Most people have plenty of experience with community pharmacies. You drop into one in your neighborhood to pick up a prescription, then go home to handle treatment on your own.
In some cases, healthcare providers purchase medications from manufacturers, store them, and administer them to patients on-site. This practice is known as buy and bill, a reimbursement model often used for complex, high-cost medications that aren’t as common in community pharmacies. On the other hand, specialty pharmacies offer similar drugs to buy and bill, but with a similar reimbursement model to community pharmacies.
Why do some providers go this route? And what’s the difference between buy and bill and a specialty pharmacy? Here’s a comparison of the two to help you decide if the buy-and-bill reimbursement model is a good fit for your healthcare organization.
4 benefits of the buy-and-bill model
Buy and bill poses some unique challenges. But if your organization can overcome those obstacles, the benefits may be worth the trouble.
What are buy and bill’s biggest benefits?
1. Increased control over the supply chain
Purchasing medications directly from manufacturers or wholesalers gives you greater control over drug inventory. This helps ensure medications are readily available, reducing the risk of treatment delays for patients and giving you more stock management flexibility. It’s especially valuable for hospital outpatient clinics with high patient volumes and complex medication needs.
2. Product integrity
Providers who use buy and bill maintain tight control over medication storage and handling — from the moment medications arrive until they’re administered. This high level of oversight ensures proper storage, adherence to quality standards, and effectiveness for patients.
3. Opportunities for negotiation
Negotiating directly with wholesalers and distributors can result in lower drug costs compared to other methods. Those savings can be passed on to patients or contribute to your bottom line.
4. Higher revenues and better profit margins
Buy-and-bill providers can bill insurers directly for the drugs they administer, often leading to higher reimbursement rates and increased profit margins. This revenue boost is most significant for providers who practice in areas where specialty drugs are common, like oncology wards.
6 challenges of buy and bill
Before implementing buy and bill, understand the risks and make a plan to tackle them head-on.
1. Financial risk
One of buy and bill’s most significant challenges is the upfront financial investment required to purchase medications. Reimbursement delays or denials can strain your finances.
But that’s not the only obstacle. Spending on medications that expire or become obsolete wastes money. Proper inventory management, including accurate demand forecasting and careful expiration date tracking, is essential to mitigating this risk. Fishbowl’s software makes it easy to track and trace all inventory by the criteria you prefer — whether that’s the expiration date, lot number, or serial number.
2. Complex regulatory compliance
Many have stringent storage and handling requirements, including specific temperature controls and security protocols. You must adhere to these regulations to ensure patient safety and prevent legal issues, which requires meticulous attention to detail, specialized training for staff, and robust quality assurance procedures. And since reimbursement for buy-and-bill drugs is often based on the average sales price (ASP), accurate reporting and regulatory compliance avoid financial penalties.
3. Administrative burden
The buy-and-bill model involves complex administrative processes, including purchasing, inventory management, and insurance reimbursement. These tasks can be time-consuming and resource-intensive, requiring dedicated staff and efficient systems.
4. Competition and stakeholder engagement
There’s a lot of money to be made in the specialty drug market, which means there’s competition. Staying competitive while pleasing all stakeholders requires navigating complex relationships with drug manufacturers, wholesalers, and patients. Without strong communication and favorable agreements, it’s hard to keep up with competitors.
5. Patient management
With the buy-and-bill model, you’re in charge of more tasks — both purchasing and patient care — which is overwhelming. You have to manage side effects, monitor treatment progress, and make sure patients receive medications on time. This is only possible if you commit to effective communication and comprehensive documentation.
6. Resource limitations
Successfully implementing and maintaining a buy-and-bill program requires significant resources — adequate storage facilities, proper medication handling and disposal protocols, and staff devoted to inventory management and billing processes. These requirements are particularly challenging for smaller practices with limited budgets and staff. But effective inventory management minimizes waste and allocates resources where they’re needed most, so it could balance out.
Buy and bill or specialty pharmacy: What’s the best approach for your organization?
If your office treats complex conditions that require high-cost drugs, the buy-and-bill model offers greater control and revenue potential. But for some providers, specialty pharmacies and other distribution models are smarter choices. Here’s how they compare.
Buy and bill
In the buy-and-bill model, a patient’s insurance typically covers drug costs because the medications are administered by the healthcare provider in a clinical setting. This can lead to higher reimbursement rates compared to specialty pharmacies that give drugs for self-administration and are often covered under different benefits.
Specialty pharmacies
Unlike buy and bill, where providers purchase and store medications, specialty pharmacies handle the dispensing process. They also typically handle insurance billing, including coinsurance collection, and offer patient support and medication management services. While providers using the buy-and-bill model have greater control over the entire process, including inventory and pricing, they have more administrative and care tasks, which can be overwhelming.
White bagging
Much like buy and bill, the white bagging distribution model involves the healthcare provider administering the medication. Instead, it’s a third-party payer (like an insurance company), not the provider, that purchases the drug from a specialty pharmacy. This reduces the provider’s financial risk but limits their control over drug selection and timing.
Brown bagging
With buy and bill, providers manage the medication supply chain. But brown bagging makes patients responsible for getting the drug from a pharmacy and bringing it to the provider’s office. While this option shifts the financial risk away from the healthcare organization, it also means the provider has little control over proper medication storage and handling.
Clear bagging
Like white bagging, clear bagging involves the payer purchasing the medication and delivering it directly to the patient, who then brings it to the provider. Healthcare providers have no involvement in purchasing or storing the drug. With clear bagging, they’re focused solely on administration.
Find buy-and-bill success with Fishbowl
The need for an effective inventory management system isn’t unique to specialty pharmaceuticals. But it’s important for buy and bill because of the medications’ high cost and specialized nature. And Fishbowl is one of the best tools for pharmacy inventory management.
Fishbowl is the all-in-one inventory management solution designed to help you track inventory levels, monitor expiration dates, and automate reordering. The platform even integrates seamlessly with QuickBooks to promote financial visibility.
Are you ready to optimize stock levels and give patients timely access to the medications they need? Schedule a demo of Fishbowl today.
