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.