In-office drug dispensing: A new revenue stream?

Jan 01, 2009

Contemporary financial challenges call for creative thinking on the part of the physician-cum-small business operator. One idea that is gaining popularity is in-office dispensing of medications.

Key Points

This article will discuss the sometimes controversial concept of in-office dispensing and how to get started with this potential source of ancillary revenue.

A 2007 telephone survey of 1,000 adult men and women revealed that 75% of Americans would like to have their prescriptions filled in their doctor's office instead of a pharmacy if given the choice. Translation: Urologists are missing an opportunity to improve patient satisfaction and enhance revenue by not dispensing medicine in their offices.

The study, conducted by Opinion Research Corp. on behalf of the health care technology firm Purkinje, showed that in addition to convenience, patients like the concept of immediately starting their treatment.

The practice of filling prescriptions in the doctor's office is not new, but advances in technology, changes in reimbursement rates, and the emergence of patient-centered medicine are helping to fuel the resurgence in point-of-care dispensing.

In terms of technological advances, sophisticated software programs are available to ensure that patients are receiving the right medications, crosscheck against known allergies, and look for potentially adverse drug interactions. The medications arrive in safety-sealed bottles, prepackaged offsite under the supervision of pharmacists. Customized labels explain how and when to take the medications.

Controversy remains

The practice of office dispensing is not without controversy. Critics say that selling health-related items creates a conflict of interest when physicians stand to profit from items sold in their offices. They also note that patients might feel pressured or obligated to buy products or medications from their physicians in an attempt to please and that professionalism is compromised by selling products that could be just as easily purchased at the pharmacy.

So many issues surround the legality of ancillary services today that many of us are fearful of doing anything that could generate a fine or penalty-generating audit. Be sure to check the laws in your state regarding the practice. While point-of-care dispensing is perfectly legal in most states, it is by no means a universally accepted practice.

Every urologist has the right to dispense medicine to their patients. State and federal laws require physicians to dispense only properly labeled and packaged drugs.

The AMA also permits office dispensing, provided it primarily benefits the patient. Dispensing companies will assist your practice on what licensing is required by your state regulatory board. Typically, it is a matter of completing a short form and paying a small licensing fee.

The average urologist sees 100 patients and writes 100 prescriptions or more each week. Most of the generic drugs cost $5 to $10 and sell for $15, with a profit margin of $5 to $10 for each prescription filled. This represents a potential annual profit of $50,000 or more each year.

Consider the loss of productivity associated with sending your patients to the pharmacy to have their prescriptions filled. It takes minutes to dispense the medication to your patient in the office. An average urology practice takes up to 20 calls per day regarding refills from existing patients or pharmacy calls for clarification of scripts at an average cost of $5 to $7 per call. Each urologist spends 30 minutes to an hour each day on pharmaceutical matters without compensation.

This overhead totals about $30,000 annually per physician. These costs can be reduced or eliminated by dispensing medication directly to the patient, increasing practice income significantly.

Other than the cost of the drugs, you may have to purchase a drug cabinet and pay a minimum monthly fee for software, which is used for accounting purposes, tracking, and software maintenance. Shipping is also free on minimum orders.

If the patient has a prescription card, we suggest that you accept the co-payment on the card (typically $15 for generic medications). This way, it doesn't cost any more for the patient to purchase the medication from you, and you will earn a profit on the medication dispensed. Make sure to set reasonable prices to maximize profits.

Look for software that makes use of the Internet so that controls on your inventory occur in real time. Real-time inventory control eliminates the need to order more product, as this is done automatically.

One company, Clinical Rx Solutions ( http://www.clinicalrxsolutions.com/), is unique in that it has support staff who come to your practice to observe your work flow and, based on these observations, will implement the dispensing system and train your staff on the use of the software. Other dispensing companies include Allscripts ( http://www.allscripts.com/) and the American Association of Dispensing Practitioners ( http://www.aadponline.com/).

The bottom line: Thousands of dollars per month can be generated on something you already do in your office: write scripts. Your patients will be thank you for offering this service.

Dr. Baum is a urologist in private practice in New Orleans. He is the author of Marketing Your Clinical Practice-Ethically, Effectively, and Economically.

Dr. Dowling is medical director of Urology Associates of North Texas, a 48-physician community- based, single-specialty group in the Dallas-Fort Worth metroplex.