Wednesday, September 13, 2023

White Bagging Update 2023: Saving Money or Shifting Costs?

Time for our annual update on the channels for provider-administered drugs.

For 2023, specialty pharmacies—via white, brown, and clear bagging—retained a meaningful share of the distribution channels for provider-administered oncology drugs. Despite the concerted efforts of insurers such as UnitedHealthcare and Elevance Health, however, buy-and-bill remains the most common channel for these products. Below, I review the latest data on trends over the past five years.

Strategies for white and brown bagging reflect the broader battle over oncology margins—and plans’ attempts to shift costs to providers, patients, and manufacturers. The persistence of buy-and-bill reflects this channel’s legacy infrastructure as well as providers’ push back on white bagging mandates. But perhaps patients and manufacturers will start paying more attention to the higher costs from white bagging.

FYI: The material in today’s article is adapted from Chapter 3 of our forthcoming 2023-24 Economic Report on Pharmaceutical Wholesalers and Specialty Distributors, now available to preorder at special introductory pricing.


Most provider-administered outpatient drugs are governed by the buy-and-bill process. In the buy-and-bill process, a healthcare provider purchases, stores, and then administers the product to a patient. After the patient receives the drug and any other medical care, the provider submits a claim for reimbursement to a third-party payer. The process is called buy-and-bill because the medical claim is submitted (billed) after the provider purchases (buys) and administers the drug. For a channel flow chart, see Follow the Vial: The Buy-and-Bill System for Distributing and Reimbursing Provider-Administered Outpatient Drugs.

In recent years, third-party payers have become dissatisfied with the buy-and-bill approach for specialty pharmaceuticals covered under a patient’s medical benefit. Buy-and-bill poses several challenges to payers:
  • Health plans cannot always capture specialty-drug cost and utilization data from their medical claims systems as quickly as pharmacy systems can.
  • Under a buy-and-bill system, administering utilization management programs can be difficult, because claims are submitted after a service has been administered, not in a real-time electronic format.
  • Inappropriate financial incentives can arise when a healthcare provider generates profit both from providing care and from dispensing drugs. Providers may therefore favor treatments with larger absolute markups.
Third-party payers have therefore permitted or mandated a role for specialty pharmacies in managing and distributing provider-administered specialty drugs. There are three alternative approaches:
  • White bagging. A specialty pharmacy ships a patient’s prescription directly to the provider, such as a physician office or an outpatient clinic. The provider holds the product until the patient arrives for treatment.
  • Brown bagging. The patient picks up a prescription at a pharmacy and then takes the drug to the provider’s office for administration.
  • Clear bagging. A provider’s internal specialty pharmacy dispenses the patient’s prescription and transports the product to the location of drug administration. Clear bagging has emerged due to the presence of practice- and hospital-owned specialty pharmacies. Provider-owned specialty pharmacies now account for more than one-third of five accredited specialty pharmacy locations. (See Exhibit 51 of our 2023 Economic Report on U.S. Pharmacies and Pharmacy Benefit Managers.)
With any of these approaches, the provider neither purchases the drug nor seeks drug reimbursement from a third-party payer. Instead, the specialty pharmacy adjudicates the claim and collects any copayment or coinsurance from the patient before treatment. However, the provider is still paid for professional services associated with the drug’s administration. Providers are not permitted to bill the third-party payer for drugs, because the pharmacy receives the reimbursement for the drugs sent to the provider.

UnitedHealthcare’s Medication Sourcing Expansion policy is the most prominent example of white bagging by a large commercial insurer. This policy requires certain outpatient hospital providers to obtain specified specialty and oncology supportive care drugs from selected pharmacies. As of mid-2023, the program includes 94 specialty and oncology supportive drugs. The availability of these drugs varies among the 12 participating specialty pharmacies and differs by therapeutic class. Only two of the 12 pharmacies are affiliated with UnitedHealthcare’s Optum business. (See Exhibit 46 of our forthcoming 2023-24 wholesale report.)


MMIT has again graciously provided us with multiple years of data from its MMIT Oncology Index. For more information about this valuable resource, please contact Jill Brown Kettler ( These data have notable limitations. For important information, see the Notes for Nerds below.

For 2023, health plans reported that buy-and-bill remained the most common method of product sourcing for both physician offices and hospital outpatient departments. However, pharmacy channels have displaced buy-and-bill for a meaningful share of provider-administered drugs. In the chart below, pharmacy channels are represented by the orange and green bars. Pharmacy dispensing typically corresponds with pharmacy benefit coverage rather than medical benefit coverage.

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The most common channel for infused oncology products varies somewhat by practice type:
  • At physician offices, the share of covered lives for which white bagging was reported to be the most common method of product sourcing has been about 15% to 20% in three of the four years shown above.
  • At hospitals, commercial plans reported that buy-and-bill was hospital outpatient departments’ most common method for sourcing provider-administered oncology drugs. The 2023 figure is consistent with the figures from 2019 and 2021.

    The 2022 figures reflect responses from four health plans that switched their most common acquisition method from “specialty pharmacy” to “buy-and-bill.” The number of covered lives at these four organizations was large enough to cause a significant increase in buy-and-bill’s 2022 share and a corresponding decrease in white bagging.
  • Brown bagging is not reported as being the most common approach for provider-administered drug sourcing at hospitals and physician offices. Many providers and payers consider brown bagging to be a problematic method of product sourcing, because patients may mishandle products that they acquired via brown bagging.
  • Due to the survey methodology discussed below, white and brown bagging may represent a higher or lower share of units or dollar volume than shown in the chart above. That's because the data did not reveal whether physician practices and hospitals utilized an in-house specialty pharmacy to source these products. Thus, the shares labeled “white bagging” and “brown bagging” may represent a combination of white bagging and clear bagging. For example, health systems steer prescriptions to their own specialty pharmacies.

A health plan’s savings from white and brown bagging strategies often come from the lost profits and incremental costs incurred by providers, patients, and manufacturers.

Consider some of the reasons that providers dislike white bagging:
  • Providers incur additional costs for handling and storage with white bagging. The provider must maintain separate, patient-specific inventory of product and ensure that a patient’s designated product is in stock when the patient arrives for treatment.
  • Product waste can be higher. Drugs shipped to a provider’s office may not be used due to changes in dose, therapy, duration of therapy, benefit changes, or enrollment in palliative care programs.
  • Drugs that arrive from third-party specialty pharmacies may not be streamlined for in-house pharmacy systems and can be incompatible with in-house equipment to deliver the infusion.
Patients may also lose out. An intriguing  new JAMA Network Open study found that white bagging lowered payers’ costs, but raised patients’ out-of-pocket obligation. (See Financial Outcomes of “Bagging” Oncology Drugs Among Privately Insured Patients With Cancer.) As you can see below, overall average payer reimbursements were more than $2,000 lower when oncology drugs were white bagged by pharmacies compared with provider payments under buy-and-bill. Payments for immunotherapy were higher, while payments for supportive and other oncology drugs were lower.

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However, patient obligations were always higher when products were white bagged compared with buy-and bill. This gap reflects commercial benefit designs. White bagged products are typically billed under pharmacy benefit plans, where patients face coinsurance and deductibles for specialty drugs. By contrast, many commercial plans require no or minimal patient cost sharing for drugs administered in a hospital outpatient setting and billed to the medical benefit.

The lack of information about manufacturer copay offset payments for pharmacy claims is an unacknowledged limitation of this research. Actual patient out-of-pocket spending may have been lower—but only because manufacturers had to pay more when payers used white bagging strategies.

For a deep dive into all things buy-and-bill, check out Chapters 3 and 6 in our forthcoming 2023-24 wholesale channel economic report.


The MMIT data are based on health plan survey responses to the following question: “What is the most common acquisition method for oncology specialty products professionally administered by infusion or injection to patients in the following settings?”

Figures for 2023 based on 35 commercial plans representing 118.8 million covered lives. Sample sizes for the other years are shown in the footnote of the first chart above. Due to concerns about the survey’s reliability during the peak of the COVID-19 pandemic, we have excluded the 2020 survey results.

The MMIT data measure health plans’ self-reported “most common” sourcing method for provider-administered drugs. The results shown above are weighted by health plans’ covered lives. However, these data do not measure the unit quantities or dollar volumes of providers’ purchases by sourcing channel. Consequently, a large plan’s switch in its reported “most common” method could swing the measured figures disproportionate to the actual changes in underlying volume.

As far as I know, there are no public data on actual purchases. If you have such data, please email me so I can share the information with the Drug Channels community.

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