Thursday, September 20, 2007

Myths and Realities in Oncology Drug Purchasing

The price of oncology drugs is sky rocketing and reimbursement for them has continued to fall. This may be hurting your practice more than you know. What are you paying for your drugs as compared to the Average Sales Price (ASP)? Do you know the Medicare allowable for these drugs? If you cannot answer these questions, what you don't know may be hurting you.

What person would enter into a business where:
· 85% of his/her product has a margin less than 2%?
· The cost of the product is paid in not less than 90 days?
· The product purchase price requires a huge cost of labor to support the product and has a bad debt of not less than 5%?

Probably no one. Now, let’s take a quiz.

Reality or Myth:
· Oncologists cannot purchase drugs at ASP or lower.
· Oncologists have been misled by industry representatives that oncologists are purchasing drugs at or below ASP.
· Many oncologists are now faced with hundreds of thousands of dollars in debt using the “buy now and pay later” leverage.

If you answered “myth” once and reality twice, you are in the same boat as many of your colleagues. The unfair practices occurring in oncology drug purchasing are putting small private practice oncology groups out of business as we speak. Within our client base, we are finding that several small oncology/ hematology practices and solo practitioners are ending up in the red relative to the purchase of their oncology drugs.

At the helm of a Midwest billing and consulting firm that works with many oncology practices, I intend to continue to investigate what is happening here.

Smaller practices and solo practitioners don't have the purchasing power of larger practices. Therefore, they pay higher drug prices. That does not seem fair. The Medicare allowable for these drugs is ASP plus 6%. Medicare's payment is 80% of their allowable. While this may seem to come out in your favor, many times it does not and you end up paying for your patients' drugs.

There is a difference between purchasing drugs at ASP and at ASP + 4%, 5% or higher. Many oncologists think they are purchasing drugs below ASP, when in fact, they are purchasing drugs at ASP + 6% or 7%. Yes, there is a difference. Calculate your complete numbers and see what you are really paying. Don’t rely on certain drugs with their rebates that come later.

The free enterprise system suggests you, the oncologists, must figure out the process to purchase your drugs at ASP. Is that your job? The perfect world would be when every oncology practice can buy at ASP – because no one would be offering a drug cost below ASP. We’d all be on a level playing field.

So now that we have identified the problem, what is the solution? Share your thoughts by clicking the comment button below.


Anonymous said...

Marty, I think your points are all well taken. Thanks for the information.

Anonymous said...

You are right on idenitifying the problem, but there does not seems to be any solution in sight. CMS has turned its back and refuses to engage on this issue. Legislative process is working so slow on 2-3 bills in congress. Those bills are seeking to correct the methodology of calculating ASP - ie taking out the prompt pay discounts. I don't see any big changes coming through in near future, except when a big chunk of solo practices will go under and several folks will fast forward their retirement

Anonymous said...

for DDAVP 1mcg J2597 if a patient received a single dose vial of 4iu /1ml total of 10ml how many units am i billing?

PByrne1 said...

Marty, thanks for your ideas and a forum to discuss these critical issues. I am very concerned as a solo practictioner about not being able to get anything close to "average" sales price on my pharmaceutical purchases....who is getting it? Is the govt using the price the manufacturers sell to the VA or other govt sites in calculating our "average"? If we have to have discounts then it should be prorated by the number of physicians not just for the huge groups. Who is trying to help us ? I'm interested in any reasonable solutions .

Neltner Billing and Consulting said...

Per the FDA label for DDAVP (J2597), “one mL (4 mcg) of DDAVP (desmopressin acetate) solution has an antidiuretic activity of about 16 IU; 1 mcg of DDAVP is equivalent to 4 IU.”

Anonymous said...

Please direct me to any E&M benchmarks your organization may have published or that I may obtain independently. Some of my hematologists/oncologists are under coding, and some appear to be over-coding (99 percent level 5s), based upon recommendations of consultants. Thank you!

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