The Georgia House of Representatives is moving forward with a bill (HB 924) to limit so-called “white bagging” — a practice in which insurance companies send drugs to hospitals and doctor’s offices rather letting the providers source the drugs themselves. Insurance companies say the practice saves money. Hospitals and pharmacy groups say white bagging leads to mix ups and treatment delays.
If the legislation is approved, Georgia would join 10 U.S. states that have restricted the practice. The bill, proposed by Rep. Mandi Ballinger (R-Canton), would ban insurance companies from denying payment or refusing permission to hospitals and doctors who opt to use their own supplies of medicines.
“It helps protect patients by ensuring they receive the medicine their doctor intended them to have, as they have to have it,” Ballinger told the AJC in an emailed statement. “Many medicines are light and temperature sensitive — considerations that might well be beyond the control of the patient. This bill will make sure they are protected, safe, and getting the full efficacy of the medicines they and their doctor intend.”
Anna Adams, executive vice president of external affairs at the Georgia Hospital Association, told the AJC that white bagging unfairly saddles hospitals with costs. She said hospitals are responsible for the preparation of complex and hazardous specialty medications, but do not receive reimbursement for these services. White-bagged drugs can also lead to mix-ups and rescheduled appointments that drive up costs for both patients and hospitals, she added.
“With white bagging, our members have experienced drugs that have shown up the wrong day, or late,” Adams said. “Or the drugs require lab work before they can be administered. If anything has changed with the patient, we can’t administer the drugs. With MS patients, for example, it means we can’t treat them at their appointments — they can relapse, which can start a negative a chain reaction.”
She said Northside Hospital System, Shepherd Center and Tanner Health System have been lobbying for limits to white bagging.
The Georgia Hospital Association does not favor an outright ban on white bagging, but rather a rule limiting it to patients who are receiving treatment from a doctor or facility that’s out of network for their insurance coverage, Adams said. “We don’t want insurance plans to be able to come back later after a treatment agreement is in place, and say ‘you can’t use your own pharmacy anymore, we want to white bag.’ Some states have attempted to go for an outright ban. But this is what we think will work better in Georgia from a legislative perspective.”
It’s about the money
The practice of sending patients to hospitals to receive infusions and other drugs, and then billing insurance companies, is called “buy and bill.”
The majority of outpatient drugs administered by healthcare providers follow the buy-and-bill procedure. The approach gives doctors the flexibility to adjust drugs or make changes to treatment, if necessary.
The proposed Georgia legislation pits hospital associations, nurses, and state boards of pharmacy against employer groups and insurance companies.
“Both sides are saying, ‘This isn’t about that money,’ but that’s not true,” Carmen A. Catizone, Founding Partner, CLM Pharmacy Advisors, told the AJC.
Catizone said hospitals could be marking up the price of drugs they provide to patients to “subsidize” other parts of their operations.
He said a reasonable use of white bagging could be for uncommon or perishable drugs. “Bagging can be useful when a hospital doesn’t carry a medication, or if it’s a drug with a short lifetime. That might be a legitimate use.”
Also part of the discussion are lucrative rebates drug makers give to either hospitals or insurance companies who buy their drugs.
In its 2022 annual report, UnitedHealthcare — one of the most vocal critics of buy and bill — said it received pharmaceutical manufacturer rebates of $8.2 billion in 2022 and $7.2 billion in 2021. The company said potential new legislation and regulations regarding the receipt or disclosure of rebates and other fees from pharmaceutical companies represents a risk to its future earnings.
A report by the Institute for Clinical and Economic Review found that under buy and bill, hospital markups can be more than the price of a drug itself. The hospital markups can represent hundreds of thousands of dollars per patient, the report said.
A report by the Institute for Clinical and Economic Review found that under buy and bill, markups charged to payers by hospitals when clinicians administer drugs in the hospital setting have been found to be as high as 200 to 300 percent of the base price of the drug.
Both white bagging and buy and bill succeed at getting specialty drugs to patients in Georgia and around the country, though at great expense. Even though less than 2 percent of the population uses specialty drugs, those prescriptions account for 51 percent of total pharmacy spending in the U.S., according to a report by Evernorth health services.
Overall spending on specialty drugs rose 8.4 percent from 2019 to 2020, according to one academic study.
Researchers attribute part of this increase to markups. A nationwide study found that hospitals mark up cancer drugs 120 percent to 630 percent. However, doctors’ offices charged much less, marking up drugs just 23 percent, according to the AHIP, the trade association of U.S. health insurance companies.
Cost cutting
Over the last decade, insurance companies have tried to push back on the buy-and-bill approach, in an effort to cut their costs for expensive drugs. What emerged was not just white bagging but also “brown bagging,” and “clear bagging.”
Brown bagging involves a patient picking up a prescription and bringing it to a provider for it to be administered. Clear bagging is when a hospital-owned pharmacy sends and transports a drug to the treating hospital.
The proposed Georgia legislation would broaden two directives that John F. King, Insurance And Safety Fire Commissioner State Of Georgia, issued in August 2022 and in October 2022.
Those rules prohibit health plans from engaging in the practice of white bagging at any hospital in the state designated as a “Critical Access Hospital” by the Centers for Medicare & Medicaid Services; any hospital not designated as a Critical Access Hospital but that is located 30 miles or more from another hospital; and any hospital the Georgia Department of Community Health has qualified as being eligible for the Georgia HEART program. Critical Access Hospitals and those in the HEART program are typically smaller hospitals located in rural areas.
The proposed legislation would allow health plans to notify a patient that they may receive savings from utilizing the practice of white bagging.
UnitedHealthcare’s policy protocol requires specialty drugs listed on UHCprovider.com to be sourced through an indicated specialty pharmacy, which it lists on its website.
The trade group that represents UnitedHealthcare and other insurers worries that HB 924 would weaken rules that have the potential to reduce hospital pricing, Jesse Weathington, President and CEO at Georgia Association of Health Plans, told AJC.
“We are concerned about Georgians who would be trapped in the most expensive setting possible when receiving physician-administered drugs,” Weathington said in an emailed statement. “Hospital ‘Buy and Bill’ practices mean patients are forced to pay thousands of dollars more for life saving medications that can be safely provided to them for a fraction of the cost elsewhere.”
But trade groups like American Society of Health-System Pharmacists say drugs mailed from the insurers’ pharmacies to hospitals or patients could be compromised.
The issue isn’t unique to Georgia hospitals. In a letter to the California Board of Pharmacy, John P. Teague, Director of Pharmacy at the Pioneers Memorial Healthcare in Brawley, CA, said pharmacists could not determine how long white bagged medicine sat unattended. Medicines sent via auto-refill in advance of treatment were sometimes thrown out after physicians decided to stop the treatment, he added.
“Physicians have to throw out drugs and that can create a hazardous waste issue,” Lemrey “Al” Carter, spokesman of the National Association of Boards of Pharmacy NABP, told the AJC. “If a pharmacy is sending a full vial when the patient only needs a few doses, that’s a complication that can lead to costs.”
Data on the practice is hard to quantify but two studies have tried. The more expensive drugs, such as those used for cancer treatments, are more likely to be white bagged.
About 17 percent of infused cancer drugs administered at doctors’ offices, and 38 percent administered by hospitals, were sent via white bagging methods, according to MMIT Oncology Index.
Another study found that bagging accounted for 11.4 percent of supportive care drugs given to cancer patients. The study affirmed one of the hospital lobby’s criticisms of white and brown bagged drugs: that modification of treatment plans may or may not be possible. But it also pointed to lower prices for bagged drugs. The study’s authors said further research was needed to understand how bagging affects clinical outcomes.
Georgia hospitals say they need to mark up drugs to account for uninsured patients who visit emergency rooms, but neglect to pay their bills.
“People do ask us why the hospital is charging $20 for an Advil,” Adams of the Georgia Hospital Association said. “We call it the cost shift. Commercial insurance makes up the cost differential that helps us cover the cost of uninsured patients whom we are federally required to treat.”
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