Expanding Your Practice to Include a Dispensing Pharmacy

Oncology Business News®, February 2014, Volume 3, Issue 1

When she first heard about the idea of an onsite dispensing pharmacy, Diane Gerards-Benage wondered if the venture could be successful, given the change in cancer treatments from intravenous to oral methods, and the promise of an automated system to track prescriptions and other procedures

Tatiana Melnik

When she first heard about the idea of an onsite dispensing pharmacy, Diane Gerards-Benage wondered if the venture could be successful, given the change in cancer treatments from intravenous to oral methods, and the promise of an automated system to track prescriptions and other procedures. Happily, she was right: the senior director of medical oncology service supported and oversaw the establishment of a successful pharmacy at Quincy Medical Group in Quincy, Illinois, in 2011.

“We chose to do it primarily because it was convenient for patients,” she said. “We had numerous examples of when the patient would get to [another] pharmacy or when their mailorder plan contacted them, and when they found out what their portion of the cost was going to be, they didn’t get the medication. We would not know this until their next visit, often interrupting or undermining, if in conjunction with radiation, the treatment plan. Dispensing here, we are actively involved from the get-go.”

Establishing a dispensing pharmacy can be a way to make things easier for patients as they coordinate the medication aspect of their cancer care. It can also be a financial win, with potentially significant profit margins. Yet Gerards- Benage’s concerns about profits, who will do the actual dispensing, and where such a facility will be located, are common questions among those considering the pros and cons of setting up a dispensing pharmacy. What does it all entail?

Where to Begin?

Regulations for dispensing pharmacies are complicated and vary from state to state, so knowing exactly what is allowed where you are is critical. “Pharmacy laws change pretty regularly,” said Tatiana Melnik, a health care attorney with Melnik Legal PLLC, based in Tampa, Florida. “It’s a contentious issue between pharmacies and prescribers, because pharmacists can’t prescribe and doctors who put in their own pharmacies affect market share. This is something your attorneys should look at—the most recent laws and regulations. Include court case law and attorney general opinions, and pharmacy board decisions and commentary that have reviewed existing laws,” she said.

Some states require fees to have a dispensing license, while others don’t require a license at all (see http://bit.ly/1kBWHvB). “In-house dispensing run by physicians within oncology practices is allowed in some form in nearly all states,” but not in New York, Texas, and Utah, said Cyrus A. Chowdhury, CEO and managing partner of CBPartners, a New York City-based firm that specializes in oncology pricing and market access issues.

“About half of states have ‘any willing provider’ laws that specify that if an in-house pharmacy meets the requirements for a specialty pharmacy in that state, payers cannot prevent the in-house pharmacy from filling prescriptions,” he added. At the same time, there’s no need to go it alone.

“We would advise that the practice thoroughly research the process and stakeholders involved,” said Chowdhury. “It’s a lot more complicated than simply hiring staff and ordering inventory. We recommend getting support from ION (International Oncology Network) Solutions or U.S. Oncology [a network of community-based oncology physicians] to review considerations for best practices in the setup of dispensing pharmacies.”

Another resource is Metro Medical Supply, a private company based in Nashville, Tennessee, which caters directly to community-based oncologists, that offers a new pharmacy model for those considering this direction.

Determining (and Paying For) the Right Product Mix

Figuring out exactly what to dispense will help determine what is profitable and who will reimburse (ie, commercial insurers and Medicare) for their use. “We took a look at the medications we commonly dispense to our patients, and decided to carry those,” said George Kovach, MD, the president of Iowa Cancer Specialists PC in Davenport, Iowa, and a past president of the Association of Community Cancer Centers.

These included antiemetics such as Zofran and Reglan and oral oncolytics such as Gleevec and Sutent. “We also carry some of the support drugs, vitamins. We also carry things like Tylenol and Prilosec, and one of our biggest revenues is a cream used for radiation therapy.”

Drug reimbursement is a key factor in establishing a pharmacy, as it determines what kind of revenue the pharmacy will bring in. “Contract with your payers,” said Gerards-Benage. “Sell them on the convenience to the patient and the potential for increased adherence. Negotiate to be the same price as their mail order pharmacy. This was easier and more profitable than we thought.”

Gerards-Benage noted that 65% of her group’s patients are on Medicaid, and that her group is the only one in the area for cancer care. “We dispense, bill, and are reimbursed, and I think market area has a lot to do with how successful a dispensing pharmacy is. If you can’t get an insurance plan to work with you, then you have to have a large Medicare population in order to get enough part B drugs to make this a worthwhile endeavor,” she said.

George Kovach, MD

Kovach noted that there are pharmacy contracting services for insurance payers, offered through networks such as Good Neighbor Pharmacy, a collaboration of independent pharmacies, or Smart ID Works, a business that helps oncologists to more smoothly run their practices and their pharmacies.

Staffing Up and Providing Better Patient Care

Again, regulations vary from state to state, but some practices are required to hire a registered pharmacist (RPh), or a registered pharmacist with a PharmD degree, to work onsite in a dispensing pharmacy. Other states will allow a pharmacy technician or a registered nurse to dispense drugs with a physician’s prescription. Someone must be available to oversee all prescriptions dispensed, to give information about adverse medication effects, to know about drug interactions, and so on. “We needed to establish our pharmacy as a full time staffed department,” said Kovach. “We employ a pharmacy tech in our office and he takes care of all dispensing, inventory, and contracting.”

Consider the costs of adding more staff or training existing staff. “Oncology practices interested in establishing their own dispensing pharmacies must first understand whether they have the staff to support additional pharmacy-related tasks, or what additional staff and their relevant training and education (ie, pharmacy degree, prior authorization requirements, co-pay and financial aid assistance, education on adverse effects, etc) are necessary,” said Chowdhury.

Once the Quincy group decided to move forward with setting up a pharmacy, said Gerards-Benage, doing so helped strengthen the coordination of care. While nurses at most mail order pharmacies will check if a patient is taking medication as prescribed by determining trends in refill rates, there is often “no communication to the provider’s offices, so we would not necessarily be informed that the patient was taking half the dose in order to save money,” she said. “When you go to take a medication that costs $7000, and you are paying $1500 for it, people are going to try to spread it out or alter the dose to preserve it as long as possible.”

Having someone in-house to oversee this means medications are being taken in the way they are prescribed and treatment plans are being followed as expected. “Before that, our nurse educator would meet with patients and would literally try to inspect the bottles at each visit to determine when the patients were due for a prescription refill.”

Financial and Other Rewards

It is quite possible to have a healthy profit margin with a dispensing pharmacy in place, say experts, but there are other aspects to consider, too. “To make a sound business decision, the practice should calculate the time and costs saved by not dealing with outside pharmacies,” said Chowdhury. This entails hiring new staff or training existing staff to understand pharmacy-related tasks and the burden associated with seeking reimbursement from commercial payers and Medicare, and whether or not margins will be sufficient now and in the future to sustain growth, he added.

As a result, substantial profits are not a given. “Results may vary, but there are many examples of practices that have added dispensing pharmacies without resulting in a significant profit,” said Chowdhury. “The creation of an inhouse dispensing pharmacy will increase patient comfort while being able to receive prescribed therapy immediately and be educated on it is beneficial. Over time, if more patients take this route to filling prescriptions, rather than at an outside pharmacy, then the financial upside may be realized.”

Kovach noted that the pharmacy his group set up “paid for itself in less than a year, and the economic revenue is generating what an oncologist generates—rather significant.”

But patient convenience is worth a lot, too. “A lot of doctors are interested in establishing a pharmacy because it gives them a nice source of income,” said Melnik. “For a lot of doctors, it’s not about the money. It’s about making it easy for their patients to get the drugs they need.”