders
Payers
- Set up coverage rules (eg, prior authorization , step therapy, quantity limit) and build benefit structure
- Discuss payments for medications and other services with health care provider
- Handle submitted claims and reimburse provider for services billed
Distributor
- Negotiate cost of drug with physician office
- Complete and ship medications
- Charge physician office for drug
- Send invoices to office about net payment term
Pharmacy Benefits Managers (PBMs)
- May contract with or have their own specialty pharmacies
- Can acquire smaller specialty pharmacies to have greater market power
- Negotiates drug rebates with pharmaceutical manufacturers
Specialty Pharmacy
- Can supply medication to providers through white bagging or brown bagging
- Adjudicates claims and collects copayment or coinsurance
- Minimizes some risk for providers
Provider
- Order drug from distributor
- Prescribe and administer product
- Provide clinical supporting notes to submit prior authorization claims
- Submit claim to payer for drug and administration services (when applicable)
- Counsel patient
- Collect co-insurances (when applicable)
Benefits of Buy and Bill
- Profitable
- Stock on hand
- Streamline function
- Save time
Providers can see great benefits of buy and bill in their practice. There are opportunities for increased profitability as well as more hands-on approach to dealing with payers.
Providers can make a profit by marking up the drug after purchasing from a wholesaler or distributor and administering it to patients when necessary. Having stock on hand allows for limited delays to administer medication. Patients can initiate therapy at their first visit. Additionally, physicians can make any necessary dosing adjustments without delays and interruptions from administrative duties.
Buy and Bill Challenges
- Increased financial risk
- Must manage inventory
- Requires skilled prior authorization specialists
- High competition
Although the promise of profitability is appealing, there are some risks and challenges that should be considered. Implementing buy and bill does involve risk for the provider because they will be purchasing the drugs and processing claims in the office. Therefore, the provider must stock, manage, and bill these medications properly to be paid in an timely manner.
In addition to the high risk, there is increasing competition. Specialty drugs are highly profitable and many players in the healthcare system are looking to get involved. Many independent or physician-owned practices must compete for patients against hospitals, hospital-owned clinics, and other provider types.
Recently, there is a shift from oral medications to specialty drugs and value-based care. This can lead to loss of revenue for prescribers. Consequently the drug cost is much higher for specialty drugs. Administrative fees are more prevalent. Bundled payments limit the markup with value-based care.
Buy and bill also comes with a higher need for inventory management, minimizing waste and liability for administration. This is also burdensome.
Health systems with a small specialty population may face bigger issues in buy and bill. Much of the organization’s finances coincide with inventory for patients, therefore human behaviors can impact the bottom line. In cases where patients may discontinue the medication, do not show up for appointments, or are changed to an alternative drug, the health system may lose hundreds and thousands of dollars.
