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| Mar 28, 2014
Co-authored by Deni Deasy Boekell, Senior Director
Channel dynamics are changing for physician-administered infusible drugs, with implications for practice economics, payer utilization management, site of care, and availability of data for manufacturers. Today, buy and bill’ is the primary method of distribution of IV oncology drugs, whereby oncology practices typically purchase these drugs from specialty distributors/group purchasing organizations (GPOs), which are then billed to payers under the medical benefit. Recently, however, specialty pharmacies are making inroads into the buy and bill model via “white bagging.” (Figure 1).
Figure 1: With the advent of white bagging, drugs flow through SPs, bypassing buy and bill and usually SDs/GPOs
White bagging is the method of delivery by which physician-administered drugs are dispensed by a specialty pharmacy (SP) for a specific patient, shipped to the physician for administration, and generally paid under the pharmacy benefit rather than the medical benefit. The specialty pharmacy is reimbursed by the payer for the drug; the physician is only paid a drug administration fee.
Payers and providers have different, and at times, conflicting objectives, but both are finding reasons to adopt white bagging. Providers may elect to have a specialty pharmacy dispense the drugs to eliminate the financial risks and hassles of securing adequate reimbursement for certain drugs. In addition, some payers mandate – or encourage through unfavorable reimbursement structures – white bagging to control utilization and lower costs of selected drugs.
Manufacturers look to channel partners for product access, quality control through the supply channel, and product data. Although specialty distributors (via buy and bill) or by specialty pharmacies (via white bagging) may both be able to support these objectives, the two models have implications that manufacturers will want to consider. Knowing what the drivers of white bagging are, whether payer or provider instigated, is important to manufactures if they wish to influence distribution dynamics.
White Bagging Growth Trend
While most IV drugs continue to flow through the specialty distributor channel, the use of the SP channel is increasing (Figure 2). Similarly, payers report 25% of IV oncologics being dispensed by SPs in 2013 (Figure 3).
Figure 2: The white bagging channel increases as buy and bill decreases.
Figure 3: Payers report one-quarter of IV cancer drugs are distributed through SPs.
White bagging may be attractive to payers for a few reasons. Partnership with SPs allows payers to extend the reach and depth of utilization management on the pharmacy benefit. In addition, white bagging may be cost effective if payers are able to negotiate more favorable dispensing rates with SPs than through buy and bill. One-third of respondents in Kantar Health’s 2013 MCO survey reported that they had implemented or expanded their use of specialty pharmacies for office-administered drugs in 2013, with additional increases planned in 2014 (Figure 4).
Figure 4: Payers have increased their use of Specialty Pharmacy for office-administered drugs in 2013, and plan to further increase use of SPs in 2014
Providers, in turn, may choose to white bag to avoid carrying costs and the financial risk associated with expensive drugs (Figure 5).
Figure 5: Financial considerations and payer mandates drive practice use of white bagging
Practices are increasingly sensitive to carrying costs and reimbursement risk – indirectly driving white bagging. Financial pressure and risks stem from decreased reimbursement from payers and patients’ inability to pay their cost shares. Growing oncologist comfort with SPs for oral oncolytics may also support increased use of SPs for IVs (Figure 6).
Figure 6: Practices acknowledge value of SPs in providing administrative assistance
The confluence of payer and provider drivers is likely to precipitate a slow but steady growth of white bagging over time. The result will likely be a combination of models in oncology – buy and bill and white-bagging – co-existing across provider segments and even within practices.
Why should manufacturers care whether their IV oncology products are dispensed via buy and bill or white bagging?
- In using an SP, providers forego the potential margins on buy and bill. Do the differences in margins impact physician choice in treatment options?
- Unfavorable practice economics, including loss of revenue from buy and bill, and unfavorable reimbursement on some products, is fueling the shift toward the more expensive hospital as site of care. Among other cost implications, patient cost share may be higher in this setting, impacting ability to pay and treatment continuation.
- Manufacturers’ access to data is more limited through SPs, reducing the ability to track sales.
- Specialty Pharmacy is a more fragmented channel than SDs, requiring many more relationships and increasing quality control risks.
In any case, manufacturers of IV products may want to expand relationships with SPs and leverage their relationships with oncology practices.