Sunday, September 16, 2007

Clinical Innovations - Office Dispensing, Retail Clinic Prescribing, and Conflicts of Interest

Times are changing and may require different prescribing methods by doctors. Many consider doctors profiting from prescribing as a conflict of interest. Yet thousands of retail clinics, featuring prescribing nurse practitioners, are being set up for the express purpose of offering convenient prescriptions at the point of care. Is that not too a conflict of interest? Or is it just entrepreneurs finding a niche to provide convenience for time-pressed consumers? If that’s the case, why can’t profit-pressed physicians offer a similar convenience?

Growth of Retail Clinics as Competitive Threat to Doctors

Retail clinics are exploding at Walgreen’s, CVS, Osco, Wal-marts, Target, Duane Reade, and other commercial outlets. There may be 10,000 of these nurse-practitioner staffed clinics by 2010. These clinics represent a competitive threat to doctors, since surveys show 12% of patients going to these clinics say they plan to use these clinics for their care rather than doctors.

According to Scott Nystrom, MD, medical director of Physician Total Care, Inc, a Tulsa-based company providing drugs and software for physician office dispensing,
Retail store walk-in clinics certainly provide convenience but the underlying motives to this movement beg comment.

The spirit of in-store clinics, Nystrom says, is to move the prescription writer (not a physician) to the pharmacy effectively creating point-of-care dispensing. For the store, it puts the patient in a retail environment where the entire process is focused primarily on generating retail sales not health care. For physicians, the competitive response is to move the process of dispensing back into the physicians‘ offices where it originated.

In Innovation-Driven Health Care: 34 Key Concepts for Transformation, I have a chapter entitled “Physician Office Dispensing Stages a Comeback.” In that chapter, I said the typical physician, seeing 20 patients a day, averages writing 30 prescriptions and refilling 30 more. Writing these prescriptions take knowledge and time, and the process of refilling them may cost $5 to $7 in direct and indirect costs.

Facilitating Office Dispensing

Physician Total Care and other companies facilitate office dispensing by purchasing prescription medications in bulk, repackaging them into individual prescription sizes for physicians, who then dispense these medications by using company software.

This process provides convenience for patients, (who don’t have to drive to pharmacies to have the prescription filled), assures greater compliance (30% of patients never have their first prescriptions filled, and as many as 50% don’t have them refilled), lowers prescription costs by as much as 50%, and provides most common generic and brand name drugs. Furthermore, it allows the dispensing physician to earn up to $6 per prescription, which may amount to $180 per day.

Office Dispensing Not for Everyone

Office dispensing isn’t for everyone. There are those who say doctors shouldn’t profit from prescribing because it represents a conflict of interest. Furthermore, seven states (Massachusetts, New Jersey, New York, New Hampshire, Texas, and Utah) don’t allow office dispensing.

There are other reasons doctors may choose not to dispense as well: hesitancy to change existing office patterns, fear of being perceived as overly “commercial”,: lack of office space to store drug inventories, balking at buying these inventories, reservations about upsetting cordial relationships with local pharmacists.. For these reasons, only about 10% of doctors dispense from their offices.

The Other Side of the Argument

Nystrom argues. The current retail pharmacy method of getting medication to patients is inefficient.

In 2006, pharmacists dispensed more than 3 billion prescriptions and placed over 900 million prescription-related telephone calls which cost the industry $280 billion, primarily for office staff and physician time as well as the telephone and fax charges. Each pharmacy call back costs physicians’ practices $5-$7. With the average physician writing 30 prescriptions a day and handling another 30 requests for refills, the costs escalate rapidly. The estimated 20 pharmacy related phone calls per day costs $20,000-$28,000 annually. In general, physicians are oblivious to this cost center. By moving dispensing into the physician’s office, this overhead can be cost shifted to better serve patients as well as create additional income.

Office dispensing respects patients’ time and increases patient medication compliance. Furthermore, only physicians possess the authority to substitute therapeutically equivalent generic or brand name medications of differing drug class. As a result, their cost saving generic use rates reach levels not attainable by any industry strategy. In 2006, the average generic prescription cost was over $88.00. Payers have increased generic substitution nationally to 63%. Stimulating higher generic prescription rates through higher co pays on branded drugs and limiting formulary may have the unintended consequence of deceasing compliance. Dispensing physicians achieve an 85% generic substitution rate with an average medication cost for both branded and generic drugs of $37.20. Without direct physician involvement, increasing generic prescription rates remains impractical. Physician dispensing prescriptions cost half the national average. The potential cost savings for payers and consumers is staggering.

The number of retail clinics staffed by nurse-practitioners who write prescriptions may reach 10,000 by 2010 in multiple retail outlets. These clinics offer convenience, lower costs, and quick access to prescriptions at the outlet. Twelve percent of patients patronizing these outlets say they plan to use them as substitute for their doctor and as their main source of care.
Some doctors may choose to partially counter the competitive effect of retail clinics by dispensing medications in their offices, in the process, offering convenience, lower costs, ease in refills, and lower overhead costs. The estimated 20 pharmacy related phone calls per day costs $20,000-$28,000 annually, which is nothing to sneeze at if you’re an economically stressed physician trying to meet a bottom-line.

For full story, see


Electronic Medical Records Information said...

Thanks for the thoughtful analysis of the pros and cons of physician dispensing. Today, the Washington Post published a detailed feature story about the trend of physician (point of care, or in office) medication dispensing. I thought you and your readers would enjoy taking a look at what the Post wrote. You can find the story online at

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