For years, oncologist John DiPersio, MD, PhD, had faced frustrating encounters with insurers that only cover medications through a process called white bagging.
Instead of the traditional buy-and-bill pathway where oncologists purchase specialty drugs, such as infusion medications, directly from the distributor or manufacturer, white bagging requires physicians to receive these drugs from a specialty pharmacy.
On its face, the differences may seem minor. However, as Dr. DiPersio knows well, the consequences for oncologists and patients are not.
That is why Dr. DiPersio’s cancer center does not allow white bagging.
And when insurers refuse to reconsider the white bagging policy, his cancer team is left with few options.
“Sometimes, we have to redirect patients to other places,” said Dr. DiPersio, a bone marrow transplant specialist at Siteman Cancer Center, Washington University, St. Louis.
In emergency instances where patients cannot wait, Dr. DiPersio’s team will administer their own stock of a drug. In such cases, “we accept the fact that by not allowing white bagging, there may be nonpayment. We take the hit as far as cost.”
Increasingly, white bagging mandates are becoming harder for practices to avoid.
In a 2021 survey, 87% of Association of Community Cancer Centers members said white bagging has become an insurer mandate for some of their patients.
A 2023 analysis from Adam J. Fein, PhD, of Drug Channels Institute, Philadelphia, found that white bagging accounted for 17% of infused oncology product sourcing from clinics and 38% from hospital outpatient departments, up from 15% to 28% in 2019. Another practice called brown bagging, where specialty pharmacies send drugs directly to patients, creates many of the same issues but is much less prevalent than white bagging.
This change reflects “the broader battle over oncology margins” and insurers’ “attempts to shift costs to providers, patients, and manufacturers,” Dr. Fein wrote in his 2023 report.
White Bagging: Who Benefits?
At its core, white bagging changes how drugs are covered and reimbursed. Under buy and bill, drugs fall under a patient’s medical benefit. Oncologists purchase drugs directly from the manufacturer or distributor and receive reimbursement from the insurance company for both the cost of the drug as well as for administering it to patients.
Under white bagging, drugs fall under a patient’s pharmacy benefit. In these instances, a specialty pharmacy prepares the infusion ahead of time and ships it directly to the physician’s office or clinic. Because oncologists do not purchase the drug directly, they cannot bill insurers for it; instead, the pharmacy receives reimbursement for the drug and the provider is reimbursed for administering it.
Insurance companies argue that white bagging reduces patients’ out-of-pocket costs “by preventing hospitals and physicians from charging exorbitant fees to buy and store specialty medicines themselves,” according to advocacy group America’s Health Insurance Plans (AHIP).
Data from AHIP suggested that hospitals mark up the price of cancer drugs considerably, charging about twice as much as a specialty pharmacy, and that physician’s offices also charge about 23% more. However, these figures highlight how much insurers are billed, not necessarily how much patients ultimately pay.
Other evidence shows that white bagging raises costs for patients while reducing reimbursement for oncologists and saving insurance companies money.
A recent analysis in JAMA Network Open, which looked at 50 cancer drugs associated with the highest total spending from the 2020 Medicare Part B, found that mean insurance payments to providers were more than $2000 lower for drugs distributed under bagging than traditional buy and bill: $7405 vs $9547 per patient per month. Investigators found the same pattern in median insurance payments: $5746 vs $6681. Patients also paid more out-of-pocket each month with bagging vs buy and bill: $315 vs $145.
For patients with private insurance, “out-of-pocket costs were higher under bagging practice than the traditional buy-and-bill practice,” said lead author Ya-Chen Tina Shih, PhD, a professor in the department of radiation oncology at UCLA Health, Los Angeles.
White bagging is entirely for the profit of health insurers, specialty pharmacies, and pharmacy benefit managers, the middlemen who negotiate drug prices on behalf of payers.
Many people may not realize the underlying money-making strategies behind white bagging, explained Ted Okon, executive director for Community Oncology Alliance, which opposes the practice. Often, an insurer, pharmacy benefit manager, and mail order pharmacy involved in the process are all affiliated with the same corporation. In such cases, an insurer has a financial motive to control the source of medications and steer business to its affiliated pharmacies, Mr. Okon said.
When a single corporation owns numerous parts of the drug supply chain, insurers end up having “sway over what drug to use and then how the patient is going to get it,” Mr. Okon said. If the specialty pharmacy is a 340B contract pharmacy, it likely also receives a sizable discount on the drug and can make more money through white bagging.