Emerging Trends in Payor-Mandated White Bagging

Over the last several years, several of the nation’s largest insurers, pharmacy benefits managers (PBMs), and specialty pharmacies have combined or consolidated into just a handful of vertically integrated healthcare conglomerates. This consolidation and integration have had a variety of impacts on the healthcare and provider community.  However, in seeming unison, several health insurance companies (who have integrated PBMs and specialty pharmacies) have begun to take drugs that were previously purchased by the hospital facilities and/or physician practices and administered in-office to patients, and now requiring that they be filled by a PBM-owned specialty pharmacy. These are drugs that historically have been “buy-and-bill” medications, reimbursed under the medical benefit (as opposed to the pharmacy benefit).  Because these are often intravenous (IV) drugs, they cannot be self-administered by the patient, and still need to be infused by a health care provider. In essence, these plans are seemingly requiring hospital-based infusion clinics and/or physician practices to accept “white bagged” and/or “brown bagged” medications, and administer them to their patients.
These actions have an immense impact on patients and providers, alike.  Patients face issues of delays and confusion over where their medications will come from, and providers face not only the potential for lost sources of revenue, but also increased legal and administrative concerns with accepting white- or brown-bagged medications.  Fortunately, options exist for many affected providers – including hospital-based infusion centers and physician practices – to combat these trends.
In order to better understand the actions being taken by different plans, and the impact on different providers, it is important to have a clear and consistent understanding of certain terms and practices
that have emerged over the past few years.
White Bagging. This is practice where a medication is ordered by a physician, and is supplied pursuant to a prescription, by a licensed pharmacy, who then causes the medication to be delivered directly to the provider’s office for administration to the patient in the clinical setting.  The distinguishing factor of this practice is that the medication is delivered directly by the pharmacy to the provider’s office.
Brown Bagging. This is practice where a medication is ordered by a physician, and is supplied pursuant to a prescription, by a licensed pharmacy, who dispenses the medication to the patient.  The patient, in turn, brings the medication with them to their next physician’s appointment, and the physician then administers the medication to the patient in the clinical setting.  The distinguishing factor of this practice is that the medication is delivered to the patient (rather than directly to the provider’s office), thereby affecting the chain of custody of the medication.
Clear Bagging. This is practice is very similar to white bagging, in the a medication is ordered by a physician, and is supplied pursuant to a prescription, by a licensed pharmacy, who then causes the medication to be delivered directly to the provider’s office for administration to the patient in the clinical setting.  The distinguishing factor of this practice, however, is that rather than the medication being filled and delivered by an unrelated pharmacy, the prescription is instead filled and supplied by a pharmacy associated with the ordering physician.  This typically occurs in the context of health-system owned specialty pharmacies supplying medications for their affiliated clinics.  Here, not only does the medication never leave the chain of custody or control of licensed providers, but it stays within the custody and control of a single entity (i.e., an integrated health system).
In mid-2020, several large payors took virtually identical conduct to begin to require that in-office infused medications be filled at their wholly-owned specialty pharmacies, and placing limitations, or removing the ability altogether, on providers’ ability to source and seek reimbursement for medications administered in their facilities.  We detail some of the specific payor actions below.
Anthem Blue Cross, who processes under CVS Caremark, has put out a notice offering CVS Specialty as its “designated” specialty pharmacy for specialty medications administered in the office or outpatient hospital setting.  According to the notice, providers will be required to obtain specialty pharmacy medications administered in the office or outpatient hospital setting through CVS Specialty for dates of service on or after July 1, 2020. This policy appears to apply to all specialty drugs covered through commercial HMO members’ medical benefits where Anthem has financial risk for the cost of specialty medications. The medical group will continue to be responsible for UM and prior authorization of specialty medications.  The notice further suggested that drugs could be delivered to any destination of the patient’s choice, potentially explicit authorizing “brown bagging.”  Ultimately, this new policy appears to impact both hospital-based infusion centers as well as physician practices (such as oncology practices, hematology practices or ophthalmology practices) that routine administer medication to their patients in office.
Cigna, who processes under (and owns) Express Scripts, has put out a notice stating that certain specialty medical injectables must be dispensed and their claims must be submitted by a specialty pharmacy with which Cigna has a reimbursement arrangement.  The notice goes on to state that Cigna will not reimburse “facilities” that purchase these injectables directly from specialty pharmacies, manufacturers, or wholesalers.  While the notice lists multiple medications across many disease states, with respect to oncology medications, Cigna indicates that it shall apply to Opdivo, Yervoy, and Enhertu, stating that for each of these products, ESI’s wholly-owned Accredo is the sole contracted specialty pharmacy.   While the notice does not define “facilities,” the notice at one point appears to suggest that “physicians, hospitals, ancillaries, and other providers” can access the website to find out more information; however, at another point, it suggests that “the reimbursement restriction may apply when these oncology drugs are administered in a high-intensity setting, such as an outpatient hospital.”  Thus, this new policy appears to impact at the very least hospital-based infusion centers, but might also impact physician practices as well.
Aetna, who is owned by CVS Health and processes under CVS Caremark, has put out a notice moving several oncology in-office therapies to a “Site of Care Management List.”  Effective July 1, 2020, several therapies, including Opdivo, Keytruda, Yervoy, and Tecentriq, will be added to the list.  This means that in lieu of administration in the hospital outpatient setting (which Aetna contends can cost over $20,000 per infusion), the patients will be required to choose in-network options, including independent infusion centers, home infusion, infusion within a physician’s office, or, when those options are not possible, Aetna will coordinate with the hospital facility to deliver patient-specific medication from a specialty pharmacy.  While this policy does not (yet) prohibit physicians from doing “buy-and-bill,” it does require white/brown bagging for outpatient hospital centers.  
There are many uncertainties with the scope and full affect of these practices.  For example, what happens if a hospital-based infusion center or physician’s practice refuses to accept white-bagged medications?  Will the plan require that the patient receive the medication through home infusion, even if the drug is not FDA-approved for administration outside of a clinic setting?  In addition, several payors have suggested that hospital-based infusion centers and/or physician practices might still be able to seek reimbursement for the administered medications, but would have to seek admission to the PBM’s specialty pharmacy network, which often come with onerous terms and conditions, as well as aberrantly low reimbursement rates.
Physician practices and hospital-based infusion centers are clearly impacted by payors’ “white bagging” mandates.
For one, there is an immense financial impact by no longer being able to seek reimbursement for medications administered within the office or facility. For many specialty providers, such as oncologists, revenue from drug administration can constitute 50% or more of the practices’ overall revenue.  While practices can still bill for a CPT code associated with the professional services for the administration of the drug in office, they can no longer bill for the drug itself, and from an economic perspective, a large part of reimbursement for the administration is actually baked into the cost of the drug.  Oncology professional services have long been underpaid and that average wholesale price drug payments were made the standard by the Centers for Medicare & Medicaid Services years ago, recognizing that the use of average wholesale price provided a margin that covered costs not otherwise reimbursed.
Beyond financial impacts, mandatory “white bagging” exposes facilities and practices to legal and regulatory risk.  An increasing number of states have moved to prohibit or curtail white and/or brown bagging. For example, Massachusetts identifies white bagging as “redispensing” which is prohibited. 1  In addition, going along with payors’ white bagging mandates could run afoul of state patient steering laws (such as New Jersey’s 2 or Georgia’s 3) which generally prohibit health care providers from agreeing to send prescriptions to a particular pharmacy.  Finally, accepting and administered white or brown bagged medications may create exposure for providers seeking to comply with track-and-trace and drug pedigree laws, including the Drug Supply Chain Security Act 4 and other state laws.
 247 CMR 09.01(4).
 N.J.A.C. 13:39-3.10.
 GA. Code Ann. § 26-4-119
 21 U.S.C. § 360eee, et seq.
Apart from compliance concerns, accepting white- or brown-bagged medications poses a significant liability to physicians and hospital centers with regard to product integrity, product labeling, and accuracy. The ordering/administering provider remains legally responsible for any drug injected or infused into the patient, even when he/she has lost control of the process. In October 2012, 64 people died and over 700 people became sick as a result of contaminated compounded steroid injections supplied by New England Compounding Center (NECC).  The medications had been ordered by physicians for in-office administration to their patients in clinics and surgery centers.  However, due to insanitary conditions at the pharmacy, several batches of the medications had become tainted with fungus, causing many patients to develop fungal meningitis and become seriously ill or die.  In the wake of this, dozens of lawsuits (including multiple class actions) were filed against not only the pharmacy, but also the clinics, surgery centers and underlying physicians.  In several of these lawsuits, plaintiffs not only accused the providers of negligence (particularly in their selection of the pharmacy), but sought to invoke strict liability for the clinics, meaning the facility could be held liable for selling a defective product even without knowledge of a defect.
Beyond impacting the providers, mandatory white bagging also has negative impacts for patients and the healthcare system as a whole.  At a patient level, it compromises and is detrimental to patient care on so many levels, ranging from optimization of therapy, patient access and missed doses, interruptions to critical treatment, worsening disease states, increasing risks of medication errors, adverse events, interference with the patient physician relationship, and failure to ensure and monitor FDA-mandated REMS.  Not having control over the sourcing, storage, preparation, and handling of specialty medications exposes patients to potentially serious harm, while increasing the administrative burdens and liability.
White bagging may increase overall healthcare costs and waste. Dosing adjustments based on the patient’s laboratory results, other clinical considerations or therapy cancellations result in waste. 5   Once the prescription has a patient-specific label, the specialty pharmacy will not accept returns. Delays in receiving the medication past an anticipated date are commonly caused by a variety of factors, including failed delivery, incorrect medications being delivered, medications shipped to the wrong address, prior authorization issues, out of stock medications, etc.  In addition, failure or inability of patients to pay up-front for any copay or co-insurance (often thousands of dollars) will interrupt critical treatment.
 Schwartz RN et al. NCCN Task Force Report: Specialty Pharmacy. J NCCN Network.2010;8(Supp 4):S1-S12.
As noted earlier, several options may exist to help physician practices and hospital-based infusion centers that are impacted by these policies.  Some require affirmative and direct action by providers, while others may provide operational solutions.
Dispensing or “Clear Bagging” Under the Pharmacy Benefit. Clear bagging requires the health system to have specialty pharmacy capabilities which may be a solution for larger hospital-based infusion centers. One advantage is the health system maintains inventory control with a just-in-time inventory strategy. The drug belongs to the health-system pharmacy (as opposed to the clinic itself), but it may benefit from reduced waste as the pharmacy generally has the ability to prepare and dispense/deliver the drug only when the patient is on site.  Clear bagging moves billing and payment to the front of the process, while securing reimbursement at known terms. An advantage is that the claim is processed prior to the patient receiving the drug which his important for benefit investigation and prior authorization.
Require Specialty Pharmacies and Payors to Indemnify Provider for Accepting White Bagged Medications. Physician practices and health systems may take a stand and refuse to accept white bagged and/or brown bagged medications unless the health plan and their PBM accept liability for patient harm caused by any act or omission arising from the procurement or delivery of pharmaceuticals, including product liability exposure or medical malpractice claims.
File Complaints with Regulatory Agencies. Another option available to providers facing mandatory white or brown bagging is to commence complaints with regulatory agencies.  To the extent that the plans and their vertically integrated PBMs acted via a coordinated action to restrain trade and monopolize the specialty pharmacy trade, this could justify action by the Federal Trade Commission or other similar bodies. In addition, these arrangements may run afoul of state patient steering laws, insurer licensing laws, and even track-and-trace requirements.  Finally, to the extent the policies risk patient harm, especially on issues of delays in therapy, complaints could be submitted to State Boards of Pharmacy, State Boards of Medicine, and/or State Departments of Insurance.
Engage in Advocacy Efforts.  Most State Boards of Pharmacy have not yet weighed in on these practices. The state legislative landscape is also ripe for legislative efforts. A support coalition and political action plan could be created for advocacy efforts consisting of patient groups, self-funded plans, and even pharmaceutical manufacturers whose products have been targeted for these practices.
Litigation.  At the end of the day, litigation avenues may exist for impacted providers, who are facing requirements to accept a PBM-owned pharmacy’s prescriptions for in-office administration.  This could include claims under State Any Willing Provider Laws, Patient Steering Laws, Antitrust Laws and/or existing state laws addressing white/brown bagging (as it stands, Georgia, Massachusetts, Minnesota, Ohio, and New York each have laws addressing these practices in some way or another).
How Frier Levitt Can Help
Mandatory white and brown bagging policies have clearly been on the rise among large payors. Fortunately, options exist for hospital-based infusion centers and physician practices that have been negatively impacted by these policies.  Contact us and speak to an attorney for strategic advice and advocacy as your practice or health system navigates the nuances of white bagging. We have extensive experience working through these and other white bagging issues.