How buy and bill works

If you’re under the age of 40 and on social media, you’ve probably wanted to start your own Etsy shop at least once. Perhaps you’re interested in selling crocheted bees for $10 a pop.

If you’ve thought about the logistics of how many crocheted bees you needed to make in order to keep up with demand, good news! You already get it. Substitute “Etsy shop” with “hospital outpatient clinics” and “crocheted bees” with “drugs of the medical kind,” and you’ll have a pretty good grasp of buy-and-bill.

In other words, when a health provider frequently administers specialty drugs, the clinician may buy the drug in bulk from a distributor to have on-site and then bill a patient’s health insurance for the cost of the drug along with a fee for drug administration, according to the pharmaceutical industry accreditation body the Accreditation Council for Medical Affairs (ACMA).

Specialty drugs, or provider-administered drugs, are medications that can’t be administered at home. A lot of such drugs are oncology medications, according to the National Library of Medicine.

Health providers effectively act as pharmacies on top of their typical duties in buy-and-bill scenarios, managing inventory and filling prescriptions while charging the patient’s insurance directly. This may sound straightforward, but much like starting your own Etsy shop, there are benefits and drawbacks to a buy-and-bill model for health providers.

With buy-and-bill, health providers have direct control over the supply chain, according to ACMA—which means there is a lower risk of interruptions in patients’ medications, as the provider will have prepared the medication in advance. Directly communicating with drug wholesalers also means they have a higher chance of negotiating a better price for medications, potentially increasing profit margins for the health providers.

However, just like spending hours crocheting dozens of bees that don’t sell, there’s financial risk associated with buying specialty drugs up front. If the health provider doesn’t end up prescribing the medication and getting reimbursed by patients’ health insurance, it’ll lose money on its investment—and unlike crocheted bees, specialty drugs expire.

With expensive drugs on a deadline, there’s another hurdle to buy-and-bill that health providers will have to consider: prior authorization.

Prior authorization is a process insurance companies use to determine whether they’ll cover specialty medication. Sometimes, this involves the patient trying more cost-effective alternatives to specialty drugs, otherwise known as step therapy. This lets insurers confirm whether a patient needs that specific specialty drug before deciding to cover it, according to ACMA.

Prior authorization is used to “ensure safety, optimize patient outcomes, as well as reduce costs to the patient and the healthcare system as a whole,” according to ACMA, but it’s a process that can take weeks—valuable time for both the health provider and the patient.

ACMA recommends providers who take on the buy-and-bill model to invest in prior authorization specialists, who can help ensure the reimbursement process for specialty drugs goes smoothly. Think of it like hiring a social media manager for your crocheted bees business (bees-ness?), to make sure you actually get your bees to sell.

Whether you’re an aspiring Etsy vendor or the owner of a medical practice, there are important factors to consider before launching your business model. Are you willing to shoulder the risk for investing in your inventory up front? Are you capable of dealing with the administrative burdens? And most importantly: Do you even know how to crochet?