Alternative Distribution Strategies: “Buy and Bill” and “White Bagging”

San Antonio—When handling specialty drugs, physicians typically purchase the medications directly from distributors, administer them to patients, and then bill payers for the reimbursement of the drug costs, administration expenses, laboratory work, and office visits. The so-called “buy and bill” model has been popular for a long time.

In recent years, an alternative approach has emerged. Known as external delivery or “white bagging,” payers receives drugs through a specialty pharmacy and retain the drugs in a special inventory until patients arrive at their office. Providers are paid after dispensing the products based on a negotiated rate but do not receive compensation for the drugs themselves. In the “white bagging” model, physicians do not buy or bill for the drugs.
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Karen Ribler, executive vice president and chief operating officer for the Center for Healthcare Supply Chain Research, spoke about “buy and bill” and “white bagging” and other topics at the NASP meeting during a session titled Distribution Strategies for Specialty Pharmacy Products. She was joined by Gayle Johnston, MS, BS, president of CuraScript Specialty Distribution.

Ms. Ribler defined specialty drugs as high cost, requiring special handling, intended for rare and/or chronic diseases, and associated with complex treatment regimens. She noted that IMS Health data indicated there were $327.3 billion in prescription sales in 2012, including $86.1 billion for specialty drugs.

Ms. Ribler and Ms. Johnston discussed results of a report from the Center for Healthcare Supply Chain Research titled Specialty Pharmacy: Implications of Alternative Distribution Models. The report, released in November 2013, is available on the nonprofit organization’s website (www.hcsupplychainresearch.org). Health Strategies Group, an independent research firm, conducted the qualitative study for the Center for Healthcare Supply Chain Research.

Researchers conducted interviews with 59 people involved in specialty pharmaceuticals in the United States: 15 health plan executives, 7 drug company executives, 6 executives from specialty distribution and specialty group purchasing organizations, 6 specialty pharmacy industry executives, 15 oncology practice leaders, and 10 specialists in rheumatology, neurology, and urology.

The authors noted that “buy and bill” is most common in oncology and other disease states that require physicians to administer the drugs via infusion or injection. Advantages of this approach include that patients can receive care during their first visit, physicians can make any necessary dosing adjustments, and physician offices can continue with their usual administrative processes.

Some payers believe “white bagging” is better because it eliminates markups on drugs that are prevalent in the “buy and bill” approach. The authors mentioned that “white bagging” reduces financial risk for physicians, although it also provides less flexibility to change medications or dosing regimens and can lead to patient care disruptions and increased administrative complexity.

The report found that 95% of large practice oncologists, 78% of small practice oncologists, and 59% of non-oncology specialists indicated obtained their medications through the “buy and bill” method. Physicians from smaller practices preferred “white bagging” because “buy and bill” requires them to spend a lot of money upfront to purchase the drugs. Physicians for mid-size and large practices preferred “buy and bill” because it is better for patients and leads to more revenue. The authors also mentioned that “health plan payers do not credit external delivery with generating significant savings” and that payers understand there are potential costs and wastage associated with the “white bagging” approach.

The authors concluded that “white bagging” is best used for drugs that do not require day-of-administration dose adjustments but not for medications requiring on-site modifications. They added that the use of “white bagging” has decreased, particularly for oncology, and that payers are controlling costs through other approaches such as prior authorization, case management, and specialty formularies.