Physicians can sell drugs out of their offices under a practice called “buy and bill.” The cost of these drugs, representing only a fraction of the pharmaceutical market, is generally reimbursed by Medicare Part B.
Drugs commonly covered by Part B include cancer agents, rheumatologic agents, ophthalmic agents, and biologics.
Various stakeholders have suggested changes to Medicare Part B to make “buy and bill” more competitive and tightly regulated. CMS has recently proposed adding biosimilars in billing codes to curb costs.
In broad terms, and although there is some overlap, physicians and pharmacists occupy separate tracks in the healthcare system related to drugs. Physicians typically prescribe drugs, and pharmacists distribute these drugs to patients.
There is, however, a unique corner of the healthcare machine in which physicians procure drugs, mark them up, and sell or administer them directly to patients.
This system is referred to as “buy and bill.”
Although relevant to only a segment of the pharmaceutical market, “buy and bill” can spell big bucks for various stakeholders. In recent years, it has become a hot topic among policy makers, drug manufacturers, physicians, and patient advocacy groups.
Medicare Part B
Part B, the medical component of Medicare, doles out payments to physicians for drugs they sell, consistent with the structure of Part B, which pays physicians and hospital clinics for all outpatient services.
In 2015, Part B drug expenditures for physician-administered drugs were $24.6 billion, much lower than the Part D, or “retail,” expenditures for drugs administered by Medicare, which amounted to $137.4 billion in 2015, according to a health policy brief published by Health Affairs.
By 2019, Part B expenditures for drugs had risen to $37 billion, spread over fewer than 600 drug products, as shown in an analysis performed by the Kaiser Family Foundation. Of those 600 drugs, the top 50 accounted for 80% of costs.
Part B usually covers cancer, ophthalmic, and rheumatology therapies, as well as biologics and biosimilars. Importantly, the logistics of Part B affect how manufacturers price drugs. This financial reality makes the issue highly bureaucratic, with medical specialty groups playing major roles as constituencies involved in any changes to Part B policy.
Issues with ‘buy and bill’
The current “buy and bill” model raises a number of concerns, according to the health policy brief published by Health Affairs. These include the following:
Patients must pay a 20% co-pay for Part B drugs.
Part B drug expenditures have outpaced the rest of Medicare costs for 2 decades.
A small number of very expensive drugs constitute most of Part B’s expenditures.
The reimbursement formula, mandated by Congress, is calculated as the average sales price of the drug plus a 6% handling fee. This encourages physicians to use more costly therapies, and it entices manufacturers to set higher prices for their drugs to attract physician prescribers.
The unique setup of Part B makes it ripe for change, according to Health Affairs. “Part B is also a rare case in which Medicare policy makers can address individual drug costs directly, since payment is tied to each specific prescription. In contrast, in the Medicare hospital benefit (Part A), drug payments are included in broader reimbursements for inpatient stays."
"Under the Part D retail benefit, Medicare pays insurance companies a fixed amount for all necessary drugs for covered beneficiaries; there is no direct payment for specific drugs. These factors make Part B fertile ground for testing approaches to control prescription drug spending.”
What can be done?
The Brookings Institution, a nonpartisan think tank, has proposed some ideas on how to improve the program of “buy and bill” and Part B’s role.
“We believe that reform of payment for drugs administered by physicians needs to include both competitive and regulatory elements,” Brookings stated. “This judgment reflects the fact that competition exists for multiple-source drugs included in the same billing code (such as a brand and generics) and can be enhanced for innovators with biosimilar competitors. For innovator medicines that have therapeutic alternatives (but not biosimilars), competition could also be enhanced.”
Note that these suggestions don’t apply to single-source innovator medicines, which lack alternatives or biosimilars, and therefore competition.
The Brookings Institution recommended specific tactics:
Having physicians refrain from ownership of drugs and instead being paid for storage and administration
Regulating pricing by drug manufacturers
Linking prices of agents to prices in other advanced countries, which would limit gaming of the Congressional Budget Office
What CMS has planned
The Centers for Medicare & Medicaid Services (CMS) has begun to address issues with Part B. As reported in a December 1, 2020, press release, they proposed assigning certain drug products that are “multiple-source,” or have similar labeling and uses, to the same billing codes.
“The proposed approach is consistent with the concept of paying similar amounts for similar services and with efforts to curb drug prices,” said the CMS. “The proposal also would encourage competition among products that are described by one billing code and share similar labeling,” they asserted.
Change could be coming
Unlike other facets of Medicare reimbursement, “buy and bill” is dynamic and open to change.
Change, however, is slow. Both the Obama and Trump administrations have attempted reform, with limited progress made.
With increasing use of biologics and biosimilars, “buy and bill” will likely affect more practices. Physicians should keep an eye on policy and can consider engaging medical specialty groups, lobbies, and Congressional representatives to safeguard their position.
What this means for you
“Buy and bill,” a term referring to when physicians obtain and sell drugs directly to patients has become a hot topic recently among policy makers, drug manufacturers, physicians, and patient advocates. This practice has prompted movement to change Medicare Part B, which reimburses the cost of drugs typically sold this way. Physicians should stay mindful of such potential changes, as they could affect your bottom line.