FTC Staff Comment Before the Department of Health and Human Services Concerning Report on Physician Drug Dispensing: An Overview of State Regulation

" 	(
BUREAU OF COMPETITION
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580
V890012
/
December 	15, 	1988
COMMISSION AUTHORIZED
Richard 	P. 	Kusserow
Inspector General
Department 	of 	Health and Human 	Services
washington, 	D.C. 	20201
Dear Mr. 	Kusserow:
We 	are 	pleased to 	respond 	to 	your 	request 	for 	our views 	on
the 	Office 	of 	Inspector General's 	Draft 	Report 	entitled
"Physician 	Drug Dispensing: 	An 	Overview of 	State 	Regulation"
("Report").1 	The 	Report 	recommends 	that 	states 	enact more
stringent 	regulation of 	physician dispensing 	of 	prescription
drugs 	by 	(1) 	imposing procedural 	requirements 	for 	supervision,
labeling, 	recordkeeping, 	storage 	and 	security; 	(2) 	requiring
dispensing 	physicians 	to 	be 	registered 	for 	purposes 	of 	inspection
and monitoring; 	and 	(3) 	imposing 	requirements 	to 	protect
consumers' 	freedom 	of 	choice 	in determining where 	to 	purchase
their 	prescription drugs. 	The 	Report 	also 	recommends 	various
actions 	that 	states 	should take, 	including 	the 	provision 	of
additional 	resources, 	to 	promote 	effective enforcement 	of
regulations 	concerning physician 	dispensing.
Because 	the 	Report's 	recommendations 	do 	not 	call 	for 	the
adoption of 	regulations 	that 	would 	interfere with 	the 	ability 	of
consumers 	to 	obtain 	prescription drugs 	from 	their 	physicians, 	we
do 	not 	oppose 	them. 	We 	note, 	however, 	that 	we 	cannot 	comment
definitively 	on 	proposals 	as 	broad 	and 	general 	as 	those 	in 	the
Report, 	and 	therefore confine 	our comments 	to 	the 	major 	issue
raised 	by 	the 	Report 	-- 	to 	what 	extent 	physician dispensing 	of
prescription drugs 	should be 	regulated.
The 	Bureau 	of 	Competition 	staff 	does 	not 	endorse 	physician
dispensing as 	preferable 	to 	pharmacist 	dispensing, 	or vice 	versa.
Rather, 	we 	support 	consumer 	choice 	among 	qualified 	providers 	of
prescription drugs. 	At 	this 	time, 	we 	are 	not 	aware 	of 	any
justification that 	supports 	a 	total 	ban 	on 	physician dispensing
of 	prescription drugs. 	Physician dispensing 	increases 	consumers'
options 	in 	the 	purchasing of 	prescription 	drugs, 	and we 	believe
it 	may 	increase 	competition 	among physicians 	and between
physicians 	and 	pharmacists, 	and 	possibly 	lead 	to 	lower 	prices 	and
1 	These 	comments 	are 	the 	views 	of 	the 	staff 	of 	the 	Bureau
of 	Competition of 	the 	Federal 	Trade Commission. 	They 	are 	not
necessarily 	the 	views 	of 	the 	Commission 	or 	of 	any 	individual
Commissioner.

I
Richard 	P. 	Kusserow
Inspector 	General
Department 	of 	Health 	and 	Human 	Services
2
better 	services. 	We 	believe, 	therefore, 	that 	consumers 	should
not 	be 	deprived of 	the 	potential 	benefits 	of 	physician dispensing
unless 	there 	is 	reason 	to 	believe 	that 	such 	dispensing 	has 	harmed
or 	is 	likely 	to 	harm public 	health 	and 	safety and 	that 	less
restrictive 	health and 	safety 	standards 	are 	insufficient 	to
protect 	the 	public.
It 	is 	important 	to 	clarify the 	representations 	made 	in 	the
Report 	concerning 	our views 	on physician dispensing. 	The 	Report
states, 	at 	pages 	1 	and 	6, 	that 	the 	Federal 	Trade 	Commission 	staff
"have 	sought 	to 	discourage" 	state 	regulation of 	physician
dispensing on the 	grounds 	that 	physician dispensing enhances
competition and 	that 	attempts 	by 	state 	governments 	to 	regulate
the 	practice 	"might constitute 	restraint 	of 	trade." 	This 	is
generally 	but 	not 	entirely 	accurate. 	We 	have 	opposed 	only
unreasonable 	restrictions 	on 	the 	ability of 	physicians 	to
dispense 	drugs. 	Moreover, 	a 	statute 	enacted by 	a 	state
legislature would 	generally 	not 	be 	subject 	to 	the 	antitrust 	laws
and 	therefore would 	not 	itself 	constitute 	an unlawful 	restraint
of 	trade. 	Nonetheless, 	when 	requested we 	have 	submitted comments
in 	opposition to 	the 	adoption 	of 	what 	we 	view 	as 	unreasonable
restrictions 	on the 	ability of 	physicians 	to 	dispense 	drugs 	by
both 	state 	regulatory 	agencies 	and 	state 	legislatures. 	For
example~ we 	have 	submitted 	comments 	to 	regulatory 	boards 	in
Georgia 	and Maryland 3 	and 	to 	a 	legislative committee 	in
California 4 	concerning physician dispensing. 	I 	am 	enclosing
copies 	of 	our comments 	for 	your 	information. 	In 	those 	comments,
we 	opposed the 	adoption of 	rules 	or 	statutes 	that 	we 	believed
would 	unreasonably 	restrict 	physician dispensing without
providing 	any countervailing 	public 	benefits. 	It 	is 	our 	belief
that 	restrictions 	of 	this 	nature 	are 	likely 	to 	be 	harmful 	to
consumers. 	We 	have 	not, 	however, 	opposed efforts 	to 	insure 	that
both 	physicians 	and 	pharmacists 	adhere 	to 	regulations 	that 	may
promote 	public 	welfare.
2 	see Letter 	from 	Jeffrey 	I. 	Zuckerman, 	Director, 	Bureau
I 	of 	Competition, 	to 	William G. 	Miller, 	Jr., 	Joint 	Secretary, 	State
Examining 	Boards 	(November 	26, 	1986).
3 	see Letter 	from 	Jeffrey 	I. 	Zuckerman, 	Director, 	Bureau
of 	Competition, 	to 	C. 	Earl 	Hill, 	M.D., 	President, 	Maryland 	State
Board 	of 	medical 	Examiners 	(December 	31, 	1986).
4 	~ Letter 	from 	Jeffrey 	I. 	Zuckerman, 	Director, 	Bureau
of 	Competition, 	to 	The 	Honorable 	Tim Leslie, 	California Assembly
(May 	1, 	19B7).

/
Richard 	P. 	Kusserow
Inspector General
Department 	of 	Health and Human 	Services
3
/
For 	example, 	we 	recently 	submitted comments 	to 	the 	Georgia
State 	Board of 	Pharmacy 	supporting 	the 	adoption of 	rules 	that
would 	require 	dispensing physicians 	to meet 	health 	and 	safety
standards 	similar 	to 	those 	imposed on pharmacists. S 	In 	these
comments, 	we 	stated that 	the 	adoption of 	the 	proposed 	rules 	would
not 	interfere with the 	ability 	of 	physicians 	to 	dispense
prescription drugs 	efficiently, 	and 	thus 	would 	not 	deprive
consumers 	of 	the 	benefits 	of 	choice 	among qualified providers 	of
prescription drugs. 	We 	therefore 	suggest 	that 	your 	office 	could
more 	accurately 	state 	the 	position of 	the 	FTC 	staff 	by deleting
the 	second 	and 	third 	sentences 	of 	the 	paragraph bridging pages 	1
and 	2 of 	the 	Report 	and 	substituting the 	following: 	"Staff 	from
the 	Federal 	Trade 	Commission 	(FTC) 	have 	sought 	to 	discourage 	the
states 	from 	prohibiting or 	unreasonably 	restricting physician
dispensing 	of 	drugs. 	The 	staff 	has 	suggested that 	dispensing 	by
physicians 	enhances 	competition 	in 	the 	prescription drug market
and may 	lead 	to 	lower prices 	and better services." 	Similarly, 	on
page 	6, 	the 	words 	"prohibiting or unreasonably 	restricting"
should be 	substituted 	for 	"regulating."
The 	Report's 	recommendations 	do 	not 	call 	for 	regulations
that 	would 	interfere with 	the 	ability of 	physicians 	to 	dispense
prescription 	drugs, 	and 	are 	therefore 	consistent with 	our
position. 	At 	the 	same 	time, 	however, 	the 	Report's 	regulatory
proposals, 	which appear 	acceptable 	in 	a 	generalized 	form, 	may
have 	anticompetitive effects 	when 	incorporated 	into 	a 	specific
regulation or 	statute or when 	added 	to 	an existing regulatory
scheme. 	For example, 	while 	recordkeeping and 	security
requirements 	may be desirable 	in 	principle, 	the 	specific 	language
of 	a 	regulation or 	statute proposed by a 	state may be 	so 	unduly
burdensome 	or 	restrictive 	that 	it 	unreasonably 	restricts 	the
ability of 	physicians 	to 	dispense 	drugs 	and therefore 	suppresses
competition. 	Similarly, 	a 	state 	may adopt 	the 	recommendation
that 	physicians 	who dispense 	be 	registered 	and yet may 	also
impose 	a 	myriad of 	other requirements 	that 	effectively deny 	or
significantly delay 	the 	approval 	of 	applications 	for 	such
registration. 	While 	the 	recommendations 	offered 	in 	the 	Report
appear 	to 	call 	for 	no more 	restrictive 	a 	scheme 	of 	regulation
than 	that 	which 	is 	currently 	in place 	for 	pharmacists, 	we 	do 	not
know 	how 	each of 	the 	states 	would 	implement 	these
recommendations. 	For 	this 	reason, 	we 	cannot 	endorse 	the 	Report
and would 	prefer 	to 	comment 	on 	specific 	rules 	or 	statutes 	as 	they
are 	proposed by 	the 	states.
5 	~ Letter 	from 	Jeffrey 	I. 	Zuckerman, 	Director, 	Bureau
of 	Competition, 	to 	William G. 	Miller, 	Jr., 	Joint 	Secretary, 	State
Examining 	Boards 	(June 	26, 	1987).

L
Richard 	P. 	Kusserow
Inspector General
Department 	of 	Health 	and Human 	Services
4
I
In 	sum, 	the 	dispensing 	of 	prescription 	drugs 	by physicians
increases 	consumers' 	ability 	to 	choose 	among 	qualified providers
of 	pharmaceutical 	services. 	The 	resulting competition among
physicians 	and 	between physicians 	and pharmacists 	may 	produce
lower 	prices 	and 	improved 	services. 	The 	recommendations
presented 	in 	the 	Report 	appear 	to 	call 	for 	regulatory 	action 	that
would 	not 	unreasonably 	interfere with 	a 	physician's 	ability 	to
provide 	dispensing 	services. 	We 	do 	not 	oppose 	the 	concepts
embodied 	in 	these 	recommendations, 	but we 	cannot 	comment
definitively 	until 	we 	have 	seen 	specific 	proposed regulations.
We 	appreciate 	this 	opportunity 	to 	review 	the 	Report 	and 	give
you 	our 	comments 	on 	this 	important 	issue. 	If 	you 	have 	any
questions 	or would 	like 	to 	discuss 	our 	comments, 	please 	call
Assistant 	Director Michael 	D. 	McNeely 	at 	(202) 	326-2904.
Sincerely yours,
Cjb~ucDirector
Bureau 	of 	Competition
Enclosures