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?