New Rhode Island law protects patients who rely on specialty infusion drugs

Specialty drugs are strong, complex treatments and some need to be given to patients intravenously and in a clinical setting. The prescribing and delivery process for these drugs can cause headaches for everyone involved, as competing interests control the drug’s path toward the patient. (Getty Image)

Specialty drugs might come in a delicate glass vial in the mail, shipped by a specialty pharmacy in a styrofoam carton cushioned with ice packs. These medicines can be so precious that a clinic or hospital must administer them. Your doctor prescribes and dispenses the drug — but your health insurance makes the call on where the prescription gets filled.

It’s called white bagging when insurers use their own contracted pharmacy to ship specialty drugs to a doctor’s office. That means they will often refuse claims for drugs filled from a hospital or clinic’s in-house pharmacy. White bagging is now limited under a bill signed into law Monday, June 24, by Gov. Dan McKee. Rep. Justine Caldwell of East Greenwich sponsored the House version and Sen. Linda Ujifusa of Portsmouth led the Senate companion .

Starting Jan. 1, 2025, insurers cannot refuse to pay a clinician for administering a drug in a clinical setting from the provider’s chosen pharmacy. Insurers have to honor the clinician’s choice and cover the claim, but providers also can’t charge more than the payer’s preferred pharmacy.

The new law does not change how speciality drugs taken at home are dispensed; the payer can still stipulate which specialty pharmacy fills those prescriptions.

“This is one of the proudest bills that I’ve gotten over the finish line,” Caldwell said. “It is not, you know, glamorous or easy to understand. But it is going to really help the lives of a lot of sick people in Rhode Island.”

Insurers say the practice gets patients the best price on expensive meds. That’s also the position of pharmacy benefit managers, or PBMs, the intermediaries used by insurers to manage prescription drug benefits. PBMs are usually responsible for the selection of specific specialty pharmacies that patients are permitted to use under their insurance plan.

White bagging opponents include hospitals, providers and medical associations, who argue the circuitous process can cause delays, errors or inconveniences in treatment. It can also be a hassle to receive and store medicine from an outside pharmacy, which might use barcodes or an inventory system different from the one used by the dispensing clinic or hospital. These parties may suggest buy-and-bill as an alternative, which lets providers manage and use their own stock, which payers like insurance companies or Medicare later reimburse.

The new law resonates with what Pharmacy Times called a “surge in legislative activity” over bagging practices. Last year, over 20 states entertained the idea of limiting white bagging, although the Times noted there’s “little peer-reviewed evidence one way or the other” on the practice’s merits.

State policies may be helpful depending on their specifics. Caldwell said her bill is “absolutely a consumer- and patient-centered bill,” designed to help specialty drugs’ biggest customer bases: people with autoimmune conditions and certain cancers. Data from the state’s Office of the Health Insurance Commissioner shows drugs for these populations have dominated both retail and specialty pharmacies in the past five years. In 2022, commercial payers and Medicaid combined spent $52 million in Rhode Island on chemotherapeutic drugs alone from medical pharmacies. Immunosuppressants Humira and Stelara often appeared in the top five drugs sold at retail. These drugs are frequently used to treat autoimmune conditions like arthritis or inflammatory bowel disease.

Caldwell acknowledged the legislation involved compromise like any other and might “make all of the parties a little happy and a little unhappy.”

The two major parties — payers and providers — seemed content with the new law’s terms. Blue Cross & Blue Shield of Rhode Island, the state’s largest insurer, applauds the bill it helped to amend, said spokesperson Richard Salit.

It is not, you know, glamorous or easy to understand. But it is going to really help the lives of a lot of sick people in Rhode Island.

– Rep. Justine Caldwell, an East Greenwich Democrat, who sponsored the legislation in the House

Insurers successfully lobbied to keep providers from charging more than the payer’s preferred pharmacy to “ensure that our members will have access to the infusion medications they need at the lowest possible price,” Salit wrote in an email.

Lifespan, the state’s largest health care system, stressed white bagging as an unhelpful addition to patient care: “Coordinated care within the health system is the best type of care we can deliver,” said Christine Collins, senior vice president and chief pharmacy officer, via email. “The practice of white bagging disrupts this coordination, and at one of the most vulnerable points in a patient’s care — the administration of their medication infusion.”

PBMs under increasing scrutiny

The Senate bill inspired 30 pages of written testimony at a Feb. 8 committee hearing. The almost equally divided opinions (five in support, four against) suggested the bill’s divisive nature. Ujifusa suggested in a recent email that prescription drug costs go unchallenged at their roots: a lack of federal negotiations on drug pricing (the Canadian model, she said) and the suppression of “middlemen insurers and their Pharmacy Benefit Managers [who] take billions of dollars for themselves.”

Ujifusa launched multiple bills against PBMs this session, and Caldwell said she and her peers on the House Corporations Committee are “constantly hearing” PBM-related legislation. That kind of discussion has become normal in legislatures nationwide as pharmacy companies have widened their scope of business, leading PBMs to become more deeply integrated in their businesses. PBMs force providers and patients to deal with their stipulations, which has made the middlemen a foil for legislators and attorney generals nationwide, who blame them for higher drug prices. That a specialty pharmacy, a regular retail pharmacy, an insurer and a PBM might exist under a single corporate umbrella has been offered as further evidence.

Rhode Island’s own CVS Health is owner of the country’s largest PBM, Caremark — one of the five companies that account for 79% of about 116,000 contractual relationships between hospitals and PBMs. Caremark’s contracted specialty pharmacy is, maybe unsurprisingly, CVS Specialty.

Asked for a comment on the white bagging law, a Caremark spokesperson deferred to the company’s trade group, Pharmaceutical Care Management Association. The association responded that it “worked with stakeholders across the health policy space in Rhode Island to amend [the bills] to ensure that patients in the state are protected,” according to an email from a spokesperson, David Lumbert II.

Rhode Island Health Insurance Commissioner Cory King has a role in the new law, too. The amended version that made it to McKee’s desk prescribes that King’s office oversee the new regulations and publish anonymized pricing data. King said via email that he was anticipating his work with payers and providers to craft “ a data-driven and fair report on these issues as mandated by the new law.”

But is white bagging as suffocating to patients as its detractors insist?

“While I have heard anecdotes about the impact of these drug distribution and payment policies on consumers,” King wrote, “I would like to withhold judgment until we undertake a more thorough review.”

What’s so special about specialty drugs?

At full price, specialty drugs can cost more than an annual salary — $84,000 is the estimated average annual cost without insurance or manufacturer rebates.

Federal data shows the medications’ market growth : The specialty drug sector soared 43% from 2016 to 2021, but the number of prescriptions went up less than 1%. Even with so few consumers, specialty drugs comprised a $301 billion market in 2021 and have recently usurped the profitability of pills, at least as far as profit-per-patient goes.

Most oral medications are small molecule drugs that penetrate cells easily when digested. But many specialty drugs are also biologics, meaning they’re manufactured using animal matter and complex chemistry that require special handling, care and provider oversight.

These are the kind of drugs Caldwell wanted to protect from outside intervention. She acknowledged the law doesn’t change anything for specialty drugs which are administered at home, like the popular Humira or its new-to-market generics (which are called biosimilars in biologic medicine). Caldwell’s focus was on easing life for people who may already be exhausted by illness and treatment alike. Imagine having cancer, she suggested, and driving to an infusion appointment only to find your medicine isn’t there because the insurance-mandated shipment was late.

The context of Caldwell’s empathy is also the context for competing parties’ financial interests. Specialty drugs tiptoe the line between medical and prescription insurance. One of the first successful biologics was Remicade for inflammatory bowel diseases, derived from human and mouse antibodies. It requires a three-hour infusion — a level of involvement that, to many insurers, means the drug falls under medical and not prescription coverage.

Ge Bai, a professor of accounting and health policy at Johns Hopkins University, told Rhode Island Current that efforts to eliminate white bagging may not be “purely patient-centered.” Hospital lobbying plays a role, as do government programs like 340B reimbursements, which are meant to subsidize care for low-income people via deep discounts for hospitals’ pharmaceutical purchases. But the program’s reporting standards are inexact, leading one 2023 study to conclude the subsidies are probably not helping their intended audience.

“White bagging allows insurers to grab the profit margin from selling specialty drugs; and restrictions of white bagging give hospitals the sole right to that profit,” Bai said. “When there is no restriction, insurers and hospitals fight each other for that profit, which puts downward pricing pressure on both of them. If they are too greedy, then they are more likely to be undercut by their opponents.”

White bagging restrictions protect hospitals, Bai said, giving them room to comfortably expand profits, sometimes at the financial expense of patients and their employers who sponsor health plans.

The situation is highlighted in cancer treatment, where corporations like CVS have stacked their multiple assets in “ the battle for oncology margin ,” as a 2023 presentation from the Drug Channels Institute put it. PBMs, specialty pharmacies, health insurers and occasionally provider networks (like CVS’ MinuteClinic) have been vertically integrated to better wrestle for the profits from cancer drugs.

Caldwell thought people who take these drugs deserve better, and both she and Ujifusa expressed a desire to reign in PBMs as a means of correcting a profit-crunching system.

After all, people taking these drugs are seriously ill, Caldwell offered: “The last thing they deserve is to not get the medicine at the place most convenient to them, and at the time that they need it.”

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