Deirdre Fuller, Oncology Roundtable
A recent report suggests that by the end of 2013, 40% of total drug spending will be on specialty products. As a result, hospitals will need to create strategies to manage higher instances of "white bagging." Read on to learn how you can better manage the operational and financial challenges posed by this practice.
What is "white bagging?"
- Traditionally, oncology providers have operated using the buy and bill model. They purchase specialty drugs, like chemotherapeutics, administer them, and then bill payers for the drugs and the drug administration.
Drug reimbursement is typically equal to the cost of the drug plus a fixed percentage.
White bagging takes cancer providers out of the buy and bill business. Under white bagging, payers purchase the drugs through a specialty pharmacy, which then ships them to the provider for administration.
Why the shift to white bagging?
As discussed at a recent Oncology Pharmacy Education Network (OPEN) meeting, white bagging has become increasingly popular with payers because it allows them to:
- Purchase drugs at a cheaper rate
- Shift coverage of specialty drugs from medical benefit to pharmacy benefit, which transfers greater cost responsibility onto patients
- Increase their visibility into their drug spending
A 2010 survey by iCore, a benefits management company, revealed that 29% of injectable drugs administered by providers, including both oncology and non-oncology drugs, were obtained through white bagging. As payers focus on controlling cancer costs, these numbers are most likely higher today, and will continue climbing.
Why is white bagging problematic for hospitals?
One of the biggest challenges white bagging poses for providers is that they do not receive any compensation for the additional responsibilities they must take on to serve as couriers for complex drugs, such as special handling and temperature-control monitoring.
Under white bagging, hospitals often assume responsibility for patient care and safety. This means that they must verify drug integrity and pedigree and ensure that risk evaluation and mitigation strategies requirements are met.
As health care consultant Ernie Anderson recently said during his presentation at the Oncology Pharmacy Education Network (OPEN) meeting, “institutions don’t get reimbursed for mixing the white-bagged specialty pharmacy drugs, but they assume all of the liability for it.”
How can hospitals respond to white bagging?
Here are a few strategies hosptials have used to manage white bagging:
- Refuse to allow white bagging. Some health systems have pushed back when requested by payers to use a specialty pharmacy and have refused to do so. However, as the number of specialty pharmacy drugs increases, this option may not be viable for many hospitals.
- Make a case for compensation. Although rare, some hospitals have convinced insurers to pay them an administration fee for the management of specialty pharmaceuticals. If insurers are using average sales price reimbursement, pharmacies should request a fee of +25-30% over ASP to include the additional overhead costs.
- Become a specialty pharmacy. A number of hospitals and health systems have developed their own specialty pharmacies. Since becoming a specialty pharmacy is no easy task due to complex regulatory criteria, hospitals may consider forming specialty pharmacies in partnership with other organizations.
Want to Learn More?
For more on specialty pharmacies, check out our blog post, and keep an eye out for the American Society of Health-System Pharmacists' upcoming guidelines on coordinating patient care with specialty pharmacies.