AHA Calls for Oversight of Pharmacy Benefit Manager Practices

The American Hospital Association (AHA) has urged the Federal Trade Commission (FTC) to increase its surveillance of commercial health plan and pharmacy benefit manager (PBM) practices that steer patients to third-party specialty pharmacies. The practice can harm patient care and increase administrative burden on hospitals, AHA said.

This practice, known as “white bagging,” prevents providers from procuring and managing the drugs they administer to patients. Instead, third-party specialist pharmacies dispense the drugs and send them to the hospitals on a case-by-case basis.

A similar practice known as “brown bagging” consists of third-party specialty pharmacies dispensing drugs directly to patients who must then bring the medications to the hospital for administration.

In response to a request for public comment on the impact of PBM practices, AHA stressed that these practices create safety concerns for patients, delays in care, and administrative burden on hospitals that must reconcile these policies.

If a patient’s health plan directs them to a third-party specialist to obtain a prescription rather than receiving it from her provider, clinicians cannot adjust medications following clinical and patient needs without delaying treatment. This can lead to adverse health outcomes for patients in some instances.

Disallowing providers from storing and managing drugs can also create planning challenges for providers. For example, if providers receive a medication supply that is not their own, it may violate hospital policies and overwhelm hospital storage capacity.

Additionally, tracking and recording each patient-specific drug that comes in can create an unnecessary and significant administrative burden for hospital staff.

White bagging requires hospital staff to take on additional, often inefficient, and duplicative responsibilities.

Providers must create and manage two separate pharmacy inventory systems, manage a new supply chain and vendor, and manually fill in gaps in the patient’s medical record to link the external pharmacy order with the administration records, the letter detailed.

In addition, providers must educate patients about insurance benefits and explain why white bagging may lead to treatment delays.

“Each of these steps creates additional resource-intensive burden on providers that adds further complexity and cost to the healthcare system,” AHA wrote. “Specifically, the costs of all of these workaround processes accrue to hospitals, which must manage a myriad of issues to ensure they protect the safety of their patients and receive appropriate payment for administration of the drug.”

Hospitals may face higher labor expenses, increased workload and supply chain coordination, and reimbursement refusals from health plans.

These practices may also impede patient safety, AHA said.

“When hospitals control and own medications dispensed through their own pharmacy, they can certify the point of origin of the drug and demonstrate a clear chain of custody needed to ensure that the product is safe for patient administration,” the letter stated. “White bagging and brown bagging, however, interrupt that process, disrupting a hospital’s ability to guarantee the safety of such drugs firsthand.”

AHA also noted how PBM practices impact the 340B drug pricing program. According to the letter, PBMs have engaged in tactics that reduce the scope and benefits of the program.

For example, PBMs have created policies that discriminate against 340B hospitals by paying them less than non-340B hospitals for certain outpatient drugs.

PBMs also require 340B hospitals to accept unfair terms to participate in their pharmacy networks, which these hospitals need to provide patients with sufficient access to drugs. Hospitals typically must agree to lower reimbursement rates which may threaten their ability to offer patients comprehensive services, AHA said.

Lastly, AHA raised concerns about whether PBMs reduce healthcare spending. PBMs negotiate drug prices between manufacturers and payers using rebates. However, the rebate practice incentivizes continued list price increases and inhibits competition, AHA concluded.