1. Key stakeholders

Doctor's office drugs are administered to the patient in a doctor’s office or hospital outpatient clinic. Multiple stakeholders participate in the distribution and financing of doctor's office drugs.
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Doctor's Office Drugs

1. Key stakeholders

Doctor’s office drugs are administered to the patient in a doctor’s office or hospital outpatient clinic. Multiple stakeholders participate in the distribution and financing of doctor’s office drugs.

Hover on a to learn more about each stakeholder’s basic role.

Go to the pharmacy drug key stakeholders

Pharmaceutical Company Wholesaler Group Purchasing Organization ( GPO ) Doctor s Office or Hospital Clinic Health Insurer Commercial Health Insurer Government Health Insurer Patient

The pharmaceutical company develops, manufactures and markets the drug.

The wholesaler plays the role of buying the drugs from manufacturers and distributing drugs to Doctors' Offices, Hospital Outpatient Clinics, and other intermediaries in the supply chain.

The Group purchasing organization (GPO) acts on behalf of Doctor’s Offices and Hospital Outpatient Clinics to negotiate volume purchases of drugs and other products from Wholesalers and Pharmaceutical Companies.

The doctor's office or hospital clinic is the outpatient treatment setting in which drugs are administered to patients. These drugs, such as infusions and certain injections, typically require administration by a healthcare professional.

A Health Insurer reimburses health providers for health-related products and services, including inpatient, outpatient and pharmaceutical drugs.

The patient receives the drug in the doctor's office or hospital outpatient clinic.

Next Map View:
2. The drug's journey to the patient

Key Terms

Group Purchasing Organization (GPO)

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Group purchasing organizations (GPOs) are third-party administrative organizations that aggregate purchasing volume across multiple healthcare providers and negotiate with pharmaceutical companies and wholesalers on providers’ behalf.
GPOs may receive discounts from manufacturers or wholesalers for volume purchases. In addition, they receive fees from provider clients for aggregating purchases and negotiating favorable pricing.

72% of purchase volume by hospitals is contracted through GPOs.

In 2016, the four largest GPOs in the US were:
Vizient - More than $100b annual spend volume, membership including more than 50% of nation’s acute care providers
Premier - More than $50b annual spend volume
HealthTrust - $30b annual spend volume
Intalere - $9b annual spend volume

Health plan

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A health plan is an insurance policy administered by a government program or commercial entity that reimburses beneficiaries for health services, including inpatient, outpatient and prescription drugs.

Health plan coverage is paid for by the patient according to plan agreements in the form of monthly premiums and additional payment methods:
Deductible – costs are paid out of pocket until the deductible limit. (see deductible)
Copay/coinsurance – costs are shared between the patient and insurer until the out of pocket limit

Medical benefit

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The medical benefit provides insurance coverage for drugs administered by intravenous infusion or injection in a clinic or other outpatient setting.

Outpatient care

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Outpatient care, also known as ambulatory care, is health care delivered in a clinic, doctor’s office or hospital that does not require an overnight stay.

For Medicare beneficiaries, this is covered under Part B.

Payer

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A payer is a public or private entity that provides health insurance to patients, covering healthcare services and products. For prescription drugs, the payer generally reimburses the pharmacy or provider for the majority of the medication’s price, with the patient responsible for the balance through a co-payment or co-insurance. After the negotiated price has been reimbursed to the pharmacy or provider, the payer often receives a substantial rebate from the manufacturer.

Of the US population that is insured, the 2016 payer mix is as follows:

  • Employer 49%
  • Medicaid 19%
  • Medicare 14%
  • Non group 7%
  • Other public (VA, military) 2%

Pharmaceutical company

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A pharmaceutical company develops, produces and markets prescription drugs. Their activities include research and development as well as sales and marketing, also known as “commercialization”.

Provider

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A healthcare provider is any individual or institution certified to provide health care services, including administering or prescribing drugs.

Wholesaler

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A wholesaler or distributor acts as a middleman between the pharmaceutical companies and the pharmacies and providers that dispense medicines to patients.

There are two types of wholesaler businesses:
Full-line wholesalers – for retail and outpatient settings
Specialty distributors – for inpatient settings (hospitals, doctors’ offices) only

The three largest wholesalers account for 85% to 90% of the distribution market in revenue: AmeriSourceBergen Corp. (ABC) $147.3, McKesson Corporation (MCK) $133.7B, Cardinal Health, Inc. (CAH) $97.4B.

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