Optimizing costs: How to buy medical supplies, medicines, and vaccines

Welcome to Dr. John Scala's "The Business of Medicine" column — a monthly resource for mastering the business side of independent practice. Having owned 3 solo practices, Dr. Scala offers insights, advice, and actionable strategies to help you steer yours toward lasting success.

This month’s topic is to help save money when buying necessary office items — items such as office supplies, office equipment, medications, and vaccines. Many of you likely have these contracts already set up. As a med/peds physician, after payroll, the second-highest budget item for me is vaccines, easily costing over $100,000 annually. 

Before I explain the contract deals, I’m going to give a few tips for new startups.

When you are ready to start equipping your office — exam tables, chairs, and so on — there’s an expensive way to do it and there’s a budget-friendly way to do it.

If you decide that you want everything new, then you can type "medical exam table" or similar into your web browser and get a good idea of the costs involved. Some medical supply companies will automatically enter your business into a national buying group, in which you can get most equipment for about half the listed price. I am not promoting one company over another, but as an example, when I started my current business I contacted the McKesson representative and he was able to get me into one of the large national buying groups. This allowed me to purchase items at the same cost as the biggest healthcare companies in the country, like HCA or Kaiser. A required ADA exam table, which supports 600 pounds and has electric up and down controls, lists for $15,000, but with the national buying contract the cost was only $7,000. 

Used equipment is the way to go for most items. The big hospital chains present in most cities have warehouses full of gently used equipment. For my current business, I was able to buy an entire storage shed of equipment from a recently retired physician for about $5,000. There were exam tables, scales, chairs, resuscitation equipment, an AED, a manual wheelchair, office furniture, and lots of the little items that are difficult to remember when setting up an office. I was also able to get a free EKG machine from a hospital-employed practice that was changing to electronic EKGs. In fact, I got 2 free EKG machines and kept one as a backup. A little legwork and a few phone calls can usually score huge savings for your startup costs.

Being independent means that you are not locked into a certain buying account. You could have accounts from McKesson, Medline, and Henry Schein — or even Amazon Business and Sam’s Club. Having accounts geared toward small businesses, like Sam’s Club, was important for me during the beginning of the COVID-19 pandemic, when the big supply companies restricted my purchases and gave priority to the government accounts and large hospital systems.

Medicines usually come from the medical supply companies. There are many options, generics, and name brands. I’ve noticed over the years that certain medicines are better to buy name brand. They have longer shelf life (expiration dates) and a more consistent quality. Again, not to promote certain items, but as an example, Pfizer’s Depo-testosterone and DepoProvera are some of those name-brand products I prefer to purchase. 

Finally, we get to the racket of buying vaccines. You will need an account with each of the vaccine manufacturers, including Sanofi (VaccineShoppe), Merck, Pfizer, and GSK (GlaxoSmithKline). More importantly, you will need to get a contract with one of the national vaccine buying groups. If you type "vaccine buying group" into your web browser, there are many choices. I am currently using Vaccine Connect. Like most things in business, connecting with your vaccine reps and buying group rep is important. The vaccine buying group contracts with the manufacturers for discounted prices. Discounts range from 2–5%. That doesn’t sound like a lot, but with the volume and cost involved the savings add up.

Additionally, vaccine manufacturers give discounts for certain items and for paying early. Although many of you internists out there might be skipping this section, the adult vaccines get decent discounts also. The most expensive regular vaccine (excluding rabies and several specialized others) is currently Gardasil HPV9, which lists for $3,068.60 for 10 doses. With the Merck discount and the buying group discount, the cost is 11% lower, at $2,753.14 for 10 doses. 

Some expensive vaccine orders can easily cost $8,000–$10,000 per order. For a small business, this can become a cash flow issue. The vaccine manufacturers offer 90-day payment terms. If you’re not paying close attention, that could max out your credit card and be denied. I usually pay for vaccines within a few weeks of delivery to avoid a surprise $10,000 charge. 

Some practices don’t want the hassle of juggling vaccine purchases and payment. There are companies that can manage all the vaccines for you. Your practice still gets reimbursed for the injection fees, but the vaccines themselves are managed by another entity. 

If you take advantage of all the available discounts, the insurance companies will pay about 20% higher than your cost. So, there is some incentive to vaccinate your own patients in your office. The vaccines are a fixed cost, but necessary to prevent disease. For me, $100,000 of annual vaccine purchases leads to $20,000 extra revenue for the practice, despite the challenges of managing the cash flow. 

Managing the purchase of medical supplies, medications, and vaccines effectively is not just about finding the best deals — it’s about balancing cost, cash flow, and quality to maintain a well-equipped practice. Whether you’re setting up a new office or streamlining operations in an established one, leveraging buying groups, exploring used equipment, and maintaining multiple supply accounts can lead to significant savings. By being resourceful and proactive, you can turn what may seem like a daunting investment into a valuable revenue stream, all while delivering essential care to your patients.