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Expensive medicine

By M.D. Kittle

Wisconsin Spotlight | Jan. 19,  2022

By M.D. Kittle

MADISON — The people of Walker Forge have been around long enough to know that “tough times don’t last, tough companies do.”

The Clintonville manufacturer is as tough as the steel it’s been forging for more than 70 years. But things are getting a lot tougher for even the strongest companies, caught in a perfect storm of challenges — a severe worker shortage, supply chain breakdowns, and the ever-rising costs of health care.

Bills moving through both houses of the Legislature, critics say, would bar an increasingly popular free-market way for employers to save on expensive specialty drugs.

“If this legislation passes, it would raise the cost of healthcare for everybody,” said Willard Walker Jr., CEO of the third-generation Walker Forge. “And Wisconsin already has some of the highest healthcare prices in the country.”

Walker says his company has realized substantial savings — more than $170,000 last year alone —  through alternative sourcing of specialty drugs for insured employees dealing with chronic and costlier healthcare needs.

The practice, commonly known as “white bagging,” is the distribution of patient-specific medication from a pharmacy, typically a specialty pharmacy, to the physician’s office, hospital, or clinic for administration.” The healthcare provider still administers the drugs, typically through injections or infusions, but health insurers, employers and employees often pay less for the medicines. That’s because they don’t pay the standard markup, as high as 400 percent according to a Moran Company study, that hospital and clinics charge for the medications.

‘Unreasonable and growing cost’ 

A coalition of businesses and advocacy groups, including Wisconsin Manufacturers & Commerce and state and national health insurer associations, oppose Assembly Bill 718. 

While proponents have characterized AB 718 as ‘white bagging’ legislation, in reality this harmful bill removes nearly every existing tool health insurance providers have to encourage lower cost, higher quality, and more convenient drug administration,” the coalition wrote in a letter to the bill’s sponsors late last year.  “Patients and employers bear the unreasonable and growing cost of clinician-administered drugs through higher health insurance premiums and out-of-pocket costs. Health insurance providers are responding to excessive hospital markups and the unsustainable cost of clinician-administered drugs by encouraging lower cost, more convenient settings when it is safe and clinically appropriate.”

Patient safety 

The Senate’s version of the bill, slated for a public hearing Thursday before the Senate Insurance, Licensing and Forestry Committee, has a lot of bipartisan support. It’s backed by healthcare providers and their advocates, like  the Wisconsin Hospital Association, which says the measure is critical in ensuring the timely delivery of vital medicines and, ultimately, the health and safety of patients.

“Healthcare providers and their pharmacists can’t guarantee or know for sure if that drug was stored properly. In a lot of cases these are drugs that require special handling, temperature controls,” said Joanne Alig, WHA’s senior vice president for Public Policy of what often is a mail-order process. “They can’t guarantee that the drug can be all the way through the process handled properly.”

Rita Shane, chief pharmacy officer for Cedars-Sinai in Los Angeles, described alternative specialty drug sourcing this way:

“Imagine a restaurant where everyone with a reservation has sent bags and boxes of raw food and ingredients from numerous vendors for the restaurant’s staff to prepare and cook. That’s similar to what clinics face when payers implement white bagging policies for medications,” Shane told Kate Traynor in an article for the American Society of Health-System Pharmacists ASHP.

‘Anti-free market’

Opponents of the bill say hospitals are employing fear tactics because they’re being cut out of the extremely lucrative market of specialty drugs. The specialty drugs aren’t coming from some fly-by-night market, they say. They are being delivered from pharmacies that are licensed and regulated as strenuously as those based within healthcare systems.

Hospitals and clinics can’t defend the high markups on their in-house specialty drugs, said Rachel Ver Velde, WMC’s director of Workforce, Education and Employment Policy. She said the higher prices are helping keep struggling hospitals going, particularly hospitals in rural parts of the state.

“Just because your business model isn’t working doesn’t mean you should charge exorbitant prices on employers and patients,” Ver Velde said. And the legislation would codify the practice instead, with the government once again picking winners and losers at the peril of the free market, she added.

Alig, of the Hospital Association, said the drug prices are negotiated into the contracts with health insurers, and now insurers want to operate outside of those agreements.

“If the payers don’t like the contracts negotiated, we would say that this should be done through contract negotiations, not through these policies,” the WHA official said.

Walker said the fight isn’t between the hospitals and the insurance companies. The people with the most to lose are the companies like his that are already being battered on so many fronts. Eventually, much of the rising cost will be absorbed through higher employee premiums, co-payments or even reduced healthcare offerings. Or employees will have to give up raises, retirement contributions and other compensation to offset healthcare costs.

“Hospitals are trying to justify this legislation in terms of what’s best for the patient and patient safety, but that’s not what’s going on here,” Walker said. “They don’t want competition. It’s an anti-free-market position they are taking, and it works to the extreme detriment of employers and to employees who pick up the ultimate tab.”

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