Wayne Winegarden, PhD, of the Pacific Research Institute, explains the harm that white bagging policies cause health systems and how replacing them with new measures to boost market competition could help patients.
Pharmacy benefit managers (PBMs) deploy numerous anticompetitive actions, which have not gone unnoticed. The Federal Trade Commission (FTC) has launched an inquiry to examine whether PBMs have adverse impacts “on the access and affordability of prescription drugs.”
The government’s probe is welcome news. But there are many detrimental PBM practices that are creating unwarranted risks to patients’ health and, consequently, require remedying sooner rather than later. The growing restrictions on where providers can source their drugs, a practice referred to as white bagging, exemplify such practices.
White bagging restrictions prevent medical practices from choosing their preferred drug suppliers. Many doctor practices are integrating specialty pharmacies into their practices (particularly oncology practices). These integrated cancer care models offer benefits including providing medicines faster, improving the communication between doctors and pharmacists, and allowing doctors to monitor their patients better.
Instead of purchasing medicines directly from a manufacturer or the pharmacy of their choice, white bagging requires practices to have the prescribed drug dispensed from specified specialty pharmacies, often specialty pharmacies that are owned by the PBM.
PBMs pivotal position in the drug supply chain enable them to mandate such anti-patient practices. The 3 largest PBMs, which are integrated with health insurers and pharmacies, control more than 80% of the administered drug benefits on behalf of health insurers and other payers.
Mandating where specialty medicines can be purchased is an unwarranted incursion into how doctors manage their practices with ill effects on patients’ quality of care.
Specialty drugs are typically high-cost, high-value medicines that treat devastating illnesses such as chemotherapy drugs for cancer patients. Not unexpectedly, effectively treating cancer patients with complex medicines requires vigilant care. Before administering chemotherapy drugs, doctors perform pretreatment evaluations that include blood tests to ensure, among other important considerations, that no dosing adjustments are necessary.
White bagging interferes with this process. Specialty pharmacies send medicines to doctors’ practices tailored to specific patients with the dosing pre-established. If that dosing needs to be adjusted, then the specialty pharmacy needs to resend an entirely new medicine to the practice.
Patients who were supposed to receive their chemotherapy must consequently reschedule that appointment to a later date creating delays in care. Particularly with cancer, delayed care is worse care. A 2020 study in the BMJ found that each 4-week delay in cancer care was associated with an increased rate of mortality.
White bagging also increases the amount of systemic waste. When doctors are unable to use a patient’s dose—for whatever reason—this dose cannot be used for any other patient. Valuable medicines are needlessly lost as a result.
These concerns are echoed by the North Carolina Oncology Association, which noted that white bagging “can endanger patient care by potentially bypassing safety checks, introducing dosing errors, delaying treatment, and interrupting care planning processes.”
Unfortunately, the practice is accelerating. In a spring 2021 survey of the Association of Community Cancer Centers (ACCC) membership, 87% of respondents said white bagging is “an insurer mandate for some of their patients.”
Preventing these potential costs does not need to wait for the FTC inquiry to end—states can implement policy solutions that will eliminate the costs associated with white bagging. Legislators in Ohio have introduced House Bill 451, which would prohibit health plans from requiring providers to order their medicines from specified pharmacies to receive insurance coverage. A bill in Minnesota (HF 3280) would similarly prohibit such mandates.
It is important to note that these bills only eliminate the PBM mandate, they do not prevent specialty pharmacies that are affiliated with insurers and PBMs from providing the important specialty pharmacy service to doctors. But instead of relying on their dominant market power to force an outcome, these specialty pharmacies will need to demonstrate their value to the providers and earn their business. This type of free-market competition will incentivize specialty pharmacies to become more effective health care partners and improve patient outcomes. It is precisely the types of reforms the health care system needs writ large.
The practice of white bagging is another example of how industry intermediaries are reducing choice to the detriment of patient welfare. In this case, the choice of where to source the drug is restricted rather than which drug can be prescribed.
Even if there were no adverse impacts from white bagging, it makes little sense to allow insurers and PBMs to mandate where doctors can purchase their medicines or any other medical supply. Doctors serve patients best when they are empowered to control their own practices. The reality that significant adverse impacts exists only strengthen the arguments in favor of such reforms.
Wayne Winegarden, PhD, is a senior fellow in business and economics and director of the Center for Medical Economics and Innovation at the Pacific Research Institute.