The Huge Cost of Physician Dispensing Is Still a Risk; In Fact, It Never Really Went Away

Despite regulation meant to curb abuse of physician dispensing, it's still a common practice and presents both safety and financial risks. 
By: | October 27, 2020

Physician dispensing, the practice of in-office medication dispensing outside of a typical pharmacy interaction and closely tied to the repackaging of drugs, has been a major point of discussion at workers’ compensation industry conferences and events over the last decade.

Despite regulation meant to curb abuse of physician dispensing, it’s still a common practice and a risk both in terms of safety and for carriers’ bottom lines.

“A lot of phases wax and wane,” said Melissa Burke, vice president and head of managed care and clinical for AmTrust, in describing the ongoing existence of physician-dispensing, despite efforts to clamp down on it.

“We identify a cost driver within the industry, we put in legislation, we put in strategies, we’re all striving to achieve the best outcome. So you see something like physician dispensing, reforms work for awhile, and then someone finds another loophole and then begins increasing unnecessary expense in the system.”

Those loopholes typically take the form of either increased utilization or increased prices for prescription drugs that would be available in cheaper generic form at a pharmacy.

In other cases though, even generics can pose a problem.

“You’d see a generic that’s been inexpensive for a long time. And instead of the five or ten milligram, we’ll see a dose come to market that’s 7.5 milligrams, and they’re charging much higher for it, and we’re only seeing it as a physician dispensed drug for the most part,” explained Burke.

“When those issues were raised, there were regulations put in place for how much they could charge, and in some states, it was how long they could dispense for. In very few areas was it both.”

Finding Evidence in the Reports

A review of regulations from myMatrixx reflects Burke’s assessment: There are a total of 22 states with “limits of physician dispensing practices,” which range from restricting particular classes of medication like Schedule II or III, to limits on the length of time a physician can dispense, usually 5-15 days.

A 2017 report “A Multistate Perspective on Physician Dispensing, 2011-2014,” by the Cambridge, Massachusetts-based Workers Compensation Research Institute (WCRI) came to the same conclusion.

That report noted that “in post-reform states, the average price per pill for existing drugs decreased after reforms. However, physicians are bypassing the reimbursement rules that specifically target repackaged drugs by dispensing newer, higher-priced drugs. That has offset the cost savings of reforms, actually driving up the average price per physician-dispensed pill in some states — particularly in California, Florida, and Illinois.”

WCRI used a representative sample from 26 study states to perform its analyses. But the observed risks in the realm of physician dispensing are not simply of a financial nature.

Physician Dispensing: Pros and Cons

The purpose of physician dispensing is to increase the convenience and accessibility of medications with an individual’s treating physician, according to the position piece published in Pharmacy & Therapeutics, “Good Intentions, Uncertain Outcomes: Physician Dispensing in Offices and Clinics,” by Matthew Grissinger, RPh.

Melissa Burke, vice president and head of managed care and clinical, AmTrust Financial

However, Grissinger, who acts as the director of error reporting programs at the Institute for Safe Medication Practices (ISMP), argued against “unbridled” physician dispensing and warns of “unintended consequences.”

In particular, Grissinger explained that “physician dispensing bypasses a crucial second independent check of the prescribed drug therapy by a pharmacist. Preventable adverse drug events that harm patients originate most often when prescribing the medication. At least half of these prescribing errors are detected and corrected when pharmacists review the safety and appropriateness of the medication.”

Burke, for her part, agreed.

“The value that a pharmacist brings when you fill your prescriptions all in one place from every doctor you’re seeing, every provider that’s involved in your care — that pharmacist is really the gatekeeper who’s keeping prescription use safe,” Burke said.

“That’s ensuring there aren’t drug interactions between different providers, that there’s not duplicate therapy, that we’re not treating one side effect of a drug with another drug leading to polypharmacy.”

Polypharmacy and Other Concerns

Polypharmacy, the inappropriate use of which was the subject of a California Workers’ Compensation Institute study in 2018, found that opioids were a common component in workers’ comp claims with polypharmacy, especially for older workers.

While many states limit the physician dispensing of controlled substances, the risk is still significant that a prescription could go unnoticed.

Another 2018 study published in Pain Medicine and focused on physician dispensing practices echoed this finding, using data from 2000-2015.

Patterns of distribution to practitioners and the number of practitioners varied markedly by state and changed dramatically over time. Comparing 1999 with 2015, the [morphine milligram equivalents] distributed to dispensing practitioners decreased in 16 states and increased in 35.

Most notable was the change in Florida, which saw a peak of 8.94 MMEs per 100,000 persons in 2010 (the highest distribution in all states in all years) and a low of 0.08 in 2013.

In addition to polypharmacy, physician dispensing is commonly linked with compounding, another practice that drew the ire of the workers’ comp industry. This is primarily private label topicals, which combined with new dosages of old meds, can quickly add up with minimal if any benefit to the patient.

“I remember coming over from retail, then joining the hospital environment prior to joining work comp — there were drugs I never saw, doses I never saw dispensed in a hospital — and here they are, one of top-selling medications in work comp. So that was something that was really tied to physician dispensing,” Burke explained.

“We’d see drugs in compounds that were absolutely not meant to be applied topically, that weren’t effective topically, and now we see these private label topicals, and they have the same thing. They have unnecessary amounts of certain ingredients that really aren’t bringing any more relief than your typical generic Bengay.”

Working Toward Solution

Burke points to formularies, joint regulation of utilization and pricing, and evidence-based medicine as potential solutions.

Ultimately though, nothing in the physician dispensing landscape will change unless both payers and providers come together for the sake of patient health.

“Physicians need to have buy-in on this as well, and they need to understand the risks and bring physician dispensing back to what it was designed for,” she said.

“There are physicians that feel strongly about the value of the pharmacist and oversight of medication.” &

Nina Luckman is a business journalist based in New Orleans, focusing primarily on the workers' compensation industry. Over the last several years, Nina has served as Editor of Louisiana Comp Blog, a news site she started in 2014 under the auspices of a group self-insurance fund. She can be reached at [email protected].

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