A few years back, some budding entrepreneurs in California figured out how to make a bundle for themselves as well as referring docs by repackaging drugs and dispensing them in physician offices where there is an exemption to laws which prevent from owning their own pharmacy (New York and Texas specifically prohibit physician dispensing).
This practice is almost exclusively used in worker’s comp because drug prices are often paid according to a formula of average wholesale sale price (AWP) plus a markup (similar to DME) as opposed to healthplans which generally have co-pay requirements, networks, and formularies which have driven down reimbursement and make dispensing repackaged drugs for the most part unprofitable for physicians.
The rational for physicians goes along the lines of making sure that the patient gets the right drug, patient convenience, and compliance. This is consistent in physician owned PT services (POPTS) where the same arguments are used along with “I can see what is going on and I am there in case something goes wrong”.
Of course, the financial incentives are also just as clear and consistent. Since I am referring for a service or a pharmacy, I should make some money off of the deal. Interesting that research out of CWCI (California) is showing that some repackaged drugs pricing is often 1700% between physician dispensing and what the same cost would be in a discount pharmacy. In Florida, the cost is 38% higher than the median of the states that were studied.
Recently, Florida Governor Charlie Crist vetoed a bill which would have limited the reimbursement for physician-dispensed repackaged drugs.
What I find interesting is the major similarities between POPTS and repackaged drugs on so many levels. There is data that is irrefutable regarding financial incentives and referral patterns (average # of prescriptions per claim in Florida is 17% higher than the median state). There is the difficulty in getting this banned legislatively (Crist’s veto). There are the arguments about patient convenience. There is the assumption that both drugs and PT services are essentially fungible commodities. They are both also legal in most situations.
What is strikingly different however is what is being done about it. Apparently, many payers are putting in contractual language specifically banning physicians dispensing. Other payors are cutting reimbursements and even others are notifying physicians that patients will no longer be directed to them if they continue dispensing repackaged drugs (in many states work comp patients can be directed by the employers to medical providers).
Sometimes we have to learn from those aligned with us and certainly the repackaged drugs industry is one of them.
Thoughts?
larry@physicaltherapist.com
