Did you know that in some states, such as Maryland, it is actually legal for doctors to dispense prescriptions in their offices, rather than use a pharmacy?
At first glace this seems like an excellent, convenient service for the patient. Sticking to what is usually the case, not everything is as good as it seems. It turns out that when the doctor dispenses the drug it costs health insurance companies as much as 10 times more than if the patient went to the pharmacy.
In an article written for The New York Times, the authors claim that when a pharmacy sells the heartburn drug Zantac, each pill costs about 35 cents. But doctors dispensing it to patients in their offices have charged nearly 10 times that price, or $3.25 a pill.
The same goes for a popular muscle relaxant known as Soma, insurers say. From a pharmacy, the per-pill price is 60 cents. Sold by a doctor, it can cost more than five times that, or $3.33.
So, the question is, why the markup? And, who is getting that cash?
The article states that doctors can make tens of thousands of dollars a year operating their own in-office pharmacies. The practice has become so profitable that private equity firms are buying stakes in the businesses, and political lobbying over the issue is fierce.
Apparently rules in many states governing workers’ compensation insurance contain loopholes that allow doctors to sell the drugs at huge markups. Profits from the sales are shared by doctors and middlemen who help physicians start in-office pharmacies and drug distributors who repackage medications for office sale.
The number of doctors nationwide who dispense drugs in their office is not known and the practice is prevalent only in states where workers’ compensation rules allow for large markups.
Automated HealthCare, a leader in physician dispensing, has had an uphill battle trying to defend the practice of setting up office pharmacies by providing them with billing software and connecting them with suppliers who repackage medications for office sale. Doctors sell the drugs but they do not collect payments from insurers. In the case of Automated HealthCare, the company pays the doctor 70 percent of what the doctor charges, then seeks to collect the full amount from insurers.
Founder of Automated Healthcare, Dr. Paul Zimmerman, said that insurers and other opponents of doctor dispensing were distorting its costs by emphasizing the prices of a few drugs, rather than the typical price spread between physician- and pharmacy-dispensed drugs.
Both Dr. Zimmerman and physicians who sell drugs also said the workers’ compensation system was so bureaucratic and complex that an injured employee could wait days before getting a needed medication through a pharmacy.
Although the doctors are currently profiting from this system, they claim they didn’t do it for the money.
“We did not institute this because of the money,” Dr. Marc Loev, a managing partner of the Spine Center, a chain of clinics in Maryland, testified last year at a public hearing in Baltimore. “We instituted it because we were having significant difficulty providing the care for workers’ compensation patients.”
Alarmed by the costs, some states, including California and Oklahoma, have clamped down on the practice. But legislative and regulatory battles over it are playing out in other states like Florida, Hawaii and Maryland.
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