FTC Staff Comment Before the Maryland State Board of Medical Examiners Concerning Proposed Regulations on Physician Dispensation of Drugs

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LTNTTED Si Ans OF AMU..IC A
FEDERAL TRADE COMMISSION
"'ASHl""CTON. D.C. JIOSao
•
Dece~r 	31, 	1986
C. 	Earl 	Bill, 	M.D., 	President
Maryland 	State 	Board 	of 	Medical 	Examiners
201 	West 	Preston 	Street
Baltimore, 	Maryland 	21201
Dear 	Dr. 	Bill:
The 	Federal 	Trade 	Commission'f 	Bureaus 	of 	Competition,
Consumer 	Protection, 	and 	Economics 	are 	pleased 	to 	respond 	to 	the
request 	of 	the 	Maryland 	State 	Board 	of 	Medical 	Examiners
(-Board-) 	for 	our 	views 	regarding 	the 	practice 	and 	regulation 	of
the 	dispensing 	of 	prescription 	drugs 	by 	physicians. 	We
un~erstand 	that 	the 	Board 	is 	considering 	regulations 	to 	impl.men~
recent 	legislation 	regarding 	physician 	dispensing 	(Chapter 	691 	of
the 	Acts 	of 	Maryland, 	1986, 	approved 	May 	27, 	1986, 	effective
January 	1, 	1987). 	We 	believe 	that 	diapensing 	by 	physicians 	and
other 	health 	care 	practitioners 	increases 	.ervice 	and 	price
competition 	among 	practitioners, 	and 	between 	practitioners 	and
pharmacists, 	to 	the 	benefit 	of 	consumers. 	We 	urge 	the 	Board 	to
preserve 	and 	encourage 	such 	competition 	in 	any 	rules 	and
regulations 	it 	may 	adopt 	concerning 	the 	dispensing 	of
prescription 	drugs 	by 	physicians.
Physician 	Dispensing
The 	dispensing 	of 	medication 	by 	physicians 	is 	a 	traditional
part 	of 	medical 	practice. 	Indeed, 	until 	about 	thirty 	years 	ago,
the 	family 	physician 	who 	made 	house 	calls 	and 	dispensed
medication 	was 	a 	familiar 	figure. 	Today, 	most 	consumers 	receive
a 	prescription 	order 	from 	their 	physician 	and 	purchase 	the
prescribed 	drugs 	from 	a 	pharmacist. 	Other 	consumers, 	often 	but
not 	exclusively 	located 	in 	rural 	areas 	not 	served 	by 	a 	nearby
pharmacy, 	atill 	purchas~ medication 	from 	their 	physician. 	And 	as
competition 	among 	physicians 	has 	increased 	in 	recent 	years, 	more
physicians 	have 	begun 	to 	offer 	their 	patients 	the 	convenience 	of
dispensing 	prescription 	drugs .
1 	These 	comments 	reoresent 	the 	views 	ot 	the 	Bureaus, 	and 	not
necessarily 	those"of 	the 	Co~.ission. 	The 	Commission,
however, 	has 	authorized 	submission 	of 	these 	comments.

,.'
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C. 	Earl 	Hill, 	M.D., 	President 	-2-
Dispenling 	by 	physicians 	benefits 	consumers 	by 	aaximizing
the 	number 	of 	qualified 	sources 	from 	~hich 	they 	may 	purcnase
prescription 	drugs, 	and 	by 	enabling 	consumers 	to 	avoid 	aaking 	a
separate 	trip 	to 	a 	pharmacy. 	The 	competition 	resulting 	from
dispensing 	by 	physicians 	may 	enhance 	the 	incentive 	for
pharmacist! 	to 	offer 	lower 	prices 	and 	additional 	services 	to
consumers.
Opponents 	of 	physician 	dispensing 	allege 	that 	it 	may 	injur~
consumers 	by 	encouraging 	physicians 	to 	over-prescribe, 	or 	to
limit 	product 	selection 	to 	those 	drugs 	available 	in 	the
physician's 	office, 	in 	order 	to 	increase 	revenues. 	In 	our 	view,
the 	physician's 	desire 	to 	maintain 	a 	reputation 	for 	integrity
should 	reduce 	suc~ 	incentives. 	Even 	assuming 	thai 	such
incentives 	exist, 	restraining 	an 	entire 	category 	of 	tranlactions
by 	physicians 	is 	not 	justified. 	The 	fact 	that 	lome 	pharmacists
may 	recommend 	the 	purchase 	of 	vitamins 	or 	over-the-counter
medications 	because 	of 	their 	high 	retail 	margins 	does 	not 	ju.tifY.
a 	restraint "n 	the 	-selling 	of 	"Soch ite1'lls by pharmaci.ts."--rhe
incentive 	to 	abuse 	dispensing 	authority 	for 	economic 	gain 	appears
to 	be 	no 	greater 	than 	the 	incentive 	to 	overuse 	any 	other 	lervices
offered 	to 	patients, 	including, 	for 	example, 	follow-up 	vi.it.,
in-house 	laboratory 	testing 	or 	diagnostic 	imaging. 	If
inappropriate 	dispensing 	occurs, 	it 	may 	be 	dealt 	with 	by 	1e 2s
restrictive 	means, 	such 	as 	peer 	review 	anc 	law 	enforcement.
Opponents 	also 	argue 	that 	physician 	dispensing 	eliminates
the 	system 	of 	·checks 	anc 	balances" 	in 	which 	pharmacists 	review
prescriptions 	for 	errors, 	possible 	allergic 	reactions, 	or
potential 	adverse 	interactions 	~ith other 	prescription 	or 	over-
the-counter 	drugs 	the 	consumer 	may 	be 	using. 	In 	practice, 	of
course, 	pharmacists 	frequently 	do 	not 	conduct 	such 	reviews.
Moreover, 	to 	the 	extent 	that 	physician 	dispensing 	eliminates 	the
opportunity 	for 	pharmacist! 	to 	act 	as 	a 	"check" 	on 	physician
prescribing 	errors, 	this 	loss 	may 	be 	counter-balanced 	by 	a
significant 	benefit: 	the 	elimination 	of 	medication 	errors 	that
occur 	because 	of 	miscommunications 	between 	physicians 	and
pharmacists, 	.uch 	as 	misinterpretations 	of 	written
prescriptions. 	None 	of 	the 	arguments 	against 	dispensing 	of
prescription 	drugs 	by 	physicians 	presents 	a 	compelling 	case 	for
depriving 	consumers 	of 	the 	benefits 	of 	service 	and 	price
competition 	that 	are 	likely 	to 	result.
2 	For 	example, 	the 	Commission 	on 	Medical 	Discipline 	has 	the
authority 	to 	discipline 	physicians 	who 	promote 	the 	sale 	of
drugs 	or 	goods 	to 	a 	patient 	·so 	as 	t~ exploit 	the 	patient
for 	financial 	gain." 	Md. 	Health 	Occ. 	Code 	Ann. 	S14-S04(11)
(1986) •

,..
C. 	Earl 	Bill, 	M.D., 	Pre~ident
Regulation 	of 	Physician 	Dispensing 	in 	Marylano
-3-
~ 	3
Phy.ician 	dispensing 	has 	long 	been 	permitted 	by 	federal 	and
.Olt 	Itate 	laws. 	In 	Maryland, 	physicians 	have 	not 	been
prohibited 	from 	personally 	preparing 	and 	dispensing 	prescription
drug.. 	The 	amendments 	recently 	enacted 	by 	the 	Maryland
legi.l.ture 	require 	physicians 	to 	apply 	to 	the 	State 	Board 	of
Medical 	Examiners, 	demonstrate 	to 	the 	Board's 	satisfaction 	that
.uch 	di.pensing 	is 	in 	the 	public 	interest, 	and 	obtain 	the 	Board's
written 	approval 	to 	dispense. 	In 	addition, 	the 	amendments 	limit
dispen.ing 	by 	physicians 	to 	their 	own 	patient., 	require 	that.
dispenling 	physicians 	not 	have 	a 	.ubstantial 	financial 	interest
in 	a 	pharmacy, 	and 	require 	that 	dispen.ing 	phylicians 	meet
certain 	labeling 	and 	record-keeping 	requirement ••. 	The 	amendments
authorize 	the 	Board, 	after 	consulting 	with 	the 	State 	Board 	of
Pharmacy, 	to 	adopt 	rules 	and 	regulations 	regarding 	the 	dispen.ing
of 	prescription 	drugs 	by 	licensed 	physicians.
The 	s~atutory requirement 	that 	a 	ph'ylician 	applying 	for
permission 	to 	dispense 	meet 	a 	public 	interest 	Itandard 	requires
the 	Board 	to 	determine 	what 	showing 	will 	meet 	thil 	.tandard. 	The
legislature 	declined 	to 	impose 	restrictive 	conditions 	upon
applicants. 	As 	originally 	introduced, 	Senate 	Bill 	830 	wal
hostile 	to 	physician 	dispensing. 	It 	contained 	a 	preamble
purporting 	to 	set 	forth 	as 	state 	policy 	that 	(1) 	dispenling 	by
physicians 	and 	certain 	other 	health 	care 	practitioners 	Ihould 	be
discouraged 	if 	adequate 	pharmaceutical 	service 	is 	available; 	(2)
such 	practitioners 	should 	derive 	their 	income 	lolely 	tram 	the
sale 	of 	their 	professional 	services; 	and 	(3) 	dispensing 	by 	such
practitioners 	should 	be 	limited, 	absent 	exceptional
circumstances, 	to 	starter 	doses. 	The 	bill 	would 	have 	required
physicians 	seeking 	to 	dispense 	to 	demonstrate 	for 	the 	Board 	that
there 	was 	a 	-need- 	for 	such 	dispensing, 	that 	adequate
pharmaceutical 	services 	were 	unavailable, 	or 	that 	-exceptional
circumstances ft	
warranted 	such 	dispensing. 	Th@ 	legislature
considered 	and 	rejected 	all 	of 	those 	provisions 	and 	required 	only
that 	the 	Board 	find 	that 	approval 	of 	a 	physician's 	application 	to
dispense 	is 	in 	the 	pUblic 	interest.
3 	For 	example, 	federal 	regulations 	permit 	physicians 	to
dispense 	controlled 	su~stance! listed 	in 	Schedul~. II
through 	V 	(21 	C.F.R 	SS1306.02(b), 	1306.ll(b), 	1306.21(b),
and 	1 306 . 31( b ) 	(19 8 6) ) , 	sub j e c t 	to 	spec i f i c 	r @cord - keep in 9
requirements 	(21 	C.F.R 	S130L03 (b) 	and 	(d) 	(1986)).
Md. 	Health 	Occ. 	Code 	Ann. 	SI2-l02(b) 	(1986).

C. 	Earl 	Hill, 	M.D., 	President
We 	do 	not 	believe 	that 	the 	pUblic 	interest 	is 	.erved 	by
restrictions 	on 	phylician 	dispensing 	designed 	to 	protect-the
Iconoaic 	interests 	of 	specific 	groups 	or 	individuals. 	We
rlco..end 	Itrongly 	that 	the 	Board 	not 	require 	a 	demonltration 	of
-nled- 	for 	physician 	dispensing, 	of 	·unavailability· 	of
ph.ra.cies, 	or 	of 	·exceptional 	circumstances.· 	The 	public
interelt 	will 	belt 	be 	served 	by 	maxi~i%ing 	the 	number 	of
qualified 	lourcel 	from 	which 	consumerl 	may 	purchase 	prescription
drugs. 	A. 	discussed 	above, 	this 	will 	increale 	consumer 	choice
and 	enhance 	the 	incentive 	of 	sellers 	of 	prescription 	drugs 	to
otter 	lower 	prices 	and 	a wider 	range 	of 	a.rvices.
To 	minimize 	regulatory 	impediments 	to 	physician 	diapensing,
WI 	suggest 	that 	the 	Board 	adopt 	a 	presumption 	that, 	in-general,
physician 	diapensing 	is 	in 	the 	pUblic 	intereat. 	Such 	a
presumption 	Ihould 	operate 	to 	permit 	the 	routine 	and 	expeditious
approval 	of 	applications, 	except 	whlre 	the 	Board 	believ.a 	that
there 	is 	.vidence 	to 	rebut 	the 	presumption 	in 	the 	caae 	of 	•
-- p~rt.icl1lar-Physician. -Applic..an-tl -&hc.uJ..d-AO-t~ {.quir__ d 	~o •• et --.---
burdensome 	standards 	of 	proof 	that 	might 	impoae 	unnecela.ry 	costs
or 	delays, 	and 	thus 	deter 	physicians 	from 	leeking 	approval.
Conclusion
The 	Federal 	Trade 	Commission 	actively 	encourages 	competition
in 	the 	health 	care 	sector 	to 	promote 	lower 	prices, 	higher
quality, 	and 	an 	increased 	variety 	of 	available 	•• rvices.
Physician 	dispensing 	increases 	competition 	among 	physicians, 	and
between 	physicians 	and 	pharmacists, 	thereby 	benefitting
consumers. 	We 	believe 	the 	Board 	would 	best 	lerve 	the 	pUblic
interest 	by 	seeking 	to 	facilitate 	and 	encourage 	physician
dispensing 	in 	any 	regulations 	it 	may 	adopt.
Sincerely,
Q/~Ji:L..
6!//fr(y 	I~ 	u 	kerma:
Director
Bureau 	of 	Competition
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