Prescriber Drug Dispensing Makes Sense

An Offer Five Holdout States Really, Really Shouldn’t Refuse

josh archambault is the founder of Presidents Lane Consulting and a senior fellow at the Cicero and Pioneer Institutes. josh windham is an attorney at the Institute for Justice. jeff gold is a primary care physician in Massachusetts. This article is adapted from a Pioneer Institute brief.

Published June 1, 2023


For years, headlines have highlighted lawmakers’ concerns over rising drug prices. Patients are feeling the pain with higher out-of-pocket costs for drugs, and drug spending is an ever-increasing share of insurance premiums.

There’s no easy fix for high drug prices. But five states (Texas, Massachusetts, New York, New Jersey and Vermont) lag the rest of the country in filling in one piece of the puzzle: direct prescriber dispensing. Across the rest of the country, physicians can dispense drugs directly from their offices.

Part of the reason drugs cost so much is that middlemen — commercial pharmacies and pharmacy benefit managers — tack on substantial markups. Allowing prescribers to dispense common, widely used drugs — often at a fraction of the price — can give patients a more affordable option.

This is no small matter. A 2022 Kaiser Family Foundation survey found that three in 10 adults were not taking their prescribed drugs due to price concerns, with 18 percent not filling their prescriptions due to the price, 21 percent taking an over-the-counter drug instead to save money, and 15 percent cutting pills in half or skipping doses.

Distribution systems clogged by middlemen share part of the blame. In Massachusetts, per-beneficiary spending on drugs jumped 8.6 percent in 2019 for the 71 percent of households with with commercial insurance in the commonwealth, and now averages almost $1,000 annually. For patients with high deductible plans — almost half of all those insured in Massachusetts (and 59 percent of small business enrollees) — that cost is almost entirely out-of-pocket.

Sometimes Solutions Are Obvious

Ninety-two percent of physician prescribers report the cost of the drugs they dispense to be the same or lower than what patients would pay in a pharmacy. Eighty-one percent of patients who purchase drugs from their prescriber share that perception.

Consider Kansas physician Josh Umbehr, who listed the prices of the drugs he sells through his practice, Atlas MD, as of April 2020. Some highlights:

Archambault Josh Windham Josh Gold Jeff Drug Prices Chart1a

Of course, physicians aren’t legally obligated to charge less. But almost half do — and in any case, physician-prescribing gives patients more choices and may stimulate price competition from pharmacies.

The logic of direct prescriber sales hasn’t eluded experts — or drug regulators — in most states. But five states with a combined population of 66 million somehow missed the memo, maintaining at least partial bans on direct prescriptions. And one public interest law firm is pressing the case for repeal. Two years ago, Montana eliminated its dispensing ban in response to an Institute for Justice lawsuit challenging its constitutionality. The measure passed with broad support after the Montana Pharmacy Association admitted its opposition to previous reforms bills was rooted in economic “protectionism.”

The Institute for Justice’s current efforts are focused on Texas. But hopefully the five holdout states won’t all wait for IJ to pound on the door.

Wait! There’s More

Lower prices constitute the primary prize in opening the door to physician prescribing. But there are ancillary benefits.

Safety. In the past, opponents of prescriber dispensing — namely, organized pharmacy associations — have cited concerns over patient safety. But the nation’s first peer-reviewed study of the practice recently found that prescriber dispensing is safe. Indeed, arguably safer.

Patients experienced negative reactions to drugs at identical rates whether purchasing them from prescribers or pharmacists. But only 6 percent of patients with serious reactions to a prescriber-dispensed medication sought emergency room care, compared with 15 percent for pharmacist-dispensed drugs. It seems that when problems do arise, patients taking prescriber-delivered drugs feel more comfortable calling for help or asking questions. Or it may be because patients take a first dose in the provider’s office and can be monitored on the spot for adverse reactions.

Improved Patient Experience. Allowing patients to purchase common drugs directly gives them the freedom to choose a simpler, less time-consuming option. And, for what it’s worth, it typically reduces the distance they must drive to pick up a prescription, reducing congestion and pollution.

Saves Pharmacists for What They Do Best. Pharmacists are important resources in managing the experience of complicated patients on multiple drugs, but much of their time is diverted to run-of-the-mill fulfillment. Historically, pharmacists have added an extra set of eyes on prescriptions to look for drugs that should not be combined, but the software they use to look for potentially adverse drug interactions is now widely available to all providers, including physician prescribers.

Increases Prescription Adherence. A surprising proportion of patients with chronic conditions forget their prescription schedules, which often leads to graver health problems and doctor visits down the line. Direct prescribing is not a panacea, but it does let physicians know whether the drug was actually purchased, and gives them more opportunity to encourage patients to take their medicine.

Levels the Playing Field with Big Pharmacy Chains. With the big chains like CVS and Walgreens beginning to offer primary medical care in their stores, they can effectively integrate direct drug dispensing. But in the five states with direct prescriber bans, other care providers are out of luck. Eliminating the ban would level the playing field.

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The good news here is that the case for direct prescribing is so compelling that 45 states have stood up to protectionist pressure from pharmacists and the little known (but huge) sector of pharmacy benefit managers. Why have Texas, Massachusetts, New Jersey, New York and Vermont refused to make the move? If you live in one of them, ask your legislators. Or better yet, demand that they do the right thing.

main topic: Public Health