Q&A: Regulatory, Administrative Framework Creates Barriers for Health-System Pharmacy

Due to bagging tactics, cost shifting between payers and beneficiaries, and regulatory framework that blurs the lines of which providers can administer what, the business of health care in the US has grown increasingly challenging for health-system pharmacy.

“If you reimbursed the same for every drug, no matter which setting, you're creating a huge disadvantage for the hospitals,” said Eric Tichy, PharmD, MBA, BCPS, FCCP, FAST, Mayo Clinic Division Chair and Associate Professor at the Mayo Clinic College of Medicine and Science. “Some of them might be acquiring the drug at a higher price than the physician’s office and the hospitals have this regulatory framework that they have to manage that is diametrically different than what it's like in the physician's office.”

He joined Drug Topics to discuss the American Society of Health-System Pharmacists (ASHP) 2025 Pharmacy Forecast and a section of the report that he co-authored titled “The Business of Health Care: Strategic Challenges in Health-System Pharmacy.” In the second part of our interview with Tichy, he discussed pharmacy bagging tactics as well as the intricacies of federal legislation, its regulations, and how it will impact health-system pharmacy.

According to Tichy, the bagging process focuses more on the cost of prescriptions than the cost of administering and preparing them for patients. | image credit: Giovanni / stock.adobe.com

Stay tuned for more Drug Topics interviews regarding the ASHP 2025 Pharmacy Forecast. As we meet with authors and industry leaders that contributed to the report, we will discuss some of its most important sections.

READ MORE: Q&A: How Health Systems Must Navigate Pharmacy, Medical Benefits

Drug Topics: Regarding specific industry tactics that impact health systems, the report mentions how bagging tactics “decrease costs for insurers to differing extents while increasing out-of-pocket costs for patients.” What do you think are health-system pharmacists’ perspective on the bagging process and what about it needs to be changed to equally benefit payers, patients, and providers?

Eric Tichy: First off, I think that, when you think about bagging, you're focusing exclusively on the cost of the drug, and you're not taking into account all of the work that it takes to administer medications by a health care provider. In the health care arena, there's a regulatory framework that we have to deal with that's pretty intense. There’re medical professionals that have to be administering things. All of that adds costs to the drug administration. The bagging tactics essentially try to ignore all of those other factors and just say, “Okay, we're just going to focus on the cost of the drug as the only thing that we're willing to pay for.”

I think one of the analogies that really resonates with me is it's kind of like going to a restaurant and sort of bringing the ingredients and saying, “Okay, I'm only willing to pay for the ingredients here; please make this gourmet meal for me.” To me, it's a little bit naive to think that white bagging should work, because essentially, you're just bringing the ingredients and saying, “Hey, why don't you put this together for me?” It's very disruptive to the patient experience because now I've got to receive product from some external entity that's not my normal distribution channel. I lose my ability to adjust doses and things like that. I'm not being compensated for all this other regulatory and overhead that I have to deal with as a health system. I think those are the things that we look at as health care providers and kind of scratch our heads and wonder, “Why would anyone think that this would work?”

From a patient standpoint, I think a lot of times, patients don't understand these differences between medical and pharmacy benefits. They kind of get put in the middle. I think the other thing is that we hear [about] this cost savings. Definitely, for the plan, it could be cost saving because you're sort of eliminating these overhead costs and things like that. Some of it is actually a cost shift because you're moving it to the prescription benefit, where patients have a larger out-of-pocket. You're shifting more of the responsibility to the patient. There's cost savings overall, but the actual patient might see a cost increase.

I think those are some of the things, as health care providers, we see that are a little bit challenging. I think, from the payer perspective, they would say it leads to overall health care savings. They’re reducing plan premiums and things like that. The problem is the actual patient who's sitting in the seat is not necessarily experiencing those, or the savings are being diluted so much that the individual patient is undergoing all the challenges, but they're not seeing a lower cost themselves.

Drug Topics: The report mentions HR 5378—the Lower Costs, More Transparency Act—and how it poses a financial threat to health systems. What exactly is this financial threat and what are health systems doing to prepare for the potential signing of HR 5378?

Eric Tichy: Well, I think the best way to prepare for this is to not have it get signed and passed. I talked about some of the differences of medications that are self-administered, that are under the PBM, and there's the provider-administered medications. Even in the provider world, there are differences. A physician's office is different than a hospital infusion area. Some of it is that regulatory framework that I mentioned earlier. In a physician's office, they don't have to have the same checks and balances. They don't need to have the same health care professionals involved in the care. They might not need to have the same treatment of sterile products. A lot of this is very complicated, and most people aren't aware of these differences, but big health systems have essentially all this overhead that goes into the care of the patients.

You don't have that in a physician's office, so Medicare reimburses both settings differently based on that. The cost of acquiring drugs is also different in both settings. There's a physician class of trade, and I think a lot of people aren't aware that physician offices can get drugs at a discount that hospitals can't get. Now there are other discount programs that many hospitals are eligible for, such as the 340B program. However, not all hospitals are eligible for the 340B program. For those reasons, things administered in a physician's office are reimbursed differently than things that are reimbursed in a hospital. If you reimbursed the same for every drug, no matter which setting, you're creating a huge disadvantage for the hospitals. Some of them might be acquiring the drug at a higher price than the physician’s office and the hospitals have this regulatory framework that they have to manage that is diametrically different than what it's like in the physician's office.

READ MORE: Health System Resource Center

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