What Is Buy and Bill? How Provider-Administered Drugs Are Priced and Paid

Buy and bill is the arrangement in which a clinic or hospital outpatient department purchases a drug itself, administers it to the patient, and then bills the patient's health plan for the drug and for the act of administering it. AMCP describes the traditional model this way: "For provider-administered drugs, providers traditionally purchased medications, administered them to patients, and billed the MCO for reimbursement" (AMCP). It is the traditional supply model for infused and injected drugs given in a physician office or hospital outpatient department. This guide explains how Medicare sets the price, how buy and bill differs from having a pharmacy dispense the same drug, and what to ask about your share of the bill.

Where buy and bill fits

Health plans typically manage self-administered prescriptions through a pharmacy benefit, often run by a pharmacy benefit manager, and provider-administered drugs through the medical side of the plan, but the dividing line is set by each plan and by the setting where the drug is given, not by the dosage form alone. Medicare's line is the clearest and is written into the program: "Usually, Part B covers drugs you wouldn't typically give to yourself, like those you get at a doctor's office or in a hospital outpatient setting," and "Medicare covers most injectable and infused drugs when a licensed medical provider gives them" (Medicare.gov).

Buy and bill is the traditional supply chain for provider-administered drugs. The provider takes on the cost and risk of buying and storing the drug, then recovers it through the claim it submits after administration.

How the price is set: ASP + 6 percent

For Medicare, the reference price is the average sales price, or ASP. CMS states that "most separately payable drugs and biological products have a payment limit of the Average Sales Price (ASP) plus 6 percent," that it "collects quarterly ASP data from manufacturers through the ASP Data Collection System," and that it "publishes the payment limits each quarter in the Medicare Part B Payment Limit File" (CMS).

MedPAC's payment primer fills in the detail. "By statute, Medicare pays 106 percent of ASP (ASP + 6 percent) for drugs furnished in physician offices," and "Medicare also pays ASP + 6 percent for separately payable Part B drugs furnished in HOPDs under the OPPS" (MedPAC). Two more rules matter for what a claim looks like:

• Administration is paid separately. "In addition to Medicare's payment for a drug, Medicare makes an additional, separate payment to the physician or hospital for administering the drug (that is, for the act of injecting or infusing the product into the patient)" (MedPAC).
• Discarded amounts are treated differently by container type. MedPAC describes Medicare's rule this way: "When drugs are furnished in single-dose containers or single-use packages, Medicare pays providers for the full labeled amount of drug in the container or package, including any portion that is not needed for the patient and is discarded," whereas for multiple-dose containers Medicare "pays the provider only for the amount of drug administered" (MedPAC). Payment still depends on the claim meeting Medicare's coverage and documentation requirements for both the administered and the discarded amount, and MedPAC notes that "beginning January 2023, manufacturers are required to provide a refund to Medicare for certain discarded amounts of Part B drugs furnished from a single-dose container or single-use package" (MedPAC). Other payers set their own rules.

The statutory 6 percent is not necessarily what providers net. In a 2016 report, GAO noted that "because of budget cuts associated with sequestration ... Part B drug payment rates to both physicians and hospitals have been approximately 104 percent of ASP" (GAO); that figure describes the situation GAO observed at the time, not a current rule, and the effective rate in any given year depends on the sequestration provisions then in force. Commercial insurers negotiate their own rates with providers, so the same drug can carry a different allowed amount under an employer plan than under Medicare.

Because ASP is an average, an individual provider's margin varies. MedPAC observes that "an individual provider or supplier may purchase a drug for more or less than ASP for a number of reasons," including "volume discounts" and differences "across types of purchasers (e.g., physicians, hospitals, and pharmacies)" (MedPAC). Hospitals that qualify for the 340B program buy at discounted prices; see what the 340B program is.

The incentive debate

The percentage add-on has drawn scrutiny because a fixed percentage of a higher price is a larger dollar amount. GAO summarized both sides: "Some stakeholders have raised questions regarding whether the fixed percentage add-on to ASP may create incentives for providers to use more expensive drugs. However, other stakeholders have suggested that any incentive to use more expensive drugs to maximize subsequent reimbursement may be offset by providers' expenses associated with acquiring such drugs" (GAO). In 2014, GAO reported, "Medicare spent over $24 billion on drugs covered under Part B" (GAO). That figure is a historical program total, not a current price for any drug.

Buy and bill vs. white, brown, clear, and gold bagging

Payers and pharmacies have developed alternatives that move the drug purchase away from the provider. The National Association of Boards of Pharmacy defines the two main ones:

The table describes who handles the drug, not how a particular plan adjudicates the claim; billing arrangements for clear and gold bagging in particular vary by health system and payer contract and are not characterized by the sources above.

NABP explains the trade-off from the provider's side: bagging models "reduce physicians' costs associated with purchasing and stocking expensive medications and limit the lengthy administrative process of billing payers for reimbursements, as the provider neither purchases the drug nor seeks drug reimbursement from a third-party payer. However, the provider is still paid for professional services associated with the drug's administration" (NABP). NABP also flagged a patient-safety dimension: "there is a legitimate patient protection issue when a specialty drug is distributed to an entity other than the patient," one reason the practice has drawn regulatory attention (NABP).

What the model means for your bill

The practical difference for a patient is who bills for the drug and, as a result, which of the plan's cost-sharing rules the claim is processed under.

• Under buy and bill, the provider bills the payer for the drug and separately for administering it. Ask your plan which coverage and cost-sharing terms apply to that drug and setting; Medicare generally covers drugs you would not typically give yourself under Part B (Medicare.gov). You can ask the provider's billing office for the allowed amounts in advance. If you are uninsured or not using insurance, ask whether you are entitled to a good faith estimate before scheduling; our article on what an online visit costs without insurance explains that process.
• Under white or brown bagging, the pharmacy bills for the drug and the provider bills only for administration, since "the provider neither purchases the drug nor seeks drug reimbursement from a third-party payer" (NABP). Whether the pharmacy's claim is processed under a pharmacy benefit or the medical side, and which deductible it counts toward, depends on your plan's design. The plan may also require a specific specialty pharmacy.
• In either model, the administration service is a separate charge from the provider.

Questions worth asking before an infusion or injection appointment:

1. Who will bill for the drug, the provider or a pharmacy, and under which part of my plan will that claim be processed?
2. If the provider bills: what is the contracted allowed amount for the drug and for administration, and what is my share after any deductible?
3. If a pharmacy dispenses it: which pharmacy, and what is my copay or coinsurance for the drug?
4. Does the plan require or prohibit white bagging for this drug at this site of care?
5. Is the same drug available at a different site of care, such as a physician office rather than a hospital outpatient department, at a different contracted rate?

What buy and bill is not

Buy and bill describes how a provider acquires and bills a drug it administers; it is not a property of the drug itself, and the same product can be handled through buy and bill in one setting and dispensed by a pharmacy in another. When you fill a prescription at a pharmacy for your own use, the pharmacy processes the claim, and the pharmacy's price, whether through insurance, a coupon, or cash, is what the BetterBuyRx price comparison shows. For the pharmacy-side price benchmarks that correspond to ASP on the provider side, see the NADAC drug pricing guide and the PBM spread pricing guide.