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. Specialty distributors and group purchasing organizations (GPOs) support "buy and bill" as the primary method of distribution of IV oncology drugs; oncology practices typically purchase these products, which are then billed to payers under the medical benefit. Practices are usually reimbursed for the products using the average selling price (ASP) plus a percentage. Recently, however, a diverse array of competing specialty pharmacies already commanding the majority of the oral oncolytic market are making inroads into the buy and bill model via "white bagging" (Figure 1
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 neither buys nor bills for the drug but is paid a drug administration fee. Because an oncology practice does not purchase the drugs, it loses the potential for profit, but economic risk is reduced.
Figure 1—With the Advent of “White Bagging,” Drugs Flow Through SPs, Bypassing Buy and Bill and Usually SDs/GPOs
SPs (eg, Walgreens, CVS, OptumRx, Diplomat, Biologics) can also offer clinical services including patient education, and therapy/ adherence management. SPs can serve a range of oncology stakeholders including payers, community and hospital providers, manufacturers and patients.
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 full and adequate reimbursement for certain drugs. In addition, some payers mandate—or encourage through unfavorable financial/reimbursement structures and payments—white bagging to control utilization and lower costs of selected drugs, which often results in additional administrative burden for practices. Further, specialty pharmacy dispensing provides payers with significantly greater transparency into spending on and utilization of office administered cancer drugs.
Manufacturers look to channel partners for product access, quality control through the supply channel, and product data. While these ends may be met whether physician-administered IV drugs are being distributed by specialty distributors (via buy and bill) or by specialty pharmacy (via white bagging), there are implications in the two models that manufacturers will want to consider. Knowing what the drivers of white bagging are, whether payer or provider instigated, is important to manufacturers if they wish to influence distribution dynamics.
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. Does the change in practice economics impact the physician choice of 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 data are more limited through SPs, reducing the ability to track sales.
SP is a more fragmented channel than specialty distributors (SDs), requiring many more relationships and increasing quality control risks.
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
Figure 2—The White Bagging Channel Increases as Buy and Bill Decreases
Source: Kantar Health; Practie Manager Survey, May 2013. Q7. Thinking about the physician administered injectable or IV drugs your patients receive, what percent are currently receiving these drugs in each of the following ways?
Kantar Health’s 2013 Practice Manager survey indicated a statistically significant increase in white bagging over the previous year, at the expense of buy and bill. According to practice managers, the use of white bagging is the only growing drug acquisition model, while buy and bill is decreasing. White bagging has increased to 22% from 13% in 2012. Similarly, payers report 25% of IV oncologics being dispensed by SPs in 2013 (Figure 3)
Figure 3—Payers Report One-forth of IV Cancer Drugs Are Distributed Through SPs
Source: Kantar Health; Payer Survey, June 2013—Q8.8 Please estimate what percent of your plans’ high-cost oncologics are dispensed through the following channels.
White bagging may be attractive to payers for a few reasons. Firstly, partnership with SPs allows payers to extend the reach and depth of utilization management on the pharmacy benefit. To accommodate this demand, SPs are offering these services. 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, and plan future increases in the use of SPs 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
Source: Kantar Health; Payer Survey, 2012 & 2013—Q2.13 Which of the following changes in your commercial plan design did you implement for 2013 or are you planning to implement in 2014 that affected the medical benefit for office administered druge therapy?
The upward trend in implementing use of specialty pharmacy for dispensing of some office-infused drugs demonstrates payers’ interest in replacing buy and bill with a neutral and more easily managed alternative. Despite these advantages and growth, white bagging in oncology is unlikely to completely displace buy and bill. White bagging, particularly in oncology, is complicated because the drugs and regimens are complex and often require dosing adjustments at the time of administration. There are inventory management implications for the practices in storing and using the IV drug for a specific patient, and the potential for waste if the patient’s schedule changes. Payers who recognize this complexity, often avoid mandating white bagging because the “dispensed” and “paid for” drug may end up being wasted if the patient requires a different drug or dosing which cannot be adjusted after the SP has shipped the product to the clinic. Therefore, payers are more likely to encourage the purchase of physician-administered IV cancer drugs through SPs via reimbursement policy (38% of payers) rather than a mandate (25% of payers); only about a third of payers are not actively influencing the channel at all (Figure 5
Figure 5—The Majority of Payers Are Influencing White Bagging Predominantly Through Reimbursement Mechanisms
Source: Kantar Health; Payer Survey, June 2013—Q8.8.2 Is your organization influencing the channel through which physicians are obtaining physician-administered injectable cancer drugs?
In addition to payer mandates, providers may choose to white bag to avoid carrying costs and the financial risk associated with very expensive drugs (Figure 6
). Around 70% of practice managers in Kantar Health’s 2013 survey reported white bagging in some volume. These practices estimate that 22% of practice drug volume flows through this channel.
Figure 6 — Financial Considerations and Payer Mandates Drive Practice Use of White Bagging
Source: Kantar Health; Practice Manager Survey, May 2013: Q7.9c Why do you obtain your physician-administered injectable and/or infusible drugs from a specialty pharmacy? This practice obtains physician-administered injectable and/or infusible drug from a specialty pharmacy due to...
Financial pressures experienced by oncology practices over the last several years increase practices’ sensitivity to carrying costs and reimbursement risk—and thus, indirectly drive white bagging. Financial pressure stems primarily from decreased payer reimbursement (including the sequester impact) and patient ability to pay their copayment or coinsurance (for which practices are at risk). In the 2013 Kantar Health Practice Manager survey, decreased payer reimbursement accounts for 50% of mentions as the primary reason for decreased infusion revenues; patient inability to pay is the next most cited reason (Figure 7)
Figure 7—Practice Managers Report That Practice Revenue From Infused Drugs Continues to Decline Driven by Decreased Payer Reimbursement and Patient Ability to Pay
Source: Kantar Health;, Practice Manager Survey, May 2013: Q2.20 Compared with 3 years ago, what has happened to infusion drug net revenue in your practice? Note: we are asking about revenue, not reimbursement trends. Select one.
In addition to these financial motivations, growing oncologist comfort with and reliance on SPs for oral oncolytics may be supporting increased practice use of SPs for IVs. Kantar Health’s survey of oncologists supports a growing comfort with orals based on the services SPs provide (Figure 8
). Practices are likely to leverage the relationships they have with a specific SP for oral fulfillment to support selective white bagging of physician-administered drugs.
Slow, Steady Growth
The confluence of payer and provider drivers is likely to precipitate a slow but steady growth of white bagging of physician-administered oncology drugs 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. Since payer reimbursement rates in the context of price increases and GPO contracting can differentially impact products’ margins, manufacturers need to understand how their products’ use may—or may not—be impacted by white bagging.
Figure 8—Practices Acknowledge Value of SPs in Providing Administrative Assistance
Source: Kantar Health; Oncologist Survey, May 2013 and May 2012: Q4.15.3 Please rate the reasons you are more likely to prescribe an oral over an IV now using a 7-point scale where 1 = Not at All Important and 7 = Extremely Important.
Additionally, physician choice of white bagging for select products may signal unfavorable economics for those products, which manufacturers may be able to address. Have price increases outpaced ASP? Are GPO contracting terms creating provider carry cost issues and risk? As one example, BMS has created a limited distribution for Yervoy through McKesson Specialty and Oncology Supply, with a requirement that the SPs extend payment terms to community practices, addressing the risk of carrying costs.
In any case, manufacturers of IV products may want to expand relationships with SPs and leverage their relationships with customers, eg, sharing reimbursement and financial assistance materials to support dispensing.