Tuesday, April 21, 2020

Three Early Signs That COVID-19 Could Disrupt the Buy-and-Bill Channel

Will home infusion growth be a long-overdue correction for the buy -and-bill channel or a temporary blip that will soon vanish?

For some time, I have been tracking the evolution of the buy-and-bill system for provider-administered drugs. The data have shown that hospital outpatient departments have been displacing physician offices. Amid this shift, home infusion providers have accounted for a minority of commercial medical benefit spending and a tiny share of Medicare Part B spending.

However, the coronavirus pandemic is triggering new growth in home infusion for buy-and-bill products. Below, I highlight the early signs of a marketplace change. I believe that some of these short-term shifts in the buy-and-bill market will persist even after we have recovered from COVID-19. They may even slow the runaway growth of the 340B Drug Pricing Program.

If not, then I suppose we'll just keep living in a world with limited home infusion over and over.


Provider-administered drugs include infused and healthcare-practitioner-administered medications. Commercial health plans generally cover provider-administered drugs under a patient’s medical benefit. Medicare Part B is the primary government payer of provider-administered specialty drugs.

These medications are typically paid under the buy-and-bill process. A healthcare provider purchases, stores, and then administers the product to a patient. After the patient receives the drug and any other medical care, the provider submits a claim for reimbursement to a third-party payer. The process is called buy-and-bill because the medical claim is submitted (billed) after the provider purchases (buys) and administers the drug.

For a deep dive into the economics of the buy-and-bill market, see chapters 3 and 6 of our 2019-20 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors.

Physician offices and hospital outpatient clinics are the primary sites of administration for provider-administered drugs paid under the buy-and-bill process. As you can see in the chart below, these sites of care account for about 80% of spending by commercial plans and 96% by Part B. Other sites of care—including patients’ homes, dialysis centers, and ambulatory surgical centers—account for a minority of spending.

[Click to Enlarge]

There has been an ongoing shift in drug administration from community physician practices to hospital outpatient facilities. This has occurred both in the Medicare Part B program and at commercial health plans. For example, see Part B Update: Hospitals Displacing Physicians, Amid Slow Growth in Drug Prices.

This shift has raised drug spending without any incremental revenues to drug makers. Commercial payers use reimbursement approaches that permit hospitals to inflate specialty drug costs by thousands of dollars per claim when compared with physician offices. See Still Possible: Hospitals Overcharge Health Plans for Specialty Drugs.


Consider these recent coronavirus-related signs of change in the buy-and-bill market:

1) CMS has temporarily expanded home health infusion of Part B drugs.

The Centers for Medicare & Medicaid Services (CMS) recently issued a new Interim Final Rule with comment period (IFC): Revisions in Response to the COVID-19 Public Health Emergency (CMS-1744-IFC) . The IFC allows a Medicare beneficiary to be considered “confined to the home” or “homebound” for purposes of the home health eligibility requirement based on COVID-19. (See page 62.) CMS will also not enforce rules that limit the administration of many Part B drugs in a beneficiary’s home. (See page 133 of the IFC.)

Avalere Health published this excellent summary of the IFC and its implications.

2) Temporary changes to Part B may become permanent.

Per Inside Health Policy, CMS Administrator Seema Verma has stated that not every regulation waived to help the health sector tackle COVID-19 might be restored at the end of the public health emergency. Hmm.

There is also new political momentum to expand home infusion. Look no further than the recently introduced House bill H.R.6218 - Preserving Patient Access to Home Infusion Act. The bill permits payment even if a healthcare professional is not present for the home infusion and adds “pharmacy services” to the reimbursement structure. Naturally, the National Home Infusion Association supports H.R. 6218.

You won’t be surprised to learn that the Community Oncology Alliance (COA), which advocates for community oncology practices, “fundamentally opposes home infusion of chemotherapy, cancer immunotherapy, and cancer treatment supportive drugs because of serious patient safety concerns.” Read COA’s Position Statement on Home Infusion.

3) Commercial payers are shifting more care to home infusion.

Response to the pandemic has accelerated changes that payers have long sought.

For years, commercial health plans have tried to move infusions to lower-cost sites of care. Common tactics include: reduced patient cost sharing at preferred sites; prior authorization for non-preferred sites; mandated use of certain sites of care; and specialty pharmacy white bagging strategies. Despite these efforts, hospitals have continued to grow their share of spending on provider-administered drugs.

COVID-19 has changed patients’ willingness to experiment with home infusion. Few of us would want to go to a hospital for infusion treatment—especially if our immune system were compromised from treatment for cancer or other conditions.

The largest insurers, PBMs, and specialty pharmacies have combined into vertically integrated organizations. These companies have also been rapidly integrating with healthcare providers. They are therefore well-positioned for a shift to alternate sites of care. (See Sections 5.2.3. and 12.4.1. of our 2020 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.)

Consider what UnitedHealth Group CEO David Wichmann said during the company’s recent earnings call:
“The spread of the virus has created a significant health risk for those receiving life-sustaining infusion services traditionally administered in the hospital or hospital clinic settings. For these patients, we’re providing infusion services through our Optum Infusion ambulatory suites and in their homes through our nurse infusion specialists.”
Or look at CVS Health, which is leveraging its Coram business to help transition eligible IV-therapy patients out of the hospital and into home infusion. Long time readers may recall my 2013 commentary when CVS acquired Coram. (From the wayback machine: 3 Reasons Why CVS Caremark Absorbed Coram.)

There is also early evidence that home health volumes have dropped along with other healthcare procedures. Encompass Health disclosed that the year-over-year increase in its home health volumes was +18.5% in January and February. However, volumes decreased slightly (-0.5%) in March. (See this 8-K filing.)


The COVID-19 pandemic has triggered other changes in healthcare delivery, including the rapid expansion of telehealth and increasing use of mail pharmacy dispensing. Our industry survey panelists expect that these behavioral changes will extend beyond the pandemic.

Note that a shift from hospital outpatient administration will also affect the out-of-control 340B Drug Pricing Program. The 340B program continues to expand at double-digit rates and has grown to account for at least 7% to 8% of the total U.S. drug market. (See 340B Program Purchases Reach $24.3 Billion—7%+ of the Pharma Market—As Hospitals’ Charity Care Flatlines.) I estimate that about three-quarters of 340B discounts come from provider-administered drugs.

For more on how COVID-19 will change the drug channel, I hope you will join me for my upcoming live video webinars on the industry impact of COVID-19. I’ll be discussing buy-and-bill along with many other crucial topics.

Please enjoy my brief video invitation below. (Click here if you can’t see the video.) I promise these events will be more exciting than a large squirrel predicting the weather.

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