PREPACKAGED MEDICATION DISPENSING - A WHITE PAPER

Dov Preminger

Former Sales Rep

Written January 2007

Many doctors are peripherally aware of the concept of 'pre-packaged medications,' but don't know enough to decide if it would be worthwhile to pursue. This paper is intended arm doctors with an honest understanding of the advantages and drawbacks of the system. The author, who no longer has ties to the industry, was involved for a time in pre-packaged medication sales with one of the larger companies in the business. I am not an expert on the industry, but because of the absence of this type of unbiased information on the web, felt obliged to post what I do know.

Prepackaged medications, also called medication dispensing systems, refer to medicines which doctors provide directly to patients at the office, bypassing the need for a pharmacy.

For doctors, pre-packaged medications can be profitable in practices of a certain minimum size and of a certain specialty. Practices of five or more doctors may consider dispensing, and some specialties to which the dispensing is especially beneficial are urgent care and occupational medicine. The primary downside of pre-packaged medications is the increased administrative workload associated with dispensing, especially in the case of controlled substances, which makes it unsuitable for many practices.

For patients, pre-packaged medications offer the convenience of bypassing a trip to the pharmacy, and will rarely be more expensive than a traditional pharmacy visit.

How It Works

Pre-packaged medications essentially allow a doctor to act as a small pharmacy for his patients. A doctor or a clinic which dispenses will have a supply of commonly prescribed drugs at the office, and will provide the patient with drugs on-site instead of referring them to a pharmacy.

The doctor or an assistant will sell the prescribed medication to the patient at the conclusion of the visit, and document the transaction. Documentation can be on paper or via computer software and scanner. Re-packaging companies, which sell the pre-packaged medications to doctors (discussed later), will provide the system, which tends to be simple.

It is common for re-packagers to understate the administrative burden involved in dispensing. The administrative workload is the primary reason why dispensing is not feasible for smaller practices. Despite the well-designed systems provided by re-packagers documentation is a burden, especially in the case of controlled substances, and is required by law to be accurate. Special storage and handling requirements can exist as well. Ironically, controlled substances (i.e., hydrocodone), which require the most documentation, tend to be the most profitable and most convenient medications to dispense.

Pre-packaged medications are only feasible for commonly prescribed, low cost generic drugs, such as amoxicillin, ibuprofen, or cyclobenzaprine, to name a few. The reason for that is in the purchasing process.

Re-packagers will buy medications from wholesalers and resell them to doctors. The re-packagers provide the important service of bottling and sealing the pills, so the doctor just has to hand out the right bottle. The medicines are of high quality, and when working with a reputable re-packager there should be no cause for concern on that front.

Wholesaler à Re-packager à Doctor à Patient

Doctors can acquire commonly prescribed generics for a very low price. The following medicines at the time of writing can be acquired for $3-7 from re-packagers, and sold to the patient for $10 or more:

1 Generic pain medicines (Ibuprofen, Naproxen, Hydrocodone, Propoxyphene Napsylate)

2 Muscle relaxants (Cyclobenzoprine, Carisoprodol, Chlorzoxazone)

3 Antibiotics (Ciprofloxacin, Amoxicillin, Cephalexin, Penicillin)

There is no mandated price cap which doctors have to abide by, and some doctors--particularly in wealthy areas--will mark up medications double, or even triple their own costs. Patients are often happy to pay the extra cost to avoid a trip to the pharmacy.

Only the least expensive, common generic medications tend to be appropriate for dispensing. This is because in selling the pre-packaged medications to patients, insurance is usually bypassed. Although in theory it is possible for the doctor’s office to be reimbursed by a patient’s insurance company for an expensive medicine, in practice dealing with insurance claims in the manner that a pharmacy might is time-consuming and beyond the capacity of a doctor’s office. Consequently, the dispensing is usually done on a cash-only basis, that is to say the patient will pay with cash or card for the full price of the medication at the office.

Brand name medicines or expensive generics are usually not appropriate for dispensing. These medications are often heavily subsidized by insurance, which a dispensing doctor will not deal with. Zithromax, for example, costs $50 even in its generic form. A patient will normally pay a $10 or $20 co-pay for Zithromax, and the insurance company will pick up the tab. It could be possible for doctors to act as a full pharmacy and deal with insurance, but it’s not advisable. Leave that to the pharmacies.

Should you dispense?

Pre-packaged medications are appropriate for larger practices and/or those of certain specialties.

Practices of five or more doctors may consider dispensing. Fewer than that may not be worth the administrative burden.

Additionally, certain specialties find dispensing to be more beneficial than others. The two specialties which benefit the most from dispensing are urgent care and occupational medicine. These tend to prescribe high volumes of generic medicines such as pain medicine and muscle relaxants, and thus generate high profits from the program. Their patients are also relieved of a trip to the pharmacy while they may be in pain.

Specialties which prescribe wide varieties of expensive medicines, on the other hand, are generally not good targets for dispensing.

Some specialties for which dispensing may be beneficial:

4 Student Health

5 Oral & Maxillofacial Surgery

6 Occupational Medicine

7 Urgent Care

8 Orthopedics

9 Pain Management

10 Pediatrics

11 Dentistry

12 Endocrynology

13 Internal Medicine

14 Rheumatology

15 OB/GYN

16 Cosmetic Surgery

17 Dermatology

Conflicts of Interest

There is a concern that If doctors are profiting from providing certain medications they may be tempted to prescribe those medicines more often, even at detrimental result to the patient.

A dispensing doctor might be faced, for example, with a decision to prescribe either amoxicillin or azithromycin to a patient suffering from an infection. The doctor can provide amoxicillin directly, making a small profit, but would not be able to sell the patient azithromycin.

However, the vast majority of medicines prescribed the are simple, effective, and cheap generics which doctors have always prescribed in high volumes. Much greater conflicts exist and are tolerated elsewhere in the medical industry, such as in brand name pharmaceuticals. It is the author's opinion that conflicts of interest do not pose a serious threat to patients.

Re-Packaging Companies

Doctors considering dispensing programs should solicit quotes from seveal re-packagers before deciding on one. Each may have slightly different prices and/or systems. Two well-known companies in the business at the time of writing are Allscripts and DRX.

Some companies have been known to offer very low prices on medicines, only to raise them quickly as time goes on. Doctors should be careful to deal only with reputable, high quality companies.

SAFETY

A common concern about medication dispensing for the patient is the safety factor. Re-packagers have many safeguards at their facilities to make sure the right drug is distributed to the right doctor in the right amount, and historically there have not been problems in the process. The place where there is room for error is in the doctor's office, where a harried doctor or receptionist may provide a patient with the wrong medication by accident.

Overall, medication dispensing can be a convenient and profitable service to all involved under the right circumstances. Practice size and specialty are the most important factors to consider when deciding whether to adopt a system.

-Dov