Time for DCI’s annual replace on the channels for provider-administered medication. Under, I evaluation the newest information on 2024 developments and evaluate them to the pre-pandemic figures.
For 2024, payers report that specialty pharmacies—through white and clear bagging—have displaced buy-and-bill for a significant share of economic coated lives using provider-administered oncology medication. Nonetheless, supplier pushback has restricted specialty pharmacies’ share good points, in order that buy-and-bill stays the commonest channel for these merchandise.
Payers’ adoption of white bagging—and supplier’s push again—replicate the continued battle for oncology margin in U.S. drug channels. Let’s hope that sufferers don’t get caught within the crossfire.
P.S. At this time’s article is customized from Chapter 3 of DCI’s forthcoming 2024-25 Financial Report on Pharmaceutical Wholesalers and Specialty Distributors, which will likely be accessible to preorder subsequent week at particular introductory pricing.
B&B
Most provider-administered outpatient medication are ruled by the buy-and-bill course of, which is illustrated within the chart under.
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Within the buy-and-bill course of, a healthcare supplier purchases, shops, after which administers the product to a affected person. After the affected person receives the drug and another medical care, the supplier submits a declare for reimbursement to a third-party payer. The method is named buy-and-bill as a result of the medical declare is submitted (billed) after the supplier purchases (buys) and administers the drug. The supplier is chargeable for accumulating the affected person’s share of drug reimbursement—the copayment or coinsurance.
Observe that the chart above reveals a rebate fee from producers to third-party payers. For 2023, one-third of employers and two-thirds of economic well being plans reported receiving rebates for provider-administered injectable and infused medication billed below the medical profit. (See PSG’s 2024 Developments in Specialty Drug Profit Design.)
The prevalence and worth of medical profit rebates have grown as innovator merchandise have begun competing with biosimilar merchandise. Traditionally, Medicare Half B has had no statutorily mandated rebates, however the Inflation Discount Act now requires producers to pay rebates on single-source Half B medication whose costs rise sooner than inflation.
IN THE BAG
In recent times, third-party payers have grow to be dissatisfied with the buy-and-bill method for specialty prescription drugs coated below a affected person’s medical profit. For instance, drug costs paid to 340B-eligible hospitals by Blue Cross Blue Protect well being plans had been greater than 3 times higher than acquisition prices for 57 provider-administered specialty medication. Hospitals that weren’t eligible for 340B reductions obtained funds that had been 2.4 instances higher than acquisition prices. (supply)
Third-party payers have subsequently permitted or mandated a task for specialty pharmacies in managing and distributing provider-administered specialty medication. There are three different approaches:
- White bagging. A specialty pharmacy ships a affected person’s prescription on to the supplier, comparable to a doctor workplace or an outpatient clinic. The supplier holds the product till the affected person arrives for therapy.
- Brown bagging. The affected person picks up a prescription at a pharmacy after which takes the drug to the supplier’s workplace for administration.
- Clear bagging. A supplier’s inside specialty pharmacy dispenses the affected person’s prescription and transports the product to the situation of drug administration. Clear bagging has emerged as a result of presence of practice- and hospital-owned specialty pharmacies, which account for one out of 4 accredited specialty pharmacies.
With any of those approaches, the supplier neither purchases the drug nor seeks drug reimbursement from a third-party payer. As a substitute, the specialty pharmacy adjudicates the declare and collects any copayment or coinsurance from the affected person earlier than therapy. Nonetheless, the supplier continues to be paid for skilled providers related to the drug’s administration. Suppliers will not be permitted to invoice the third-party payer for medication, as a result of the pharmacy receives the reimbursement for the medication despatched to the supplier. Exhibit 47 in our forthcoming report illustrates the white bagging course of, as a distinction to the buy-and-bill course of proven above.
Many main well being plans now have white bagging applications. As an illustration, UnitedHealthcare’s specialty pharmacy white bagging necessities for business plan members apply to greater than 100 specialty and oncology supportive medication in addition to to sure gene remedy merchandise.
THAT’S THE FACT, JACK
MMIT has once more graciously offered us with a number of years of knowledge from its MMIT Oncology Index. For extra details about this invaluable useful resource, please contact Jessica Smith jsmith@mmitnetwork.com). These information have some notable limitations. See the Notes for Nerds materials under.
As you possibly can see under, business payers reported that pharmacy channels have displaced buy-and-bill for a significant share of coated lives in business well being plans. Pharmacy channels are represented by the orange and gray bars. Pharmacy dishing out sometimes corresponds with pharmacy profit protection quite than medical profit protection.
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Observations:
- For 2024, well being plans reported that buy-and-bill remained the commonest technique of product sourcing for individuals who obtained provider-administered medication in doctor places of work and hospital outpatient departments. In contrast with the pre-pandemic interval (2019), payers report restricted shift within the utilization of white bagging.
- At doctor places of work, the share of coated lives for which payers reported white bagging to be the commonest technique of product sourcing has been 15% to twenty% all through the previous 5 years.
- At hospitals, business plans reported that buy-and-bill was hospital outpatient departments’ most typical technique for sourcing provider-administered oncology medication. The 2024 determine is in step with the figures from earlier years.
- Brown bagging has successfully been eradicated as an possibility for provider-administered drug sourcing. Many suppliers and payers think about brown bagging to be a problematic technique of product sourcing, as a result of sufferers might mishandle merchandise that they acquired through brown bagging.
Different information sources report decrease ranges of white bagging for some oncology merchandise. For instance, IQVIA reported that 98.5% of medical oncology merchandise flowed by means of the buy-and-bill system..
WHO WINS?
A well being plan’s financial savings from white and brown bagging methods usually come from the misplaced income and incremental prices incurred by suppliers, sufferers, and producers.
Clearly, suppliers can’t earn a revenue margin on the drug that an exterior specialty pharmacy delivers. Consequently, solely 49% of hospitals have insurance policies that let white bagging, whereas 94% have insurance policies that let clear bagging. It is not stunning that suppliers favor clear bagging.
Suppliers’ opposition has led to legislative efforts to ban white bagging. Arkansas, Louisiana, Rhode Island, Texas, and Virginia have additionally handed legal guidelines that prohibit state-regulated insurers from implementing white bagging insurance policies.
Sufferers additionally lose out from white bagging. One research discovered that white bagging lowered payers’ prices, however raised sufferers’ out-of-pocket obligations. That’s as a result of white bagged merchandise are sometimes billed below pharmacy profit plans, the place sufferers face coinsurance and deductibles for specialty medication. In contrast, many business plans require no or minimal affected person price sharing for medication administered in a hospital outpatient setting and billed to the medical profit.
For a deep dive into all issues buy-and-bill, try Chapters 3 and 6 in our forthcoming our 2024-25 Financial Report on Pharmaceutical Wholesalers and Specialty Distributors. Full particulars coming subsequent week!
NOTES FOR NERDS
- The MMIT information are based mostly on well being plan survey responses to the next query: “What’s the most typical acquisition technique for oncology specialty merchandise professionally administered by infusion or injection to sufferers within the following settings?”
- Figures for 2019 based mostly on 48 business plans representing 126.6 million coated lives. Figures for 2024 based mostly on 35 business plans representing 115.8 million coated lives.
- The MMIT information measure well being plans’ self-reported “most typical” sourcing technique for provider-administered medication. The outcomes proven above are weighted by well being plans’ coated lives. Nonetheless, these information don’t measure the unit portions or greenback volumes of suppliers’ purchases by sourcing channel. Consequently, a big plan’s swap in its reported “most typical” technique might swing the measured figures disproportionate to the precise adjustments in underlying quantity.
- The outcomes proven above don’t reveal whether or not practices and hospitals are using an in-house specialty pharmacy to supply these merchandise. Thus, the information are labeled “White/clear bagging” to replicate the unobserved mixture of white bagging and clear bagging.
- So far as I do know, there aren’t any public information on precise buy volumes. If in case you have such information, please e-mail me so I can share the data with the Drug Channels neighborhood.
