New Louisiana law bans insurer practice known as white bagging

Louisiana hospitals are cheering a new state law that bans health insurers’ controversial practice of white bagging, or bypassing hospital pharmacies for certain drugs.

Across the country, health insurers are increasingly setting policies that funnel services away from hospitals in favor of less expensive settings. In this case, they’re shipping doses of expensive physician-administered drugs, commonly cancer infusions, directly to hospitals instead of allowing hospitals to buy them using discounts and retrieve them from their in-house pharmacies. Insurers have defended the practice by arguing that getting drugs from their own network of specialty pharmacies helps keep healthcare more affordable.

“We didn’t wait on D.C. to solve this problem,” said state Sen. Heather Cloud, a Republican who wrote and sponsored the measure. “I’m really proud of this legislature for being proactive and not reactive in protecting our patients here in Louisiana.”

Louisiana’s law, which took effect June 1, takes a comprehensive approach to banning the practice in the state. It prohibits insurers from refusing to authorize, approve or pay a provider for giving a covered physician-administered drug. It also prohibits them from conditioning, denying, restricting and refusing to authorize or approve the drug because the provider obtained it from an out-of-network pharmacy.

Cloud said UnitedHealthcare, Aetna and Cigna have white bagging policies that affect providers in Louisiana. CVS Health, which owns Aetna, said in a statement that it supports health plan flexibility that addresses healthcare costs. The company said it transitions members to appropriate sites of care to receive infusions, such as in their homes or at local outpatient sites. The other two insurers did not comment.

Fighting white bagging has become front and center for the American Hospital Association. It wrote a letter to CMS’ then-acting administrator in February asking her to restrict UnitedHealthcare’s practice of white bagging specialty drugs, a change that took effect across commercial policies Oct. 1, 2020.

Hospitals argue white bagging—primarily done with specialty infusions and injections that must be administered by providers—disrupts continuity of care for patients and triggers safety and liability issues. Doctors usually have a set process for procuring and administering medications, said Wendy Gaudet, vice president of operations for Our Lady of the Lake Regional Medical Center in Baton Rouge. Not only that, everyone involved in a patients’ care can see their medical records.

“All of a sudden, that just puts a blanket over what’s happening to that patient,” she said, “and the provider can no longer see that.”

Providers also say that tests performed the day patients receive treatment can determine they need a different dosage than the one their insurer mailed to the hospital. If that’s the case, they often must come back a different day.

Gaudet, a pharmacist, said she’s seen patients’ conditions deteriorate when there are delays in getting the drugs.

White bagging also threatens hospitals’ bottom lines. Nathan Kaufman, managing director with Kaufman Strategic Advisors, said that’s especially true for rural hospitals, for whom infusion therapy can be one of the more profitable business lines.

“That hospital might not have the resources to stay in business,” he said.

Scott Wester, CEO of Our Lady of the Lake in Baton Rouge, said his hospital’s efforts to help pass the measure were more about patient care than money.

“We did have a little bit of our own internal challenge of making sure we don’t do legislation for just a financial reason,” he said. “That’s not who we are and that’s not what we’re about. This is really about patient choice and patient rights.”

Our Lady of the Lake is part of Franciscan Missionaries of Our Lady Health System, an eight-hospital not-for-profit organization with roughly $3.2 billion in annual revenue.

Louisiana’s law passed both chambers unanimously with bipartisan support. Proponents say it’s the first of its kind nationwide, as efforts in other states haven’t made it to the finish line. A proposal in Texas to ban white bagging was still in committees when the session ended in May. Similar proposals in New York, Massachusetts and other states also stalled.

Kaufman said there has been lots of litigation happening under arbitration clauses of managed care contracts in California.

Most large health insurers own pharmacy benefit managers, which incentivizes them to distribute the drugs themselves, said Kaufman, of Kaufman Strategic Advisors. UnitedHealthcare has OptumRx. Aetna has CVS Health. Cigna has Express Scripts.

“There is the ability to essentially double dip,” he said. “If you’re not only the distributor but also the provider of the drugs, you profit by marking up the price of the drugs and then—if you provide the drugs under a pharmacy benefit—you can essentially charge what you want and profit.”


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