In-House Drug Dispensing Boosts Bottom Line and Patient Convenience

SHARON H. FITZGERALD

In-House Drug Dispensing Boosts Bottom Line and Patient Convenience

Knoxville Company Offers Turnkey Option

The mother of a sick 6-year-old pushes a double stroller out of the pediatrician’s office, the feverish first-grader trailing behind. In the stroller are a 3-year-old and a hungry and crying 8-month-old. What’s next? A 30-minute wait with three kids in tow for the two prescriptions at a chain pharmacy across town.

Saving patients such taxing experiences is one reason why physicians today are opting to dispense at least some medications directly from their offices. Another reason is an additional revenue stream, welcome at a time of declining reimbursements.

“It is an opportunity to provide your patients with a service that they oftentimes are interested in,” explained Max Reiboldt, president and CEO of Atlanta-based Coker Group, a healthcare management consulting firm. Reiboldt is the author of several financial books on healthcare practices and is a co-author of Physician Ancillary Services: Evaluation, Implementation and Management of New Practice Opportunities.

“Keep in mind that if you put a pharmacy into your practice, you maybe compete a little bit with Walgreen’s and CVS, but that’s not what you’re doing. You’re not going to market this to the public. It’s for your patients,” Reiboldt said, adding, “It’s like most other businesses. It’s a volume-driven thing – volume and convenience.”

When Coker Group runs the pro formas for physician clients considering in-house drug sales, the numbers usually point to economic success only for larger group practices or specialty practices such as pediatrics and oncology, Reiboldt noted. “But it still may be justified just simply from the standpoint that it might rise you above your competition a little if you have that accessibility and a one-stop shop for the patient,” he continued. Coker also approaches the financial analysis from a different direction, considering what Reiboldt called the “opportunity cost” of the office space in-house dispensing would occupy. “You do have to devote a certain amount of space, and space is not inexpensive,” he said. Particularly for smaller practices, Coker may identify a different ancillary service that would produce more revenue for the space and startup costs involved.

Most in-office physician dispensaries sign a contract with a specialty company that either repackages and delivers drugs to the physician offices or that offers a more turnkey solution for mini-pharmacy operations. “They actually call it a market basket approach, where essentially you fill your market basket for your pharmacy from that supplier,” Reiboldt explained. “It’s pretty much that way, even with a multispecialty group that decides to put a pharmacy in.”

Knoxville, Tenn., is the home of Physicians’ Pharmaceuticals Corp., founded five years ago to offer doctors’ offices an in-house dispensing alternative without adding to the workload of a practice’s existing staff. PPC has physician clients in nine states and will soon add a tenth state to its service area.

Christopher Jaffers, PPC corporate secretary, said the company prefers to call its setups “physician dispensing locations,” which do “everything a retail pharmacy does – with the exception that we don’t sell Coca-Colas, Doritos and shampoo.” PPC offers a comprehensive, turnkey, in-house dispensing service, giving doctors a relatively pain-free alternative to boost revenue and enhance patient convenience. Working with a physician or a group manager, PPC chooses an appropriate location in the office for the dispensary and then goes to work. The company installs shelving and cabinetry, computer hardware and software, and then interviews pharmacy technician candidates to run the operation. The company recommends a short list of two or three candidates and leaves the final hiring decision to the client.

PPC stocks the physician dispensary from its Knoxville warehouse, with stocking decisions based on each client’s prescribing habits. “Because the doctors can only fill the prescriptions they write to their own patients, they obviously don’t have the thousands and thousands of different medications in a retail pharmacy,” Jaffers explained. “The amount of inventory they carry is much less.” Each location is generally stocked with seven to 10 days worth of inventory, he added, and it’s the pharmacy technician’s job to reorder.

PPC charges a one-time setup fee that includes equipment, one week of onsite training, and enrollment fees with insurance companies and pharmacy benefit managers. “We actually have a staff that does the paperwork, and then sends it to the practice for the signatures. The doctors actually own the contracts,” Jaffers said. “I’ll tell you, it’s an archaic system. It’s manually done, and there are probably two or three dozen contracts, some of which are 60 pages long.” PPC also offers ongoing profitability analysis, customer service for medication pricing and operations support. “Very, very, very importantly, we offer a compliance and audit program to make sure that they (PPC clients) are accounting for controlled substances,” he said.

From the perspective of the patient, the doctor dispensary operates just like a pharmacy, with similar drug packaging and the patients’ medication records and drug interaction information available via computer

When it comes to physician dispensing, Jaffers said laws and insurance acceptance differ from state to state. In Tennessee, for example, the medical board cedes authority to the physicians when dispensing for their own patients. Alabama, on the other hand, doesn’t recognize dispensing physicians and neither does Blue Cross and Blue Shield of Alabama. Mississippi requires that physicians pour, count, label and hand the drugs to each patient and file the insurance claim, onerous provisions that dissuade most physicians. In states where the doctor dispensing is prohibited or restricted, medical associations are working for change, Jaffers said, and some lawmakers are listening. That’s because in-house dispensing may help improve patient outcomes. At least physicians know that the prescription has been filled and the patient has it in hand. “Outcomes are going to be better,” he said, “if people are taking their medicines.”



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In-house physician pharmacy, physician prescription dispensing, Physicians’ Pharmaceutical Corp. Coker Group, Max Reiboldt, Christopher Jaffers