EP371: Buy and Bill vs Pharmacy Bagging—Which Is Better for a Plan Sponsor and Patients? With Erik Davis and Autumn Yongchu

So, this is a 400-level episode in specialty pharmacy options for plan sponsors, meaning here are your prerequisites: You gotta know what buy and bill is, and you gotta know what pharmacy bagging is, meaning white bagging, for example. If you do not, I would listen to Encore! EP282 with Aaron Mitchell, MD, MPH, where we go deep on buy and bill. And then listen to EP369 for the skinny on pharmacy bagging. If you already know what buy and bill is and you already know what white bagging is, then not only do you know more than 98% of the people in the healthcare industry, but also, you’re going to get as much out of this conversation with Erik Davis and Autumn Yongchu as I did.  

Last week’s show was also with Erik Davis and Autumn Yongchu. Last week, we talked about how some hospitals and cancer centers are managing to ring up up to six times the cost of an expensive-already injected or infused drug through buy and bill. This is why pharmacy bagging became a thing, if we want to talk about this in historical perspective. It’s a direct market response to buy and bill. Hospital systems start making egregious amounts of money marking up drugs that already cost hundreds of thousands of dollars, and their markups are hundreds of thousands of dollars on top of that. Hospital starts making a fortune off of drug markups. Plan sponsors need an alternative, and … enter pharmacy bagging (ie, carving out specialty pharmacy drugs to a PBM [pharmacy benefit manager]).

In this show, we compare the potential benefits and problematic loopholes and/or patient concerns for plan sponsors who are trying to figure out whether to carve out specialty pharmacy benefits to a PBM or grin and bear it with the buy and bill. Or, as another option, whether to steer patients to specific infusion centers or specific provider organizations that might have more favorable contract terms for the plan sponsor. Or, hooking up with a home infusion company, again, who is willing to negotiate terms that might be far better for said plan sponsor than just letting some hospital have their way with employees and the health plan. As another alternative, of course, plan sponsors could consider medical travel, which some certainly are.

My biggest takeaway from this whole conversation and from the episodes that we have had in this, dare I call it, series about pharmacy benefits, starting with the show with Scott Haas (EP365) where we talked about PBM contracts, moving to the show with Dr. Aaron Mitchell (Encore! EP282) where we talked about buy and bill, then going to the show with Keith Hartman (EP369) where we talked about pharmacy bagging, then last week’s show how hospitals manage to buy and bill at 6x the price of these expensive pharmaceuticals … my takeaway from this whole specialty drug extravaganza is that specialty drug procurement is very different than retail drug procurement. Retail drugs, you worry about them en masse at scale almost at the population level. Specialty drugs? You can have one patient on a specialty drug, and that one patient costs as much as the entire rest of the member population combined. So, managing specialty drugs and their administration becomes almost a case-by-case operation. What drug is it? Where is the patient? What options are available? It’s possible to save hundreds of thousands of dollars on that one patient, for that one patient’s care, and get better patient outcomes by getting the right patient on the right drug that is administered in the right setting.  

You can learn more by connecting with Erik and Autumn on LinkedIn or by emailing them at erik.davis@usi.com and autumn.yongchu@usi.com.  

Erik Davis, AAI, CIC, CRM, is senior vice president and principal consultant, managed care and analytics, at USI Insurance Services. He has over 30 years of experience in the insurance and risk management industry. Erik works to create an environment that supports the healthcare risk management goals of an organization while maintaining focus on compliance and financial accountability. He is instrumental in vendor negotiations, data benchmarking, population health strategies, claims analysis, recommendations in plan design, and communication strategies.

In this capacity, Erik has been involved with development of rates, payment structures, and recommendations of changes in processes, policies, and procedures. He has a broad understanding of contract analysis, evaluating risk, auditing for correct payment, and structuring of excess loss and pharmacy programs.

Erik’s experience extends from overall employee benefits consulting to workers’ compensation, as well as managed care organizations in Medicaid, Medicare, and commercial contractual risk arrangements.

Erik earned his bachelor’s degree in economics from Oregon State University. He holds Accredited Advisor in Insurance (AAI), Certified Insurance Counselor (CIC), and Certified Risk Manager (CRM) designations.

Autumn Yongchu is a healthcare operational risk consultant at USI Insurance Services. Autumn works with multiple database platforms to examine data for trends and abnormalities. Using investigative querying, medical coding analysis, and report development, she provides resources that help identify cost control opportunities and assists organizations in strategic business decisions regarding the management of healthcare risks.

Autumn analyzes and interprets healthcare utilization data, allowing the development of initiatives regarding claim and risk management. This includes identifying fiscal and clinical strategies and providing necessary information to develop, design, and implement management initiatives. Autumn also analyzes trends, assists with insurance underwriting, and adjudicates stop-loss claims.

Autumn has an in-depth knowledge of Medicaid and Medicare billing guidelines and payment methodologies.

Prior to joining USI, Autumn was a claims auditor and trainer for a managed care organization which serviced over 100,000 commercial, Medicaid, and Medicare lives. Her responsibilities included contract analysis, claims adjudication, ensuring accurate payment, and identifying and recouping errors.

04:45 Can you actually save money by carving out specialty infused drugs and making them a pharmacy benefit?
06:28 How can plan sponsors use white bagging as leverage to reduce costs from markups?
06:47 Does white bagging save money compared to buy and bill?
07:42 “You also need to understand that with some of these drugs, you’re dealing with very vulnerable people.”—Erik
08:41 EP369 with Keith Hartman, RPh.
11:10 “When your insurance carrier is married to your PBM, it doesn’t matter where the money goes.”—Autumn
11:33 EP365 with Scott Haas.
12:00 “You need to have a collective understanding of every variable … when you’re making those … decisions.”—Erik
14:53 How can comparison shopping save plan sponsors money when it comes to specialty infusion costs?
16:51 How can comparison shopping be a vicious circle in the wrong setting for plan sponsors?
18:43 “That’s part of the problem: It’s not just the plan sponsor not being educated enough; it’s also the consultant … that they believe is supposed to be that isn’t.”—Erik
19:03 How has transparency been used by healthcare systems to keep buyers’ eyes off the ball?
26:55 “It is very case by case, but it comes down to your risk appetite.”—Autumn
28:19 “It’s something that you have to, as a plan sponsor, really continue to monitor throughout the plan year.”—Autumn
28:38 “The more you know, the better equipped you’re gonna be.”—Autumn
29:27 What can employers who are feeling aggressive do?
31:19 “The dollars circle, whether people realize it or not.”—Autumn

You can learn more by connecting with Erik and Autumn on LinkedIn or by emailing them at erik.davis@usi.com and autumn.yongchu@usi.com.