Buy and bill is a healthcare distribution model where a medical provider purchases a drug directly from a manufacturer or wholesaler, administers it to a patient in a clinical setting, and then bills the patient’s insurance for reimbursement. It’s the standard way most infused and injected medications move from supplier to patient in the United States, covering everything from chemotherapy drugs to injectable biologics.
How the Buy and Bill Process Works
The cycle starts before the patient ever walks in the door. A provider’s office first verifies insurance coverage, confirming the drug is approved under the patient’s plan and determining what the patient will owe out of pocket. Many practices have dedicated staff or work with pharmaceutical reimbursement specialists to handle this step, since a coverage denial after the drug has already been purchased creates a serious financial problem.
Once coverage is confirmed, the provider orders the medication from a wholesaler or directly from the manufacturer and stores it on-site. When the patient arrives, the drug is prepared and administered, typically as an infusion or injection. After the visit, the practice submits a claim to the insurer under the patient’s medical benefit, not their pharmacy benefit. This distinction matters: because the drug is given by a healthcare professional in a clinical setting, it’s treated as a medical service rather than a prescription you’d pick up at a pharmacy.
Insurance companies typically take about six weeks to process these claims, though Medicare tends to reimburse faster. That gap between purchasing the drug and receiving payment is one of the defining features of the model.
Which Drugs Use This Model
Buy and bill applies almost exclusively to medications that a healthcare provider must administer. Medicare Part B, for example, generally covers only drugs that are not usually self-administered. The most common categories include:
- Chemotherapy and cancer drugs given by infusion in oncology clinics
- Biologic therapies for autoimmune conditions like rheumatoid arthritis, psoriasis, and Crohn’s disease
- Injectable treatments administered by rheumatologists, dermatologists, urologists, and ophthalmologists
- Certain home-infused drugs for conditions like heart failure or immune deficiency, when delivered through a covered infusion pump
- Preventive vaccines given in a provider’s office
Oncology drugs represent the largest share of buy and bill spending. Many cancer treatments require hours-long infusions under clinical supervision, making this model a natural fit.
How Providers Get Paid
Reimbursement varies by insurer, but the most widely referenced benchmark is Medicare’s formula: the Average Sales Price (ASP) of the drug plus 6%. ASP is a quarterly figure calculated from manufacturer sales data, so it reflects real transaction prices rather than list prices. That 6% add-on is meant to compensate providers for the costs of purchasing, storing, handling, and administering the medication.
Private insurers use their own reimbursement formulas, which may be more or less generous than Medicare’s rate. Some pay a percentage of the drug’s price, others negotiate flat fees. Preventive vaccines under Medicare Part B follow a different formula, reimbursed at 95% of the average wholesale price.
The markup built into reimbursement isn’t pure profit. It covers refrigeration, inventory management, waste from unused portions, staff time, and administrative overhead. Some practices also rely on buy and bill revenue to fund patient services that can’t be billed directly, like social workers who help patients navigate treatment. If that revenue disappears, those support services can disappear with it.
Financial Risk for Providers
The core tension of buy and bill is that providers must pay for expensive drugs upfront and wait weeks for reimbursement. A single dose of a specialty biologic can cost thousands of dollars, and oncology practices may carry hundreds of thousands in drug inventory at any given time.
To manage cash flow, clinicians often negotiate payment terms with wholesalers. A common arrangement gives practices a 90-day window to pay for the drug, which can stretch to roughly 120 days by using credit card payment cycles strategically. That buffer helps bridge the gap until insurance payments arrive, but it doesn’t eliminate the risk. If an insurer denies a claim or a patient’s coverage changes between verification and administration, the practice may absorb the cost entirely.
High-cost therapies like cell and gene treatments amplify these risks. When a single treatment costs hundreds of thousands of dollars, even the standard percentage-based markup can represent an enormous sum, raising questions about whether the traditional buy and bill structure makes sense for the most expensive new therapies.
Alternatives to Buy and Bill
Insurers have increasingly pushed alternative models that remove the provider’s role as the drug purchaser. These approaches share a common goal: separating the cost of the drug from the cost of administering it, so the provider is paid only for the service, not the product.
- White bagging: A specialty pharmacy affiliated with the insurer ships the drug directly to the provider’s office. The clinician administers it but never purchases or marks up the medication.
- Brown bagging: The insurer’s specialty pharmacy sends the drug to the patient, who brings it to the provider’s office for administration or uses it at home.
- Clear bagging: A hospital’s own internal pharmacy fills the prescription and transports it to the treatment area. Payment flows through the hospital pharmacy rather than the treating provider.
Insurers favor these models because they eliminate the provider markup on the drug itself, which can significantly reduce costs for expensive specialty medications. Providers, on the other hand, often push back. White and brown bagging introduce concerns about drug integrity during shipping, reduce the provider’s control over inventory and scheduling, and strip away revenue that many practices depend on to stay financially viable. Several states have passed or considered legislation restricting bagging practices in response to these concerns.
Why It Matters for Patients
If you receive infused or injected medications, buy and bill affects your experience in a few practical ways. Your cost-sharing is calculated under your medical benefit, not your pharmacy benefit, which means different deductibles, copays, and out-of-pocket maximums may apply. For many patients, medical benefit cost-sharing is higher than pharmacy benefit cost-sharing, though this varies by plan.
On the positive side, buy and bill keeps the drug in your provider’s hands from storage through administration. Your care team controls the supply chain, can inspect the product, and manages timing without relying on an outside pharmacy to ship the right drug on the right day. When alternative models like white or brown bagging are used instead, delays or shipping errors can force appointment cancellations, which is particularly disruptive for time-sensitive treatments like chemotherapy.