FTC Staff Comment to the Hon. Tim Leslie Concerning California A.B. 1732 to Restrict the Ability of Physicians to Dispense Prescription Drugs to Their Patients

·,
UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C 	20580
BUREAU OF COMPETITION
The Honorable 	Tim Leslie
California 	Assembly
state 	capitol
Sacramento, 	California 	94249-0001
Dear Mr. 	Leslie:
We 	are 	pleased 	to 	respond 	to 	your 	request 	for 	our views 	on
Assembly 	Bill 	No. 	1732, 	now 	pending 	before 	the 	Health 	Committee
of 	the 	California Assembly.· 	The 	bill 	would 	place 	certain
restrictions 	on 	the 	ability 	of 	physicians 	to 	dispense
prescription 	drugs 	to 	their patients. 	It would 	require 	licensure
of 	dispensing 	physicians 	by 	the 	Board 	of 	Pharmacy 	and 	permit
physician dispensing 	only 	if 	the 	dispensing 	physician's 	office 	is
located more 	than 	5 miles 	from 	a 	pharmacy, 	the 	medication
dispensed 	is 	no 	more 	than 	a 	72-hour 	supply, 	and 	no 	dispensing 	fee
is 	charged 	to 	the 	patient. 	The 	effect 	of 	the 	bill 	would 	be 	to
prohibit 	physician dispensing 	in most 	areas 	of 	the 	state 	and 	to
eliminate 	any 	financial 	incentive 	for 	physicians 	to 	dispense 	in
the 	remainder 	of 	the 	state. 	We 	believe 	that 	these 	restrictions
are 	likely 	to 	be 	harmful 	to 	consumers.
We 	do 	not 	endorse 	physician 	dispensing 	as 	preferable 	to
pharmacist 	dispensing. 	Rather, 	we 	support 	consumer 	choice 	among
qualified 	providers 	of 	prescription 	drugs. 	Physician 	dispensing
maximizes 	consumers' 	options 	in 	the 	purchasing 	of 	prescription
drugs, 	and 	we 	believe 	it may 	increase 	competition 	among
physicians 	and 	between physicians 	and 	pharmacists, 	and 	lead 	to
lower prices 	and 	better 	services.
• 	These 	comments 	represent 	the 	views 	of 	the 	Federal 	Trade
Commission's 	Bureaus 	of 	Competition, 	Economics, 	and 	Consumer
Protection, 	and 	not 	necessarily 	those 	of 	the 	Commission 	itself.
The Commission 	has, 	however, 	voted 	to 	authorize 	the 	staff 	to
submit 	to 	these 	comments 	to 	you. 	The 	Commission's 	staff 	has 	been
investigating 	restrictions 	on 	competition 	in 	the 	sale 	of
prescription 	drugs 	and has 	examined 	proposals 	by 	some 	members 	of
the pharmacy 	profession 	to 	have 	states 	impose 	restrictions 	on
physician 	dispensing.

The 	Honorable 	Tim Leslie 	-- 	Page 	2
The 	dispensing 	of medication 	by 	physicians 	is 	a 	traditional
part 	of medical 	practice 	that 	was 	once 	quite 	common 	and 	is
currently 	authorized 	in 	all 	but 	a 	very 	few 	states. 	Some
consumers 	may value 	the 	option 	not 	to 	have 	to 	make 	a 	separate
trip 	to 	a 	pharmacy 	to 	obtain medicine 	prescribed 	by 	their
physician. 	Indeed, 	the 	same 	patient may 	have 	different
preferences 	at 	different 	times. 	A parent with 	a 	two-year-old
child 	SUffering 	the 	pain 	of 	an 	ear 	infection may 	desire 	one-stop
shopping, 	whereas 	the 	same 	parent may 	prefer 	to 	get 	prescription
vitamins 	for 	the 	child 	at 	a 	pharmacy. 	There 	are 	increasing
numbers 	of 	group medical 	practices 	and 	walk-in 	clinics 	that 	are,
in 	response 	to 	consumer 	demand, 	providing 	additional 	options 	and
convenience, 	and 	this 	trend 	is 	generating 	increased 	competition
in 	the 	sale 	of 	prescription 	drugs.
California 	law now 	allows 	consumers 	to 	choose which 	provider
of 	pharmaceutical 	services 	they 	prefer 	and 	provides 	safeguards 	to
protect 	the 	public 	health. 	Under 	existing 	law, 	prescription
drugs 	may 	be 	dispensed 	by 	physicians 	only 	to 	their 	own 	patients;
the 	drugs 	must 	be 	necessary 	for 	the 	treatment 	of 	the 	condition
for 	which 	the 	physician 	is 	attending 	the 	patient; 	and 	the 	drugs
may 	not 	be 	furnished 	to 	the 	patient 	by 	a 	nurse 	or 	other 	employee
of 	the 	physician. 	Dispensing 	physicians 	must 	also 	comply with
the 	same 	labeling, 	record-keeping, 	and 	packaging 	requirements
that 	are 	imposed upon 	pharmacists. 	Enforcement 	authority 	is
vested 	in 	the 	Board 	of 	Medical 	Quality 	Assurance 	and 	the 	Board 	of
Osteopathic 	Examiners. 	The 	existing 	regulatory 	scheme 	appears 	to
be 	designed 	to 	protect 	pUblic 	health 	by 	ensuring 	that 	physicians
who 	dispense 	meet 	the 	health 	and 	safety 	standards 	applicable 	to
pharmacists, 	and 	also 	to 	allow 	patients 	the 	benefits 	of 	choice
among 	different 	providers 	of 	dispensing 	services.
Section 	1 	of 	the 	bill 	sets 	forth 	two 	justifications 	for 	the
restrictions 	it 	would 	impose. 	The 	first 	is 	that 	the 	phanoacist
may 	prevent 	the 	inadvertent misuse 	of 	drugs 	from 	multiple
prescribers 	and 	that 	patient 	health 	is 	placed 	at 	risk when 	the
oversight 	of 	the 	pharmacist 	is 	circumvented. 	Pharmacists 	can
provide 	a 	check 	against 	misuse 	due 	to 	mUltiple 	prescribers,
provided 	that 	patients 	use 	only 	one 	pharmacist 	and 	that 	the
pharmacist maintains 	complete 	patient 	profiles. 	Even where 	these
conditions 	are 	not 	met, 	pharmacists 	may 	provide 	other 	services
that 	are 	beneficial 	to 	consumers, 	including 	a 	review 	of
the 	prescription 	for 	errors, 	potential 	drug 	allergies 	and 	inter-
actions, 	and 	patient 	counseling. 	At 	the 	same 	time, 	physicians
are 	responsible 	for 	their 	prescribing 	choices 	and 	are, 	by virtue
of 	their 	contact with 	the 	patient 	at 	the 	time 	of 	prescribing 	and
familiarity 	with 	the 	patient's 	medical 	history, 	in 	an 	excellent
position 	to 	consider 	drug 	allergies 	and 	interactions 	and 	provide
drug 	counseling. 	Moreover, 	medication 	errors 	that 	occur 	due 	to
miscommunication 	between 	physicians 	and 	pharmacists, 	such 	as

The Honorable 	Tim 	Leslie 	-- 	Page 	3
misinterpretations 	of 	prescription 	orders, 	would 	be 	reduced.
Finally, 	as 	noted 	above, 	California 	law 	already 	requires
physicians 	who 	dispense 	to meet 	the 	same 	standards 	applicable 	to
pharmacists 	with 	respect 	to 	record-keeping, 	labeling, 	packaging,
and use 	of 	support 	personnel. 	In 	these 	circumstances, 	the 	fact
that 	pharmacists 	do 	provide 	some 	services 	that 	have 	value 	to
consumers 	does 	not 	mean 	that 	consumers 	should 	be 	required 	to 	buy
those 	services 	rather 	than 	the 	services 	offered 	by 	physicians.
The 	second 	justification offered 	in 	support 	of 	the 	bill 	is,
essentially, 	that 	physicians 	who 	dispense 	may 	be 	led 	by 	their 	own
financial 	interests 	to 	harm patients 	by 	overprescribing 	or
prescribing 	inappropriately. 	This, 	of 	course, 	is 	the 	same 	issue
that 	arises 	whenever 	a 	physician 	orders 	any 	medical 	procedure 	he
provides 	himself, 	including 	lab work, 	diagnostic 	imaging, 	or 	even
follow-up 	visits. 	The 	potential 	conflict 	of 	interest 	raised 	by
physician 	dispensing 	seems 	no 	different 	from 	the 	potential
conflict 	created 	when 	any 	provider 	of 	expert 	services 	recommends
a 	product 	or 	service 	and 	then 	offers 	to 	supply 	it, 	such 	as 	a
stockbroker 	recommending 	an 	investment 	or 	a 	mechanic 	recommending
the 	replacement 	of 	brakes 	on 	a 	car. 	Indeed, 	pharmacists 	face
this 	potential 	conflict 	when 	they 	recommend 	vitamins 	or 	non-
prescription 	drugs.
In 	general, 	we 	believe 	that 	the 	best 	way 	to 	deal 	with 	this
sort 	of 	problem 	is 	to 	encourage 	competition, 	not 	to 	restrict 	it
by 	banning 	an 	entire 	category 	of 	transactions 	that 	consumers 	may
want. 	Although 	there 	is 	some 	incentive 	to 	sell 	additional
products 	or 	services 	under 	such 	circumstances, 	competition
provides 	some 	incentive 	not 	to 	do 	so 	because 	a 	physician who
would 	exploit 	patients 	through 	improper 	dispensing 	risks 	the 	loss
of 	his 	reputation 	for 	integrity, 	and 	thus 	the 	loss 	of 	his
patients 	to 	other 	physicians. 	Moreover, 	exploitive 	practices 	are
already 	prohibited by more 	narrowly 	focused 	state 	laws 	and
regulations. 	Thus, 	there 	is 	the 	threat 	of 	disciplinary
proceedings 	by 	the 	Board 	of Medical 	Quality Assurance 	or the
Board 	of 	Osteopathic 	Examiners, 	state 	enforcement 	of 	safety 	and
health 	regUlations, 	and 	state 	enforcement 	of 	statutory
prohibitions 	of 	fraudulent 	or 	unfair 	acts 	or 	practices.
Finally, 	the 	provision 	of 	the 	bill 	that 	would 	require
physicians 	who 	wish 	to 	dispense 	to 	obtain 	a 	license 	from 	the
Board 	of 	Pharmacy may 	exacerbate 	the 	risks 	to 	competition
inherent 	in 	professional 	self-regulation. 	There may 	be
incentives 	for 	pharmacist-regulators 	to 	erect 	barriers 	to 	entry
or 	otherwise 	to 	limit 	competition 	from 	physicians 	who 	wish 	to
dispense. 	In 	addition, 	although 	the 	bill 	retains 	the 	current
enforcement 	authority 	of 	the 	Board 	of 	Medical 	Quality 	Assurance

•
The 	Honorable 	Tim Leslie 	-- 	Page 	4
and 	the 	Board 	of 	osteopathic 	Examiners, 	it 	is 	not 	clear whether
the 	Board 	of 	Pharmacy 	could 	revoke 	physicians' 	licenses 	to
dispense 	for 	reasons 	properly within 	the 	province 	of 	the 	medical
boards.
In 	sum, 	dispensing 	of 	prescription 	drugs 	by 	physicians
increases 	consumers' 	ability 	to 	choose 	among 	qualified 	providers
of 	pharmaceutical 	services. 	The 	option 	not 	to 	make 	a 	separate
trip 	to 	a 	pharmacy may 	be 	important 	to 	some 	consumers. 	The
resulting 	competition 	among 	physicians, 	and 	between 	physicians
and 	pharmacists, 	may 	produce 	lower 	prices 	and 	improved 	services.
We 	believe that 	consumers 	should 	not 	be 	deprived 	of 	these
potential 	benefits 	unless 	real 	evidence 	demonstrates 	that
physician 	dispensing 	has 	harmed 	or 	is 	likely 	to 	harm 	pUblic
health 	and 	safety, 	and 	that 	less 	restrictive 	safety 	and 	health
standards, 	such 	as 	those 	already 	imposed 	by 	law, 	are 	insufficient
to 	protect the 	pUblic. 	The 	burden 	should 	be 	on 	the 	proponents 	of
the 	bill 	to 	produce 	such 	evidence 	because 	the 	bill 	would
eliminate 	the 	benefit 	of 	consumer 	choice. 	In 	the 	absence 	of 	such
evidence, 	the 	changes 	to 	existing 	law 	proposed 	in 	the 	bill 	appear
likely 	to 	serve 	the 	economic 	interests 	of 	pharmacists 	and 	drug
stores 	and 	to 	reduce 	consumer welfare.
Sincerely yours,
Jeffrey 	I. 	Zuckerman
Director
Bureau 	of 	Competition