Over the past 16 months, three of the nation’s largest commercial payers – UnitedHealthcare, Anthem and CIGNA – have instituted new policies affecting how and whether they will pay for high-cost drugs administered in hospital outpatient infusion centers and outpatient sites. Referred to in the industry as “White Bagging,” these new payer policies require that hospitals administering certain high-cost medications in an outpatient setting receive those medications from third parties contracted with the health plan, instead of providing those medications directly from the hospital pharmacy inventories. The payers that have implemented White Bagging requirements have generally attempted to justify them by pointing to generic language in their payer-provider contracts requiring hospitals to comply with the payer’s “policies” or “protocols.”

Each of the national commercial payers that has announced White Bagging policies has identified a specific list of drugs to which the policy applies. However, one payer has already expanded its initial list of drugs subject to White Bagging, and payers initiating these policies may continue to add new drugs to their White Bagging lists in order to drive down hospital reimbursements and increase their bottom line.

UnitedHealthcare

UnitedHealthcare (“United”) calls its white-bagging requirement the “Requirement to Use a Participating Specialty Pharmacy Provider for Certain Medications.” First announced in a “Network Bulletin” issued in January 2020 and set to take effect on April 1, 2020, United’s policy requires participating hospitals “to obtain certain specialty medications from a participating specialty pharmacy provider in our specialty pharmacy network, except as otherwise authorized by us.” In other words, rather than providing and billing for the medications directly as they have always done in the past, under the new policy, hospitals would now receive the medications from an outside source which would bill United.

While United claims its white bagging policy was in place prior to the January 2020 bulletin, it appears that presenting the policy as a continuation of prior policies – whether or not any similar prior policies were ever adopted or enforced in connection with hospital infusion services – may be part of a litigation strategy intended to make the White Bagging policy look like less of a radical disruption to UHC’s hospital contracts and patient care.

In an April 2020 network bulletin United announced that it would postpone implementation of its white bagging policy due to the COVID-19 public health emergency. In March 2021, United announced an expansion of its Specialty Pharmacy Policy, this time expanding it to apply to 12 additional “oncology supportive medications” beginning on June 7, 2021. These include drugs of ten dispensed in conjunction with chemotherapy, such as drugs designed to augment white blood cell counts or to otherwise reduce the risk of infection.

Anthem Blue Cross

On September 1, 2020, Anthem issued a letter to a number of hospitals notifying them of a “New Requirement” to “work with CVS Specialty to procure certain medications that are covered through a member’s medical benefit” and “administered in the office or outpatient hospital setting.” Anthem characterized the letter as a new “Specialty Pharmacy Policy,” which further states that it applies to PPO and EPO Anthem members, but not HMO members. The Specialty Pharmacy Policy instructs the hospitals to continue to bill Anthem for administration of the listed medications, but to “bill a zero charge for the medication itself,” and states that “CVS Specialty will ship specialty medications to your office, hospital or location of your choice.” The Specialty Pharmacy Policy does not explain how the medications would be shipped, the timeline, the carriers that would be used for shipping medications or how the drugs will be kept safe during transportation. It does, however, note that “[i]f certain specialty medications are obtained through other pharmacies, the claim will be denied.”

CIGNA

In April 2021, CIGNA released its 2^nd Quarter, 2021 “Network News” publication including a section on “Pharmacy News.” That publication follows CIGNA’s issuance of letters to certain hospitals announcing “[c]hanges to specialty medical drug coverage effective July 1, 2021.” Those changes “require medical precertification and site-of-care management” and “medical precertification” for a list of specified drugs. Although CIGNA has not clarified what “site-of-care management” means in connection with hospital dispensing and administration of the listed drugs, it is likely that at a minimum CIGNA intends to restrict payment for drugs dispersed through hospital pharmacies.

King & Spalding is currently representing a number of hospitals and health systems in arbitrations challenging these White Bagging policies as violations of the relevant hospital-payer agreements, and as violations of several state and federal laws and regulations relating to pharmacy practice, the prohibition against the corporate practice of medicine, and the prohibition on health plan interference in medical decision-making. Some of these arbitrations involve requests for preliminary injunctive relief, and request orders from the arbitrators prohibiting the payers from implementing these policies as to King & Spalding’s clients while the arbitration is pending.

In response to the recent proliferation of white bagging policies by health plans, and the concern that more health plans may follow, providers are addressing their concerns to state legislatures in an effort to enact laws that will keep drugs, drug administration, and most importantly, patients, safe. Below are some examples of the types of advocacy activity happening around the country:

• The Texas Senate is currently considering HB 1586, which would amend the Insurance Code to address health benefit plan coverage of clinician-administered drugs for patients with cancer or a cancer-related diagnosis. If enacted, the law would prevent health benefit plan issuers from (1) requiring clinician-administered drugs to be dispensed by a pharmacy selected by the health benefit plan issuer, (2) requiring that the drug or administration of the drug be covered as a pharmacy benefit rather than a medical benefit, (3) limiting or excluding coverage for the clinician-administered drug when not dispensed by a pharmacy selected by the health benefit plan issuer, and (4) prohibiting a physician or provider from obtaining or administering a clinician-administered drug that the physician or provider is otherwise permitted to obtain or administer by law. The Texas Hospital Association has expressed support for this bill, stating that “prohibiting white bagging and allowing clinicians to choose where to obtain these drugs avoids delays in medication administration, reduces drug waste and ensures supply chain integrity.” The Texas Association of Health Plans opposes the bill, stating, among other things, that “the bill’s contracting and payment mandates and prohibitions against requiring or creating financial incentives to sue network specialty pharmacies will lead to both patient safety issues and egregious prices for these already very expensive specialty drugs.”

• In addition, as part of a national effort, the American Society of Health-System Pharmacists (ASHP) and the American Hospital Association (AHA) expressed concern over white bagging in a joint letter to the Acting FDA Commissioner Dr. Janet Woodcock. The ASHP and AHA encouraged the FDA to “consider the patient safety and supply chain security risks of white bagging, and take appropriate enforcement action to protect patients” and requested a meeting with the FDA to discuss these concerns in greater detail. See March 31, 2021 Letter to Dr. Woodcock.

• The California Board of Pharmacy met in February 2020 to discuss the challenges presented by white bagging policies including the dangers posed to drug security and patient safety. Many hospital pharmacists submitted their concerns about the dire risks that white bagging could pose to patient safety through disruption of care and medications and the eroding of confidence in the safety of critical life-saving drugs. Pharmacists also raised concerns over the increase in drug waste and caused by white bagging as well as the unacceptable liability risks it imposed on hospitals and hospital-based pharmacies.

• In Louisiana, many hospitals supported a bill that would block the practice of white bagging. The bill passed the Louisiana House and Senate nearly-unanimously, and was signed by Governor Edwards on June 1, 2021. The text of the bill can be found here.