Following the Money: Rx Revenues Underpin Community Oncology Business Models

Injectable drug revenues and margins have been a key economic driver for community-based oncology practices since chemotherapy moved to community offices in the 1980s. Following the implementation of the Physician Fee Schedule in 1992, the US Government acknowledged that Medicare’s reimbursement for chemotherapy administration infusions was insufficient to cover treatment costs, so the Centers for Medicare & Medicaid Services (CMS) built in drug margins to compensate practices.

• Gross margins have declined as a percentage following CMS’s implementation of average sales price–based reimbursement in January 2005, but the higher prices of newly introduced treatments partly offset the impact.
• The increasing prevalence of oral cancer drug dispensing also provides a useful addition to practices’ buy-and-bill portfolios.
• HMP Market Access Insights’ upcoming spring landscape report will provide further analysis of the importance of cancer drug revenues in community practices; we estimate that in 2023, drug revenue made up 90% of the average practice’s total revenue (Figure 1). We will also share 2023 financial data and insights from an independent practice we consult with in this report.

^aSource: Bourbeau B, Harter D, Towle E. Results from the ASCO 2019 survey of oncology practice operations. JCO Oncol Pract. 2020;16(5):253-262. doi:10.1200/OP.20.00009.
Data from source updated by HMP Market Access Insights for 2023.
Abbreviations: E&M, evaluation and management. Rx, prescription drug.