There has been a lot of focus on prescription drug costs during the 2020 political season. One thing both parties seem to agree on is that while prescription drugs have advanced the overall well-being of society, their rising cost has become a topic of national debate. The affordability and accessibility of the latest medications on the market have not only impacted the pharmaceutical industry, but also outpatient delivery of critical drug therapies.
Cost Controls for Prescription Drugs
Healthcare managers around the country have been adopting new strategies that promote more cost-effective drug delivery models. As a result, this is helping to control the price of advanced pharmaceuticals used in outpatient therapy. Two of the strategies employed in the healthcare industry have become to be known as “Brown bagging” and “White bagging”. Both of these medication delivery tactics involve patients acquiring their own pharmaceuticals through their drug insurance benefit to be administered by a physician, physician extender, or another qualified out-patient healthcare provider. These methodologies differ from the normal practice where the healthcare provider would traditionally stock the medication and bill the patient when it was administered in the outpatient setting. The difference between these two approaches is subtle, but each has some distinct nuances.
Brown Bagging Explained
“Brown bagging” is the practice whereby the patient is responsible for acquiring their own medication, either from a local pharmacy, or from a wholesale pharmacy that ships it directly to the patient. The patient then transports it to their healthcare providers office to be appropriately administered. This method shifts the benefit coverage from the patient’s medical benefit to their pharmacy benefit. There is no additional mark-up added at the healthcare provider’s office for the drug, thereby reducing the overall cost. From the healthcare manager’s perspective, [Request information about WTAMU’s MBA in Healthcare Management] there is an added benefit of not having to tie up operating capital in drug inventory. As a result, this leads to reduced overhead costs of storing, insuring, and staff time in handling the medications.
White Bagging Cost Method Explained
“White bagging” is a related method, except that the prescription drugs are delivered directly to the healthcare provider’s office from the pharmacy or other specialty pharmaceutical wholesalers. The cost is still billed under the patient’s pharmacy benefit with no additional mark-up. However, the patient doesn’t have to deal with picking it up, storing, and transporting the drug to the medical visit to be administered. This method helps to ensure that the drug is available at the time of the patient visit, has been stored appropriately, and is ready to administer.
Transparency Meaures of Prescription Drug Costs
Both of these strategies provide for the increased transparency of prescription drug costs, thereby helping patients to become better-educated. Especially in one of the areas that account for an ever-increasing portion of the total domestic healthcare spending. However, not everyone in the healthcare realm has embraced these new concepts. Providers are concerned about the safety and integrity of the medicine. Consequently, issues may arise with patients forgetting to pick up their medication prior to their scheduled appointment time. Some patients have voiced that being involved in this transaction costs them extra time off work having to now coordinate their pharmaceuticals for their upcoming doctor’s visit. While these concerns are certainly valid, one thing is for certain, insurance companies and policymakers have taken note of these cost-saving measures and they seem to be gaining traction in the healthcare marketplace.
For more information on this emerging practice see Nat’l Assoc. of Boards of Pharmacy
David W Clark, MPA, CPA
Instructor of Accounting & Healthcare Management