Since the passage of the Inflation Reduction Act (IRA) in August, much attention has been paid to its provisions specific to drug pricing. A scaled back version of the nearly $2 trillion Build Back Better (BBB) Act which stalled in the Senate last year, the IRA carried forward many of the BBB’s healthcare provisions, including establishment of the Department of Health and Human Services’ (HHS) ability to negotiate drug purchasing prices for Medicare.

With midterm elections upon us, the IRA has become a talking point for candidates on both sides of the aisle. Democrats maintain that the IRA “will help close the gap in access to medication by improving prescription drug coverage and lowering drug prices in Medicare.” In contrast, Republicans point to a Congressional Budget Office report as evidence that the IRA will hamstring drug manufacturers, “lead(ing) to 135 fewer lifesaving treatments and cures.”

But in all the discussions about the IRA’s impact on patients and drug manufacturers, a critical—if unintended—consequence of the legislation on another sector has gone largely unmentioned: its impact on those physicians and physician practices who administer drugs covered by Medicare Part B.

Buy-and-Bill Providers

The IRA has particular potential to impact physicians in the “buy-and-bill” space.

In the buy-and-bill model, a provider or practice purchases a physician-administered drug or biologic—typically for infusions or injections—and maintains it in inventory before prescribing and administering it to a patient at an approved site, such as a physician’s office. The provider bills the patient or a third-party payor after the drug is administered. The model is especially common in hematology/oncology and rheumatology practices, where payment for the onsite administration of Medicare Part B drugs can represent up to 50% of revenue.

The buy-and-bill model allows physicians direct, “hands-on” management of drug administration and control of the pharmaceuticals they are delivering. Buy-and-bill makes it possible for providers to initiate therapy immediately, be precise in dosing and adjustments, and more closely monitor patients undergoing treatment.

But buy-and-bill also comes with financial risk and administrative burdens. Dedicated staff are needed to manage inventory in coordination with patient scheduling. Under buy-and-bill, providers are responsible for submitting reimbursement claims for the drugs which they administer, as well as for collecting any coinsurance or copayments from patients—processes from which they are removed in other drug delivery models.

Given that buy-and-bill providers are also assuming the potential for insurance denials and bad debt on the part of patients, the model frequently necessitates the hiring of qualified staff to manage prior authorizations, denials, and collections.

In addition, maintaining an adequate inventory of both specific drugs and the means of administering them—syringes, bulbs, pumps, etc.—requires dedicated, secure, and climate-controlled storage space.

IRA Impact on Buy-and-Bill

The establishment of HHS’s ability to negotiate prices—a cornerstone of the IRA’s healthcare section and one of its most popular provisions among voters—creates a distinct threat to buy-and-bill providers.

Currently, Medicare reimbursement for drugs administered through the buy-and-bill model is based upon an average sales price (ASP) for the product plus a specified percentage.[i] However, as HHS begins to negotiate drug prices, reimbursement will shift to being based upon a “maximum fair price” (MFP) rather than ASP. And therein, say buy-and-bill physicians, lies the threat.

The American Academy of Neurology (AAN), American College of Rheumatology (ACR), American Gastroenterological Association (AGA), and Association for Clinical Oncology (ASCO) maintain that the IRA does not consider the overhead costs associated with the acquisition and administration of drugs under the “buy-and-bill” models frequently employed by their members for drug administration. They estimate that, as a result, providers could expect a 41.5% decrease “in total payment, even accounting for reduction in acquisition costs.”

AAN, ACR, AGN, and ASCO have previously echoed calls from the American Medical Association and the American Osteopathic Association for a reduction in the cost of prescription medicines in the United States and expressed support for “the goal of reducing the cost of prescription drug treatments in the drug pricing provisions” in the IRA before its passage. They did not abandon this position in their comments on either the BBB or the IRA. However, their recommendations that Congress offset the impact of the IRA’s payment reductions by exempting Part B reimbursements from sequestration reductions were not taken up.

Driving Vertical Integration

Lowered Part B drug reimbursement rates for specialty physicians and competition from 340B hospitals have the potential to further drive the recent trend in hospital acquisitions of physician practices, especially considering a proposed reduction in the physician conversion factor. In particular, as physician offices do not have access to the lower discounted rates for drugs under the 340B Drug Discount Program, they will be financially disadvantaged in comparison to the many hospitals which do. 340B hospitals will be able to purchase products at the lower of a product’s 340B ceiling price or the MFP.

Charged by its House of Delegates with assessing the impact of hospital and hospital-physician mergers on the quality of healthcare, the AMA’s Council on Medical Service concluded that their “impact on quality of health care and patient outcomes is limited and inconclusive at this time.”

But at least one survey suggests that physicians would opt for private practices if circumstances allowed. The non-profit Physician’s Advocacy Institute, which argues that “bigger is not always better,” contends that physicians should be able to practice “a variety of practice settings” and that the choice of setting should be made on a level playing field without policies that impose undue financial stress.

The AMA and specialty groups such as ASCO are continuing to voice their concerns to Congress and policymakers and have indicated that they will continue to advocate for ways to safeguard patient access to care and support physician practices.

[i] Reimbursement is currently 106% of ASP.