The History of Physician Dispensing

Physician Prescribing Legislation

By William Shell, M.D.

Historically, in 1271 in France, doctors and pharmacists were reported to have feuded over dispensing laws. This discussion has continued to this day in many countries, developed as well as developing. In 1240 the German Emperor Frederick II initiated the separation of the occupations performed by doctors and pharmacists.

Most countries provide some form of regulation for dispensing by doctors. In the USA all 50 states have regulations governing physician dispensing, 46 states allow physicians to participate in the profit from their practices that includes dispensing pharmaceuticals.

The industry consensus is that the number of dispensing doctors will continue to increase because of several inherent benefits for patients of physician dispensing. The benefits include; significant reductions in deaths and unnecessary healthcare costs related to pharmacy errors; increased patient therapy compliance and convenience; purer and safer products for the consumer; and potentially lower reimbursement costs to payers. The lower reimbursement costs to payers can be achieved by appropriate administrative controls.

Physician dispensing in its present form began in 1982 with the introduction by FDA of regulations that gave approval for re-packaging of drugs. This allowed physicians in the U.S. to dispense drugs packaged and labeled by an FDA approved drug re-packager. Drug re-packagers in the U.S. are required to adhere to stringent Current Good Manufacturing Practices (cGMP's) regulated by the FDA and DEA. These regulations results in reduced error rates in physician offices compared to pharmacy dispensing. While dispensing drugs in the office used to be a complicated and time consuming process, today's current systems allow a physician to complete the entire dispensing process in a very short period of time with a high degree of accuracy.

The drugs are usually unit packed with coherent labels that reduce prescription and dispensing errors. The physician directly delivers the drug to the patient allowing more direct translation of therapeutic intent directly to the patient.

California has a state statute that regulates physician dispensing. In relevant part, the statute states:

(A) No prescriber shall dispense drugs or dangerous devices to patients in his or her office or place of practice unless all of the following conditions are met:
(1) The dangerous drugs or dangerous devices are dispensed to the prescriber's own patient, and the drugs or dangerous devices are not furnished by a nurse or physician attendant.
(2) The dangerous drugs or dangerous devices are necessary in the treatment of the condition for which the prescriber is attending the patient.
(3) The prescriber does not keep a pharmacy, open shop, or drugstore, advertised or otherwise, for the retailing of dangerous drugs, dangerous devices, or poisons.
(4) The prescriber fulfills all of the labeling requirements, all of the recordkeeping requirements of this chapter, and all of the packaging requirements of good pharmaceutical practice, including the use of childproof containers.
(6) The prescriber, prior to dispensing, offers to give a written prescription to the patient that the patient may elect to have filled by the prescriber or by any pharmacy.
(7) The prescriber provides the patient with written disclosure that the patient has a choice of either obtaining the prescription from the dispensing prescriber or obtaining the prescription at a pharmacy of the patient's choice.

This regulation is the basis for controlling and preventing abuse.

Physician dispensing can give rise to a potential conflict of interest when the physician can potentially profit from pharmaceutical therapies. This potential physician conflict of interest has existed in many other areas of medical practice and had been effectively controlled by regulation, review and transparency. Systems have been constructed that allow physicians to provide diagnostic tests and therapies directly to their patients while avoiding over utilization and excessive profit to the physician provider.

There are two potential problem areas that could apply to physician dispensing:

  1. Increased prescribing practices
  2. Choosing products with high profit margins rather than best therapies

Dispensing by pharmacists is not without problems. The increased prescription load and the leveling off of pharmacy school graduates are causing a shortage of pharmacists, reducing the number of hours that drug stores are open, and causing concern about dispensing errors being made by overworked pharmacists. The pharmacies are increasingly placed in large retail centers with stimuli for purchase of other profit generators including alcohol, tobacco and snack foods. Pharmacy dispensing also leads to non-fulfillment, non-compliance and error rates.

Physician dispensing increases patient compliance. Studies have shown that 21% of patients never get their prescriptions filled at pharmacies (according to a survey by AARP, formerly the American Association of Retired Persons) and 30% fail to get their prescription drug refills at pharmacies (according to a survey published in The Internist). When patients leave the physician's office with medication in hand, compliance rates dramatically increase. Compliance with drug therapy is 60% to 70% better when medications are delivered at the point of care than when patients are handed a written prescription. In contrast, one third of written prescriptions are not filled therefore delaying treatments leading to longer recovery times. Dispensing at the point of care overcomes a good portion of that noncompliance.

Physician dispensing also ends the risk of errors from illegible handwriting or sound-alike drugs, reducing prescription costs by as much as 50%, helping to avoid the $100 billion cost per year of noncompliance and medical errors.

Based on the reviewed literature, it can be concluded that actual studies comparing the practices of dispensing doctors and non-dispensing doctors is very limited. Studies comparing dispensing practices of doctors compared to pharmacists are also very limited and often related to emotions, beliefs and personal opinions. The large number of observations raised by various authors that remain unanswered indicates the importance of this subject:

  1. The cost of a first prescription from dispensing doctors practices was, in several studies, found to be higher (10 -13%) than for non-dispensing doctors;
  2. Dispensing doctors were found to prescribe lower quantities per subsequent encounter and cost was found to be 5-17% lower for dispensing doctors
  3. Dispensing doctors may be better informed on drug choices and prices than non-dispensing doctors;
  4. Delay in getting drugs results in prolonged disability. For example, untreated acute pain leads to chronic pain leading to a dramatic increase in total yearly cost.

Physicians constantly experience potential conflicts of interest. The issue of making a profit is true for all services provided by medical professionals. Obviously, physicians need to make a profit from office visits and other services simply to stay in business. Everything physicians do presents ethical dilemmas; the issue is how those dilemmas are resolved. The solution has been found in regulation, transparency, and review.


Support 331 with provisions:

  1. Limit reimbursement to 0 .95*AWP for dispensing physicians which results in a 45% reduction of total costs for Workers Compensation patients from the current rates. Reduce the reimbursement to 1.1*AWP for pharmacies to reflect their increased costs
  2. .Maintain physician dispensing fee but reduce to $5.00-- a further 25% reduction.
  3. Require physicians to certify medical necessity for choice of agents they are dispensing.
  4. Require physicians to choose the best therapy for each patient indication and not the highest AWP
  5. Subject dispensing physicians to periodic review for dispensing patterns to insure that they do not have a pattern of choosing the highest AWP.
  6. Exclude physicians with consistently high utilization patters for drugs with high AWPs.
  7. Require re-packagers and other manufacturers of pharmaceuticals that are distributed to physicians to notify each physician with each order of the AWP of selected products.
  8. Require all distributors of pharmaceuticals that are intended for distribution to physicians maintain a public list of their AWPs so that physicians can make informed choice of available agents and their AWPs.

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