Witnesses urge cap on hospital outpatient drug prices as debate over white bagging continues

Charles Becker, staff attorney with the Office of the Health Care Advocate, and Jennifer Cohen, general counsel for the Office of Professional Regulation, testified May 13 about competing paths to lower Vermonters’ costs for physician‑administered outpatient drugs as legislators consider changes to H.266.

Becker said that if H.266’s Senate amendment allowing white bagging becomes law and the bill’s reporting requirements are implemented, the state will better see how much outpatient‑administered drugs contribute to hospital revenue. "If H.266 becomes law and we get the reporting that the bill calls for...the largest source of $3.40 b revenue for Vermont hospitals is far and away these outpatient administered drugs," he said. Becker and other witnesses pointed to a chart showing Vermont’s hospital‑administered drug prices at about 600% of average sales price (ASP) on average and, in some instances, as much as 2,000% of ASP.

Becker and others pressed two policy options: repeal the 2022 prohibition on insurer‑mandated white bagging so health plans could require drugs be shipped from a preferred specialty pharmacy, or set a statutory reimbursement cap linked to ASP (for example, ASP plus 20% or a fixed percentage such as 120% or 200% of ASP). "Ending a hospital's monopoly on acquiring outpatient drugs for patients could cause hospitals to lower their [prices]," Becker said. He added that the Office of the Health Care Advocate favors a reimbursement cap because it would be "more likely to have an immediate system wide impact."

Jennifer Cohen described the patient safety and professional‑practice concerns that motivated the 2022 prohibition. "White bagging means that the drug is shipped from an external pharmacy mandated by the payer or pharmacy benefit manager to either a prescriber's office or to a hospital where the drugs are subsequently prepared for IV infusion into the patient," she said. Cohen testified that when drugs arrive outside the hospital pharmacy’s standard supply chain, pharmacists may lack the electronic pedigree and verification records that confirm authenticity and proper storage, creating risks in dosing, timing and sterility for infusions.

Committee members pressed witnesses on tradeoffs and on mechanics. Becker acknowledged patient‑safety and anti‑profit concerns about pharmacy benefit managers (PBMs) if white bagging were allowed. "I'm not a big fan of PBMs making profits off the backs of sick people either," he said, noting the legislature included reporting requirements to monitor whether PBMs capture that revenue. Becker told the committee that a 120%‑of‑ASP cap applied to the 50 most expensive drugs in one analysis reduced spending by roughly $46 million; he attributed that number to an analysis he had seen but did not present.

A representative of Blue Cross and Blue Shield of Vermont told the committee that a reimbursement cap would be simpler to implement and would produce immediate revenue effects, though he cautioned there could be "leakage" because safety or clinical reasons may prevent white bagging for every drug. Blue Cross later provided insurer rate filings to the committee: individual market rate requests of 23.3% higher if enhanced federal advance premium tax credits were not continued and 15.6% higher if they were; small‑group rates were presented as 13.7% higher. The Blue Cross representative also said its filings include a 7% reserve contribution embedded in requested rates.

Public commenters and at least one other witness pressed for urgency. Mike Fisher, speaking as a commenter, said a statutory cap would address an immediate problem: "What we're talking about here is addiction to drug revenue, drug money," he said, arguing the dependency of some hospitals on drug margins harms employers, nonprofits and patients.

No formal vote or motion was taken at the hearing. Committee members discussed procedural options: concurring with the Senate amendment to H.266, substituting a price cap as a proposal of amendment, or convening a conference committee. Witnesses and members noted the Green Mountain Care Board could play a role in setting or updating any statutory cap, but most suggested that a statutory number would be needed quickly because a number set in law cannot be easily adjusted without future legislative action.

The hearing record includes repeated references to the 2022 statutory prohibition on white bagging enacted after safety concerns were raised and to Medicare Part B reimbursement practice, which uses ASP plus 6% (and in some settings ASP plus 8%) as a federal benchmark for provider reimbursement.

The committee took testimony but did not adopt a substitute amendment during the session. Members said they expected further deliberations before the bill reaches the committee, asked staff and counsel to prepare possible statutory language and requested concrete cap numbers for consideration in the coming days.