How ‘White Bagging’ Affects Patients, Physicians and 340B Funding

In healthcare, one action often begets another. A patient is treated for cancer, resulting in nausea, and then is treated for nausea. Changes in payer policies also can trigger a cascade of events affecting patients, providers and payers in unanticipated ways. An example is “white bagging,” in which a prescription is filled by a third-party specialty pharmacy and then administered by the provider without the provider taking ownership. The seemingly minor change of using a third-party pharmacy can raise patient copays and plan sponsor bills, interrupt scheduling and treatment, affect the provider’s bottom line, disrupt pharmacy receiving and storage systems, and introduce safety concerns. It can also save the payer a lot of money.

The white bagging model is a change from traditional buy-and-bill in how the prescription is filled and payment is processed. With buy-and-bill, the provider’s in-house pharmacy often fills the prescription from stored supply or through normal ordering. The treatment is typically billed under the patient’s insurance medical benefit. Commercial payers reimburse a negotiated amount for the drug and administration. Medicare usually covers these therapeutics under Part B, with the reimbursement rate set at the average sales price plus 6%.

With white bagging, the prescription is filled by a contracted specialty pharmacy that collects needed copayments or coinsurance and settles the claim with the payer. It’s typically billed under the pharmacy benefit. The medication is sent directly to the provider to prepare and dispense.

White bagging trends

White bagging is not new, but many people working in the pharmacy sector see evidence of it increasing. “It has increased significantly in the past year and a half. I think the big insurance companies are trying to use it as leverage during the contract period to drive down their contract pricing,” says Thomas Lausten, MBA, director of pharmacy services at Children’s Wisconsin, a children’s hospital in Milwaukee. White bagging is primarily driven by an area’s biggest payer, he says, but “I’ve heard from people across the country having the same issue we’re having.”

The practice has been around in some form for the past decade or two, though less so in oncology, says Jonas Congelli, RPh, chief of pharmacy for Hematology-
Oncology Associates of Central New York (HOACNY). He’s seen slight momentum recently, given pharmacy benefit manager (PBM) and payer integrations, he says: “They’re seeing the potential opportunity to insert themselves into the whole distribution process.” The practice is concerning enough to HOACNY that it instituted a policy in 2017 not to administer drugs unless they were directly purchased from a manufacturer or an accredited wholesale distributor.

White bagging usage varies widely based on site and treatment type. A 2019 survey about infused therapies included 48 commercial plans, representing 126.6 million covered lives. It showed that at physician-affiliated clinics, 11% of oncology and 43% of nononcology treatments were obtained via white bagging. For hospital outpatient departments, 28% of oncology and 31% of nononcology infusions were from white bagging. That’s only infused drugs. A 2018 report estimated that 9% of drugs administered in hospital outpatient settings were white bagged and 26% of those in office settings.

The downsides

Physicians and clinicians don’t have many good things to say about white bagging. Here are some of the downsides, from their point of view:

Drug waste

Therapeutics obtained through white bagging are purchased and sent specifically for that designated patient. If the treatment regimen changes last minute or the entire vial is not used, the medication must be discarded, even if unopened. “The specialty pharmacy won’t take it back. The drug company won’t take it back,” Lausten says. “It was bought and paid for by the patient. We can’t reuse it. Think of the healthcare dollars literally thrown away because of that system.” Although not an everyday occurrence, “it happens enough,” Lausten says. His hospital recently threw out two doses of Spinraza (nusinersen), the spinal muscular atrophy treatment drug, priced at $125,000 per dose.

The disposal may require special handling, which can be costly because of government compliance requirements. Still, white bagging still may be worth it for the payers. “We heard from payers, even with drug waste, it’s still a lower-cost practice,” says Sara Sadownik, deputy director of research and cost trends at the Massachusetts Health Policy Commission (HPC). Sadownik co-authored a 2019 HPC report on white bagging.

Pharmacy management

White bagging focuses on expensive specialty drugs, says Lausten, with some payers mandating that specific therapeutics be acquired this way. But that is not always the case. A major health plan in Lausten’s area requires white bagging for commonly used drugs, such as Remicade (infliximab) and Botox (onabotulinumtoxinA). That presents pharmacy management issues. Traditionally, the pharmacy checks regular shipments against the bar codes in its system. “When [white bagging medications] come in, there’s nothing to bar code against,” says Lausten. The items are already labeled for the patient, requiring a manual bar code and entering them into the pharmacy management system as the patient’s own medication, he explains.

Storage is an issue, too. Children’s Wisconsin may buy 50 to 100 vials of Remicade at a time, handling them once and storing them together. When the hospital pharmacy receives a patient order, the pharmacist pulls out the needed vials to dispense and prepare, according to Lausten: “We control purchasing, dispensing and billing for the drug.” The hospital pharmacy’s technology doesn’t easily track drugs coming from a specialty pharmacy, all of which must be handled individually. A separate refrigerator is needed, as well. These medications can’t be stored with the buy-and-bill drugs, because they are designated for specific patients. The hospital pharmacy is struggling to manage a few white bagging drugs, Lausten says, but the health plan is asking it to do so for up to 60 drugs. “It creates a tremendous storage problem. It’s a difficult situation to manage,” he says.

Safety

Because specialty pharmacy medications are entered as the patient’s own medications, they don’t go through the same order-entry system checks and balances. There is no automated drug interaction checking, because that’s built into the system only for hospital pharmacy’s medications. “From a quality and safety perspective, it’s not good for the patient,” says Lausten.

He has seen some occasional problems like the specialty pharmacy sending the wrong dosage or strength, or sending a drug for the wrong patient.

Scheduling and patient treatment

With white bagging, the drugs are not always delivered to the right place or in time for the patient’s appointment. With the buy-and-bill model, the pharmacy typically has the drugs or ensures the distributor delivers them in time. If the white-bagged medications aren’t available when needed, the patient must reschedule, which can result in less adherence and scrambled treatment plans. “The biggest unintended consequence is the impact on patients that is not captured in dollars to the healthcare system,” says Sadownik. “It’s wasted travel time, time off work, childcare and frustrations of navigating a more complex system.”

Sometimes the white-bagging medication arrives in time but the doctor changes the treatment. The drug is now wasted, and the needed therapeutic isn’t available. With buy-and-bill, it’s easier for the onsite pharmacy to make that change. “People don’t understand how disruptive it is,” Congelli says.

Provider income

White bagging can also affect provider reimbursement, and some critics say much of the criticism from providers is, to some degree, animated by the fact that white bagging means they lose out on the markup that comes with buy-and-bill. Lausten says that with white bagging, “we’re managing the order and dose, making sure it’s drawn up correctly in USP (United States Pharmacopoeial Convention) sterile product rooms, which are expensive to operate and maintain. We get no reimbursement for drawing them up.”

The white bagging also affects the 340B program, Lausten says. The federal 340B program means providers can get drugs at discounted prices if a substantial fraction of their patients have low incomes, are uninsured, or both. “Those (drug) savings pay for unfunded programs we provide at our hospital,” he says. “When the drug comes through the specialty pharmacy, those 340B savings go away.” But 340B program has plenty of critics, who say it has been distorted by health systems for financial gain.

Cost sharing

The reimbursement system is different for each drug acquisition model. Buy-and-bill typically is reimbursed under medical benefits. White bagging is typically reimbursed under pharmacy benefits. The pharmacy benefits reimbursement is often much higher, Congelli says. “We see the difference in what it would be to the payer and to the employer by running it through pharmacy benefits. It always costs them more,” he says.

The upsides

There is another side to the white bagging story, one that shows that it has benefits, particularly with respect to cost. Of course, lower costs benefit payers and, depending on the particulars, perhaps some patients. Specialty pharmacies use lower cost as one of their chief selling points.

Lower costs

Specialty pharmacies may be able to negotiate better discounts on the high-priced medications with volume pricing. Sadownik’s research showed that with white bagging, one payer was able to lower per-unit drug prices by between 15% and 38% for several of the drugs, compared with buy-and-bill (excluding rebates). When the payer implemented a site-neutral payment policy, there was still a price discrepancy between the two methods, but it decreased slightly. The report noted one example where a drug cost $4,000 a month through traditional billing methods versus $1,000 a month from white bagging, saving the payer $36,000 per patient on a yearly basis.

Helpful to small organizations

Some providers, especially small ones, may not have the infrastructure to take the financial risk of stocking expensive drugs, particularly if they are rarely prescribed. An organization without that cash flow can rely on the specialty pharmacy for distribution, knowing the financials won’t affect them.

No white bagging policies

Children’s Wisconsin has a policy against white bagging, although Lausten says “in certain situations, we are forced to” accept white bagging because the patient may not have another treatment option. Congelli says HOACNY’s policy has worked well but on occasion must be enforced with a payer outside the area. The payers usually don’t get very far into the process before they agree to buy-and-bill. If the payer mandates white bagging, the HOACNY physician notifies the patient and with the patient’s permission, the physician reaches out to their employer’s human resources. Usually that’s the end of the matter.

If white bagging is still mandated, the patient would need to receive treatment at the hospital or an alternate facility. “We’ve never had to admit the patient or find an alternative care center to do that,” Congelli says.

Deborah Abrams Kaplan covers medical and practice management topics.