Hospitals and Insurers Vying for the Profits on Medication Mark-Ups, Hurting Consumers

By Consumers for Quality Care, on July 19, 2023

When it comes to pricey infusion medications, hospitals and insurers are competing with each other to make a profit off these drugs, creating red tape for consumers fighting to get the treatment they need, according to KFF Health News.

Instead of sending these complex medications to hospital pharmacies and physician offices, some insurers are sending them to third-party pharmacies instead. Only then will these third-party pharmacies send the medications to the patients medical provider, a practice known as “white bagging,” or directly to patient, a practice known as “brown bagging.”

Insurers claim this practice is needed because hospital medication mark-ups are too high. On the other hand, hospitals argue that insurers, some of which have their own or affiliated pharmacy companies, are engaging in this practice simply to boost their profits. In the middle of this dispute are the patients themselves, who are subjected to unnecessary risks and delays as insurers and hospitals duke it out over who gets the profit from their health care.

Paula Bruton Shepard in Bolivar, Missouri, requires monthly injections to treat her lupus, an autoimmune disease, but said that her insurer’s white bagging infusion policy often created delays in acquiring the infusions she needs, worsening her mobility symptoms.

Ge Bai, a Professor of Accounting and Health Policy at Johns Hopkins University, notes that while insurers are claiming this arrangement reduces costs, there’s no evidence that the savings are passed on to consumers. In the battle over profits between insurers and medical providers, Bai says, “they’re all trying to make money.”

A report from the Massachusetts Health Policy Commission found that white bagging allowed insurers to save 12 percent on the cost of Remicade, a medication used to treat inflammatory diseases. But the report also found that consumers were paying more for the medication when white bagging was used for Remicade or other medications.

Even though Shepard could get her medication from the hospital where she receives treatment, under her insurance plan she was only allowed to receive her infusion medication from an outside pharmacy. If the shipment was damaged or delayed, it could hurt her ability to get the care that she needed.

State legislatures are now looking at passing legislation to better coordinate patient care and protect consumers from white-bagging and brown-bagging. So far, at least 21 states introduced some form of legislation in their last session, and 13 states have laws restricting white-bagging.

After KFF made a call to Shepard’s insurer, they stopped the white-bagging policy for her and now allow Shepard to access her medication directly from the hospital, sparing her from the “bureaucratic mess” she used to deal with. “I’m just so relieved,” Shepard said. “I don’t have to take phone calls. I don’t have to reply to emails. I just show up.”

Consumers should not get caught in the middle of payment and profit disputes between insurers and hospitals. CQC urges lawmakers and regulators to take a closer look at bad practices that are driving up the cost of prescription medications, particularly for consumers with chronic illnesses, which are often costly to treat.