What's behind the new surge in the sale of drugs by doctors in their offices




What's behind the new surge in the sale of drugs by doctors in their offices

Azar A. Korbey's family practice nestled in Salem, N.H., looks like your ordinary suburban family practice. But looks can be deceiving. Korbey, an M.D., does more than just diagnose and prescribe medications for his patients. He also dispenses them. And the money's good. He adds approximately $20,000 a year to his bottom line, he claimed in an interview with Drug Topics.

Korbey's is not an isolated tale. There are many more physicians out there who are assuming the role of drug dispensers. For some time, this form of dispensing has been regarded as a professional and economic threat to many pharmacists. Is there any reason pharmacists should be more worried now? Is physician dispensing, not a new phenomenon, gaining new momentum? What's going on here?

Something's shifting physician dispensing to a faster track, and that vehicle is electronic prescribing technology. Handheld devices designed to store abundant amounts of information on both products and patients as well as health-care plans are enabling physicians to explore the drug dispensing area more confidently.

Some cost-conscious insurance plans are also providing encouragement. They feel that physicians' participation in electronic prescribing-dispensing programs will help managed care organizations save money, reduce hospitalization costs associated with med errors, and improve patient care.

Allscripts, Libertyville, Ill., a company founded in 1986 to provide dispensing physicians with repackaged medicines, is one of the biggest players, and it's hoping to put even more physicians in the electronic prescribing-dispensing seat. In fact, three years ago, Allscripts reengineered its strategy to arm physicians with an electronic prescribing solution called TouchScript. The system has the ability to print a legible script that has undergone drug utilization review (DUR) and been checked for formulary compliance. It provides patients with a choice of receiving medications in their physician's office or having the script sent to the pharmacy of their choice—retail, mail-order, or Internet. The TouchScript software uses the Internet to route transactions to pharmacies and provide connectivity to managed care and other organizations.

Dave Mullen, president/CFO of Allscripts, told Drug Topics that the company is still involved in the nontechnology component of its business but is now emphasizing electronic prescribing with dispensing as an option. The number of its dispensing doctors has jumped from 7,500 to 12,000 in 18 months.

Allscripts carries 6,000 SKUs. "Seven hundred are our bread and butter, mostly first-fill acute medications," said Mullen. He insists physicians who dispense and use Allscripts' electronic prescribing system aren't motivated by profit. "At one time, it might have been lucrative. With the advent of managed care, I'd call it modest [profit]. Our physician population can generally cover the cost of the electronic prescribing system [through dispensing] and perhaps have a little left over after that, but it won't be anything anybody can retire on," he said. The monthly fee for the system is $200.

So, if it's not the money that's enticing them, what is the attraction of dispensing? Mullen said his customers like dispensing because it helps them attract and retain patients. Patients like the convenience and confidentiality of receiving medications in the physician's office. And the electronic prescribing device enables doctors to glean drug and patient information necessary for dispensing prescription drugs.

"The idea that a patient, at least for the first fill, can pick up the prescription right in the physician's office is a huge convenience. Convenience is also manifest when the physician is able to electronically send the prescription straight from his handheld computer to the pharmacy so that the medication could actually be waiting by the time the patient gets there," said Mullen.

Hazel Park, Mich.-based Genesis Pharmaceutical is another firm spreading the physician dispensing gospel. It manufactures over-the-counter products, health and beauty care items, and Rx medications and supplies them to more than 2,000 dispensing physicians. Three Rx products are sold only to physicians. They are a 4% hydroquinone cream, a gel, and a cream with sunscreen. The drugs are indicated for treating melasma and cholasma, both discolorations of the skin caused by aging and sun damage. Most of the company's Rx sales are in sun-drenched areas, such as southern California, Florida, and Texas.

Elliot Milstein, v.p./general manager of Genesis Pharmaceutical, said he has seen a 20% hike in the number of doctors who dispense over the past five years. "The big boom in dispensing came in the late 1980s to mid-1995," he recalled. "For us, it was the advent of alpha hydroxy acid, a very specific product that was not available in drugstores. The only way doctors could get this product to patients was by dispensing, so the percentage of dermatologists dispensing went from about 15% to 60% in the course of about five years."

Noting that, in 1998, Genesis Pharmaceutical bought C and M Pharmacal, a firm that started selling products to dispensing physicians back in 1943, Milstein downplayed the controversy surrounding physician dispensing. "Physician dispensing has a lot of advantages for the patient, which I call the three Cs: convenience, compliance, and cost. It absolutely aids compliance. Whenever you have a transfer of information, which would be the doctor writing a prescription and the patient taking it to the pharmacy, you have a tremendous opportunity for lack of compliance."

Offering a view from the practitioner's side is George Iannini, M.D., an internist in Southbury, Conn., who has been in practice 23 years. He has been dispensing for just over a year and has made about $5,000 profit. From an average of 2,000 scripts he writes per month, he dispenses 350 drugs. "Approximately 75% of our business is with contracts; 25% is cash. There's not a ton of money in dispensing. The profit part is not driving it for us. We have found that the patients love it," said Iannini.

In addition to patients benefiting from the convenience and confidentiality that comes with dispensing in the office, Iannini claims that he saves time and improves patient care by dispensing with the new technology. "I'm interested in autonomy. In my office we have a fair number of call-backs for Rxs. We're a practice owned by a health system. We do 40 different insurance plans. It's mind-boggling. Each insurer has its own formulary. We get call-backs saying, 'That's not the preferred drug,' or, 'There's a generic for that.' Allscripts solves that problem," he said. Allscripts keeps track of managed care organizations and which drugs are on their formularies and the drugs' relative costs.

Those who favor an electronic prescribing system also argue it enables better record-keeping of a patient's history. Iannini said a printed label he puts on the medications tells him who he prescribed the medication for, what medication he prescribed, the diagnosis, and how many refills are allowed. "It's quicker than doing a hand script, and there's not a legibility issue. You print it at the office, you hand it to them or fax it directly to the pharmacy if you are not going to dispense it. If you fax the prescription, it gets there quickly."

Iannini also credits physician dispensing via an electronic system with increasing patient compliance and giving him more control over people actually filling their scripts.

Although Iannini said his intention to dispense is not based on profit, dispensing is likely to be more lucrative in the future. He plans to increase the number of drugs he stocks. He currently stocks about 50 drugs—mostly for upper respiratory conditions and hypertension. He will also launch a formal effort to inform patients that he can provide refills. "We've now gotten our feet wet. It requires more organizational skills and attention, and we've been working on it," he said.

As physicians become more involved and more proficient at dispensing, the question that must be answered is, Will they take more business away from pharmacists who are already facing more than a fair share of competition?

"Sure," said Mullen, "pharmacists aren't going to love anything that competes with what they are doing, any more than independent pharmacists liked chains coming into the business." Similarly, pharmacists didn't like mail-order or Internet retailers competing with them. "If we see increased interest on the part of physicians, it's coming primarily from a desire to provide greater patient benefit for the purpose of retaining and attracting patients, because it ends up being a convenience, and there are confidentiality issues. Many of our physicians feel they can differentiate their practice by offering this convenience, which is particularly attractive to pediatric and geriatric patients, for whom transportation is often an issue."

Iannini had this response: "The percentage increase in Rxs written or dispensed per year is far outstripping the increase in the number of pharmacists. Though pharmacists are fearful of [physician dispensing], we're probably taking a burden off them, to tell you the truth."

"There are seven major pharmacy chains in my town," added Korbey. "I'm not going to put Rite Aid or Brooks or CVS out of business. There are a couple of independents located four or five miles away. I don't carry 100% of all medications in my practice. For instance, there are 35 different strengths of thyroid medications. I can't carry all of them. For the occasional ones I don't have, patients go to their pharmacy. I have a good relationship with pharmacists. They know I dispense. For those prescriptions I can't fill, pharmacies know through my system they'll get fully legible Rxs faxed or printed by computer," he said.


Allscripts' Mullen insists pharmacists will still get their share of prescription revenue. "Our system is basically a first-fill system. So when they're refilling their medications they'll do that at a pharmacy," he said.

"Pharmacists should think of themselves more as consumers and less as businessmen and realize the competition is good for the patient even though it's very hard on the pharmacy," Milstein commented. "I think a market exists for both [pharmacists and physicians]. People always want to get products at a pharmacy. Even though the number of doctors dispensing has grown significantly, I don't think the numbers show [doctors] are taking business away from pharmacists."

Cliff Berman, senior v.p./general counsel at Allscripts and a member of the Illinois board of pharmacy from 1994 to 1999, contends that Allscripts is not trying to alienate pharmacists. "Whenever we begin doing significant business in a state, we will go in and meet with the pharmacy community because they have to understand how our system works. They'll be getting Rxs electronically, and we'll also discuss with them how the dispensing aspect of the system works. We're building close alliances with the pharmacy community."

Pharmacy board helps

Berman said Allscripts has put together a pharmacy advisory board "to enable us to develop our product and understand the pharmacy community and what their needs are." He said pharmacists stand to benefit from electronic prescribing because they will get legible DUR and formulary-checked prescriptions. "More than 900 plan formularies are loaded and that information is provided to the doctor so that the Rxs they write are on the formulary." He explained that if pharmacists adopt script standard, the electronic standard for accepting Rxs in their computer, it will eliminate the retyping of the Rx by a technician or pharmacist and will reduce the source of errors. "It should absolutely cut down on heavy workload," he said.

But is physician dispensing really in the best interest of patients? Mullen believes the electronic prescribing system ensures patient safety. "If you're in the physician's office and want to get medications dispensed there and are carrying a prescription card, the physician will submit that claim to your managed care organization in exactly the same fashion your pharmacy does. And when that happens, the drug history in the managed care organization's system is checked in the same way it is checked in the pharmacy," he said.

Berman said the electronic prescribing device gives physicians information at the point of care to make sure they are prescribing appropriately. "There's also a local patient record maintained, just like a pharmacy would, of all the Rxs that have been dispensed in the office and actually prescribed because it's on our prescription device. When the physician writes the Rx, whether it is filled in the office or sent to a pharmacy, DUR review occurs on that Rx and that information is provided to the doctor."

All of the drugs are prepackaged in unit-of-use containers, which come to the doctor presealed and precounted. "There are several safety checks," said Berman. "Each bottle the physician gets has a bar code on the label, and that has to be scanned at the physician's office. That bar code maintains the NDC [national drug code] number. When the bottle is scanned, if the wrong product has been chosen, a label will not print. The bar code maintains the expiration date of the product, so if the bottle would expire during the course of therapy that has been prescribed, a label will not print. Finally, the code maintains the specific lot number for the drug and enables the physician to track the drug to the patient level and perform patient-level recalls if a manufacturer requires that."

Milstein pointed out that those who argue against physician dispensing usually cite conflict of interest as a potential problem. "There's the assumption a doctor will purchase products whether he needs them or not and sell them because he has the inventory. I've never known a doctor to purchase something and say, 'I'll figure out later what I'm going to use it for.' They only buy what they know they are going to dispense. They don't dispense what they happen to buy. Doctors are concerned about conflict of interest."

Pharmacy takes dim view

Pharmacy industry associations remain unconvinced of the purported merits of physician dispensing. Despite the supposed benefits of electronic prescribing technology, they maintain strong positions against physician dispensing.

Kurt Proctor, senior v.p., National Association of Chain Drug Stores, said, "There are companies that are making a big push—Allscripts obviously. There's been some real questions about how successful they've been and how successful a model it's going to be, but clearly we do not support physician dispensing. We're very strongly supportive of the important role pharmacists play in keeping patient records and in double-checking prescriptions. We're all for electronic transmission of prescriptions, but having the physicians dispense is not something we support."

Susan Winckler, group director of policy and advocacy, American Pharmaceutical Association, said pharmacists "have significant concerns about physician dispensing, primarily because it eliminates the pharmacist assessment of the appropriateness of the therapy. There probably is no assessment done of the interactions that may occur between that product and any other medications you are taking. From a patient-safety standpoint, it stimulates some problems with being able to make sure the drug is appropriate. They do the computer check to say the dose is correct, but I don't believe they have the capability, except in the case where a third-party plan is paying for the medication, to assess the new therapy against any existing therapy the patient also receives because they simply wouldn't have access to that information," she said.

Winckler said it's not likely physicians will have a full-service pharmacy in their practice without hiring a pharmacist to help run that practice. "It does raise questions, if you have a device that carries only the top 30 or top 100 medications. It's not likely you'd be able to meet the full medication needs of the patients. The likelihood you'd be able to do a comprehensive assessment of the new medication, its appropriateness, and the risk of drug interactions is limited. So there may be some questions about whether physician dispensing is taking business away from pharmacies, but the bigger issue here is patient safety. There's more here than who gets to dispense the medication."

Todd Dankmyer, senior v.p., communications, National Community Pharmacists Association, said NCPA thinks "physician dispensing for profit is anticompetitive and basically erodes the traditional checks and balances that exist between physicians and pharmacists to ensure consumers receive the highest quality pharmacy services. We don't think it's in the best interest of the consumer because they lose the checks and balances that exist when physicians prescribe and pharmacists dispense. Electronic prescribing, however, to the extent to which physicians are forwarding the Rx to a pharmacy, is a different issue, and generally we're supportive of it."

State pharmacy association executives have differing opinions on whether physician dispensing is on the rise. Rod Shafer, R.Ph., CEO of the Washington State Pharmacists Association, said physician dispensing had a "very brief exploratory period in Washington about 10 years ago. Most physicians did not realize the additional $50,000 per year that they were promised and found that the storage, handling, record-keeping, and so on just wasn't worth the effort. Also, they did not have any third-party payers willing to reimburse them."

Tom Temple, executive v.p. and CEO of the Iowa Pharmacy Association, "would not say that physician dispensing is being done to a significant extent, but it is significant in some limited areas. We are seeing a significant increase in marketing by Allscripts, and they have had some success in a couple of fairly large physician clinics. Because of some legal questions that surround the requirements associated with physician dispensing, there is an effort by both the board of pharmacy and the board of medicine to jointly study this issue. It's important to use everyone's expertise in the drug prescribing/distribution process, and systems that preclude the involvement of pharmacists fall short of ensuring appropriate quality."

Allison Jorgensen, R.Ph., assistant executive v.p. of the Nebraska Pharmacists Association, does not regard physician dispensing as very significant. "The allergists and oncologists use it most. It is not encouraged either by us or the medical community. We do have a few areas where there is a physician and no pharmacy, so then it seems the most reasonable way to get patients their drugs. It is probably preferable to having them freeze in a mail-box or cook on the porch."

Baeteena Black, executive director of the Tennessee Pharmacists Association, said physician dispensing is increasing slightly in her state, and Christopher J. Decker, executive v.p. of the Pharmacy Society of Wisconsin, had this assessment: "I don't believe that practicing physicians are generally interested in dispensing prescriptions. In fact, the recent recognition of the significance and frequency of medical errors, coupled with the importance of medication safety, will drive more integrated multidisciplinary systems rather than stand-alone box systems. The best combination for patient safety is when the physician and pharmacist work together to determine, manage, and monitor an individual's drug therapy. Technology that facilitates that activity will be the winner in the long run."

Tom Holt, executive director of the Oregon State Pharmacists Association, said, "Physician dispensing is not significant or especially encouraged except for cancer drugs.... It may grow with the adoption of automated dispensing systems. Other than highly specialized items, physicians should leave dispensing to the drug therapy experts—pharmacists."

Craig M. Burridge, M.S., CAE, executive director, Pharmacists Society of the State of New York, noted that physician dispensing "for profit" has been prohibited in his state since 1986. Physicians may give out samples only. "Allscripts came into New York this past legislative session and tried to get legislation passed that would once again allow doctors to dispense for profit. We will be keeping our eye on this legislation again this year."

A health plan's perspective

Offering another viewpoint on physician dispensing is Lifeguard Inc., a regional health plan in San Jose, Calif., which has been participating in an electronic physician prescribing program with the San Jose Medical Group for about a year. One hundred of the group's 140 core doctors are using Allscripts' electronic prescribing system and are dispensing drugs to clinic patients. The drugs are usually generic medications mainly intended for short-term or acute medical conditions that last from five to 10 days.

Explained Robert Ajlouny, a clinical pharmacist at Lifeguard, "We are one of the health plans participating in providing our patient data and our information to the program so our patients seen in that clinic can be involved in physician dispensing. When the doctors write prescriptions, they can see the patient data and they'll know if it's a Lifeguard patient. They'll also know the demographics and the patient's Rx history. Then they can write the Rx for that patient and the copayment will come out appropriately. We gave the San Jose Medical Group our information and hooked them up to our pharmacy provider network so all claims written for Lifeguard patients through that Allscripts program are transmitted on-line through our PBM. The patient makes a co-pay to the clinic and the clinic receives an on-line adjudication dispensing fee as if it were a retail pharmacy," he said.

Emphasizing that prescription utilization costs have zoomed in the past five years, Ajlouny sees Lifeguard's participation in the electronic physician prescribing and dispensing program as a way to lower patients' co-pays. "Physician dispensing at the clinic site alleviates the workload at the local pharmacy for these acute short-term use medications and in this manner allows local pharmacies to have more time to spend on patient interactions. The biggest benefit is it tends to focus on generic drug utilization, and it tends to promote a decrease in medical errors. It also decreases the incidence of call-backs to the physician's office based on improperly written prescriptions," he said.

Allscripts, Genesis, and Lifeguard may claim that monetary incentives are not the prime motivation enticing physicians to dispense, but Korbey's story reveals that a handsome profit can be made. When he first opened his practice 14 years ago, he was looking for a way to supplement his income. "Someone brand new in practice who doesn't work for anybody has to hang a shingle and hope to see some patients. I had to do something to supplement my income. When I first started my practice, there were days I'd see only three or four patients. This Allscripts program came across my desk. It just looked like a no-brainer to me," said Korbey. He has slowly but surely developed a very wide formulary, keeping 250 different medications on hand.

Emphasizing that managed care pays for most patients' medications, Korbey said, "We have no control over the mark-up we get paid. We get whatever the patient co-pay is and whatever the insurance pays. All we know is we don't deal in the red. We make from $1.50 to $2.00 profit, just like a drugstore does."

Whether or not physician dispensing will continue to grow, thanks to electronic prescribing, remains to be seen. One thing is certain. Firms such as Allscripts are intent on putting more of their handheld devices in physicians' hands.

Mullen doesn't think pharmacists need to be worried. "We tried to create a win-win situation. Rather than have a pharmacist say, 'Oh, physician dispensing is bad,' we'd like them to say, 'Electronic prescribing is good' because it reduces the number of phone calls the pharmacist has to make to the physician, it makes the pharmacist more productive, it reduces the likelihood a mistake will be made in the processing of the prescription, and it lowers the cost of doing business as transactions go straight from the physician's computer to theirs. The trade-off is, What is going to motivate the physician to want to dispense? Presumably the ability to provide a value-added benefit to the patient is enough to motivate some doctors."

Sandra Levy


Sandra Levy. PHYSICIAN DISPENSING. Drug Topics 2001;1:41.