In most states, physicians can directly dispense medications to patients based on the authority provided to them by virtue of their medical licenses. That is, a physician does not have to obtain a pharmacist license or comply with the legal strictures of running a pharmacy to dispense prescription medications. Specifically, a physician who dispenses drugs to patients is legally in the practice of medicine, not engaged in the practice of pharmacy. It does not make a difference if dispensing physicians make a profit on the drugs (in most states) that they dispense or if they simply dispense samples. However, some legal restrictions do apply (e.g., keeping non-controlled substances behind a single set of locks), as I have discussed in previous articles on dispensing prescription medications.
Yet, many legal restrictions do not apply.
State law and state courts do not deem that a physician suffers from an inherent conflict of interest by dispensing medications for profit, which effectively casts the physician in the role of pharmacist. States basically consider the act of dispensing by a physician to be part of the practice of medicine and the provision of care to patients governed by the professional codes of conduct that govern physicians.
A Look at a Lawsuit
This article discusses dispensing in California. As the largest state in the Union, California provides a good model for observation because it often sets the pattern that other states follow.1 California has a well-established legal framework for physician dispensing. (See Tables 1, 2 and 3.) However, despite the fact that California law is well settled in allowing physicians to dispense, a pharmacy challenged this legal regimen in a case report in 2002 by the California Court of Appeals.
Park Medical Pharmacy v. San Diego Orthopedic Associates Medical Group, Slip Op. No. D038051 (June 11, 2002), 2002 Cal App 4225
The San Diego Orthopedic Associates Medical Group was the defendant medical group. This medical group was composed of physicians who operated an outpatient clinic in a San Diego medical building. Several other physician groups had unrelated clinical practices in the same building. The building also housed an outpatient pharmacy.
Individual physicians in the medical group regularly dispensed prescription-only drugs to workers’ compensation patients on a for-profit basis. Each patient was given a disclosure form upon registration with the clinic, which informed patients that physicians working in the clinics may dispensed some of the prescribed medications; the form also indicated that patients had the option of obtaining a prescription and having it filled at the pharmacy of their choice. Each physician purchased his or her own medications on an individual basis and kept these drugs separate from the stocks of other physicians in the practice. All of the drugs were stored in a secured room designated the “physician-dispensing unit.”
Case Highlights
The plaintiff, Park Medical Pharmacy, noticed a decline in prescription drug volume soon after San Diego Orthopedic Associates Medical Group started directly dispensing medications to its patients. Park Medical Pharmacy filed a complaint against the medical group in September 2000 claiming, among other things, that the group was violating subsection 3 of the above statute by operating a retail pharmacy within its clinic.
Park Medical Pharmacy claimed that the physician-dispensing unit constituted a pharmacy within the meaning of the statute. It also claimed that the legislature had expressed its intent to not allow physicians to dispense prescription drugs on a for-profit basis. Park Medical Pharmacy asked the trial court to institute an injunction preventing the physicians from continuing the practice. The trial court judge refused and dismissed Park Medical Pharmacy’s complaint and lawsuit.
What Happened After the Appeal
Park Medical Pharmacy appealed the trial court judge’s ruling. The California Court of Appeals determined that its role in resolving the conflict between the parties was to interpret the meaning and intent of the legislature at the time the statute was adopted. Statutory interpretation is a core function of the judicial branch of government, and a whole set of rules defining this interpretation have been developed by the courts. One rule stated that the words in a statute are to be read using ordinary definitions unless they are susceptible to more than one interpretation. In the latter event, courts consider extrinsic evidence, such as the legislative history of the statute, remarks made by legislators when the statute was debated, and amendments or deletions to the statute proposed before it became finalized.
In undertaking its task, the court of appeals initially noted that it would not make sense to assume that the mere existence of a room to store medications in a dispensing physician’s office constituted a pharmacy when the legislature expressly required a dispensing physician to maintain a secured, separate area to store the drugs. The court also noted that the statutory definition of pharmacy had remained unchanged since 1905, when the legislature first regulated the dispensing of drugs in California.
At that point in time, “pharmacy” was synonymous with “drugstore,” and the term referred to a place where drugs were sold to the general public pursuant to a physician’s prescription. It should be noted that in the 1920s, almost 40% of physicians dispensed medications.
Based on these common definitions, the court concluded that the “legislature’s intent in stating that physicians could not keep a ‘pharmacy, open shop, or drugstore’ was to prohibit physicians from having a place where they sold drugs to the general public and to limit physicians to dispensing drugs to their own patients for the condition for which the patient was seeking treatment.” It also stated that nothing in the language of the statute indicates that the legislature’s prohibition on physicians’ keeping a pharmacy was intended to address or to limit the profits a physician could make from dispensing drugs to his or her patients.
Park Medical Pharmacy also argued that the prohibition on physicians’ “retailing of dangerous drugs” meant that physicians should be barred from selling drugs to patients for a profit. The pharmacy reasoned that “profit is inherent in retailing.” The court of appeals rejected the argument, stating that while retailers typically hope to make a profit from selling goods, retailing does not necessarily entail making a profit. It also could find no evidence that the legislature ever intended the term “retail” to mean a sale for profit as opposed to a sale to the general public.
The court of appeals also believed that if the legislature had intended to prohibit physicians from selling drugs for profit, it would have said so in much plainer terms. For example, the legislature plainly stated that physicians cannot charge a fee for distributing samples obtained from manufacturers. Moreover, the legislative history of regulating physician dispensing showed that no agreement had ever been reached on limiting physician profits for the activity. At least two bills were introduced in the 1980s that would have capped dispensing fees by physicians. Neither bill passed.
The pharmacy also claimed that permitting physicians to profit from the drugs they prescribed and dispensed raised an inherent conflict of interest that could lead to public harm. In essence, the pharmacy was asking the court to interpret the statute from a public policy perspective rather than consider the plain language of the words used. In support of the claim, the pharmacy introduced the legislative history of an earlier version of the code prohibiting physician ownership of pharmacies. The 1988 legislative findings section states:
“The [California Legislature] finds and declares that the licensed pharmacist plays a critical role as the advocate of the patient-consumer and that when, in whatever manner, the oversight of the pharmacist is not available, the patient-consumer may be deprived of essential consultation. The Legislature further finds and declares that the prescriber’s role of patient advocate may be diminished when the prescriber has a financial interest in medications ordered for the patient. Amendment to §§2191 and 4051 [predecessor to section 4170] of the Business and Professions Code.” (Stats.1988, ch. 1600, § 1, pp. 5793-5794.).
This argument did not persuade the court of appeals. The court noted that subsections 6 and 7 represent the legislature’s cure for any conflict that might exist. Those sections require the disclosure of the choice patients have and an offer to write prescriptions to permit patients to go to the pharmacy of choice. Finally, the court noted that both the attorney general and the board of pharmacy in California had also issued written opinions concluding that the law does not prohibit physicians from charging for drugs they dispense. Accordingly, the decision of the trial court judge to dismiss the case was upheld.
Physician Dispensing Holds Its Ground
For purposes of this series, I suggest that this case raises important legal themes that include the following:
1. the “turf” battle between “professions” licensed by the state
2. the persistence of legal provisions for what may appear to be anachronistic practices
3. efforts by physicians to find revenue sources in an age of stagnant reimbursements.
Turf battles rage between office-based cosmetic dermatologists and hospital-based plastic surgeons over where surgery should take place. This case is no different. Whenever money is concerned, competitors will wrap themselves in the mantle of the public good to maintain incomes.
Over the last 2 years, I have highlighted that compounding medications is beyond the regulatory authority of the FDA. Compounding medications and physician dispensing were norms before the FDA was created, and while the world has changed, the rationales for them — patient convenience and tailoring a therapy to a specific patient — are legally valid in 2007 and are provided for in the law.
Lastly, in the 21st century, we see a recapitulation of 19th century medicine (an age that for most physicians was not lucrative), a difficulty in maintaining medical incomes and a gravitation towards the provision of medical goods (in this case, the lucrative Worker’s Compensation prescription reimbursement scheme) that can supplement incomes. The cliché “the more things change, the more the stay the same” is valid without update.
This article is based on a case discussion and article in U.S. Pharmacist Physician-Owned Pharmacies Vol. 27:08, August 15, 2002. by Jesse C. Vivian, and sections of that article are used in this article by permission of the publisher of U.S. Pharmacist. I thank the publisher for this permission.
In most states, physicians can directly dispense medications to patients based on the authority provided to them by virtue of their medical licenses. That is, a physician does not have to obtain a pharmacist license or comply with the legal strictures of running a pharmacy to dispense prescription medications. Specifically, a physician who dispenses drugs to patients is legally in the practice of medicine, not engaged in the practice of pharmacy. It does not make a difference if dispensing physicians make a profit on the drugs (in most states) that they dispense or if they simply dispense samples. However, some legal restrictions do apply (e.g., keeping non-controlled substances behind a single set of locks), as I have discussed in previous articles on dispensing prescription medications.
Yet, many legal restrictions do not apply.
State law and state courts do not deem that a physician suffers from an inherent conflict of interest by dispensing medications for profit, which effectively casts the physician in the role of pharmacist. States basically consider the act of dispensing by a physician to be part of the practice of medicine and the provision of care to patients governed by the professional codes of conduct that govern physicians.
A Look at a Lawsuit
This article discusses dispensing in California. As the largest state in the Union, California provides a good model for observation because it often sets the pattern that other states follow.1 California has a well-established legal framework for physician dispensing. (See Tables 1, 2 and 3.) However, despite the fact that California law is well settled in allowing physicians to dispense, a pharmacy challenged this legal regimen in a case report in 2002 by the California Court of Appeals.
Park Medical Pharmacy v. San Diego Orthopedic Associates Medical Group, Slip Op. No. D038051 (June 11, 2002), 2002 Cal App 4225
The San Diego Orthopedic Associates Medical Group was the defendant medical group. This medical group was composed of physicians who operated an outpatient clinic in a San Diego medical building. Several other physician groups had unrelated clinical practices in the same building. The building also housed an outpatient pharmacy.
Individual physicians in the medical group regularly dispensed prescription-only drugs to workers’ compensation patients on a for-profit basis. Each patient was given a disclosure form upon registration with the clinic, which informed patients that physicians working in the clinics may dispensed some of the prescribed medications; the form also indicated that patients had the option of obtaining a prescription and having it filled at the pharmacy of their choice. Each physician purchased his or her own medications on an individual basis and kept these drugs separate from the stocks of other physicians in the practice. All of the drugs were stored in a secured room designated the “physician-dispensing unit.”
Case Highlights
The plaintiff, Park Medical Pharmacy, noticed a decline in prescription drug volume soon after San Diego Orthopedic Associates Medical Group started directly dispensing medications to its patients. Park Medical Pharmacy filed a complaint against the medical group in September 2000 claiming, among other things, that the group was violating subsection 3 of the above statute by operating a retail pharmacy within its clinic.
Park Medical Pharmacy claimed that the physician-dispensing unit constituted a pharmacy within the meaning of the statute. It also claimed that the legislature had expressed its intent to not allow physicians to dispense prescription drugs on a for-profit basis. Park Medical Pharmacy asked the trial court to institute an injunction preventing the physicians from continuing the practice. The trial court judge refused and dismissed Park Medical Pharmacy’s complaint and lawsuit.
What Happened After the Appeal
Park Medical Pharmacy appealed the trial court judge’s ruling. The California Court of Appeals determined that its role in resolving the conflict between the parties was to interpret the meaning and intent of the legislature at the time the statute was adopted. Statutory interpretation is a core function of the judicial branch of government, and a whole set of rules defining this interpretation have been developed by the courts. One rule stated that the words in a statute are to be read using ordinary definitions unless they are susceptible to more than one interpretation. In the latter event, courts consider extrinsic evidence, such as the legislative history of the statute, remarks made by legislators when the statute was debated, and amendments or deletions to the statute proposed before it became finalized.
In undertaking its task, the court of appeals initially noted that it would not make sense to assume that the mere existence of a room to store medications in a dispensing physician’s office constituted a pharmacy when the legislature expressly required a dispensing physician to maintain a secured, separate area to store the drugs. The court also noted that the statutory definition of pharmacy had remained unchanged since 1905, when the legislature first regulated the dispensing of drugs in California.
At that point in time, “pharmacy” was synonymous with “drugstore,” and the term referred to a place where drugs were sold to the general public pursuant to a physician’s prescription. It should be noted that in the 1920s, almost 40% of physicians dispensed medications.
Based on these common definitions, the court concluded that the “legislature’s intent in stating that physicians could not keep a ‘pharmacy, open shop, or drugstore’ was to prohibit physicians from having a place where they sold drugs to the general public and to limit physicians to dispensing drugs to their own patients for the condition for which the patient was seeking treatment.” It also stated that nothing in the language of the statute indicates that the legislature’s prohibition on physicians’ keeping a pharmacy was intended to address or to limit the profits a physician could make from dispensing drugs to his or her patients.
Park Medical Pharmacy also argued that the prohibition on physicians’ “retailing of dangerous drugs” meant that physicians should be barred from selling drugs to patients for a profit. The pharmacy reasoned that “profit is inherent in retailing.” The court of appeals rejected the argument, stating that while retailers typically hope to make a profit from selling goods, retailing does not necessarily entail making a profit. It also could find no evidence that the legislature ever intended the term “retail” to mean a sale for profit as opposed to a sale to the general public.
The court of appeals also believed that if the legislature had intended to prohibit physicians from selling drugs for profit, it would have said so in much plainer terms. For example, the legislature plainly stated that physicians cannot charge a fee for distributing samples obtained from manufacturers. Moreover, the legislative history of regulating physician dispensing showed that no agreement had ever been reached on limiting physician profits for the activity. At least two bills were introduced in the 1980s that would have capped dispensing fees by physicians. Neither bill passed.
The pharmacy also claimed that permitting physicians to profit from the drugs they prescribed and dispensed raised an inherent conflict of interest that could lead to public harm. In essence, the pharmacy was asking the court to interpret the statute from a public policy perspective rather than consider the plain language of the words used. In support of the claim, the pharmacy introduced the legislative history of an earlier version of the code prohibiting physician ownership of pharmacies. The 1988 legislative findings section states:
“The [California Legislature] finds and declares that the licensed pharmacist plays a critical role as the advocate of the patient-consumer and that when, in whatever manner, the oversight of the pharmacist is not available, the patient-consumer may be deprived of essential consultation. The Legislature further finds and declares that the prescriber’s role of patient advocate may be diminished when the prescriber has a financial interest in medications ordered for the patient. Amendment to §§2191 and 4051 [predecessor to section 4170] of the Business and Professions Code.” (Stats.1988, ch. 1600, § 1, pp. 5793-5794.).
This argument did not persuade the court of appeals. The court noted that subsections 6 and 7 represent the legislature’s cure for any conflict that might exist. Those sections require the disclosure of the choice patients have and an offer to write prescriptions to permit patients to go to the pharmacy of choice. Finally, the court noted that both the attorney general and the board of pharmacy in California had also issued written opinions concluding that the law does not prohibit physicians from charging for drugs they dispense. Accordingly, the decision of the trial court judge to dismiss the case was upheld.
Physician Dispensing Holds Its Ground
For purposes of this series, I suggest that this case raises important legal themes that include the following:
1. the “turf” battle between “professions” licensed by the state
2. the persistence of legal provisions for what may appear to be anachronistic practices
3. efforts by physicians to find revenue sources in an age of stagnant reimbursements.
Turf battles rage between office-based cosmetic dermatologists and hospital-based plastic surgeons over where surgery should take place. This case is no different. Whenever money is concerned, competitors will wrap themselves in the mantle of the public good to maintain incomes.
Over the last 2 years, I have highlighted that compounding medications is beyond the regulatory authority of the FDA. Compounding medications and physician dispensing were norms before the FDA was created, and while the world has changed, the rationales for them — patient convenience and tailoring a therapy to a specific patient — are legally valid in 2007 and are provided for in the law.
Lastly, in the 21st century, we see a recapitulation of 19th century medicine (an age that for most physicians was not lucrative), a difficulty in maintaining medical incomes and a gravitation towards the provision of medical goods (in this case, the lucrative Worker’s Compensation prescription reimbursement scheme) that can supplement incomes. The cliché “the more things change, the more the stay the same” is valid without update.
This article is based on a case discussion and article in U.S. Pharmacist Physician-Owned Pharmacies Vol. 27:08, August 15, 2002. by Jesse C. Vivian, and sections of that article are used in this article by permission of the publisher of U.S. Pharmacist. I thank the publisher for this permission.
In most states, physicians can directly dispense medications to patients based on the authority provided to them by virtue of their medical licenses. That is, a physician does not have to obtain a pharmacist license or comply with the legal strictures of running a pharmacy to dispense prescription medications. Specifically, a physician who dispenses drugs to patients is legally in the practice of medicine, not engaged in the practice of pharmacy. It does not make a difference if dispensing physicians make a profit on the drugs (in most states) that they dispense or if they simply dispense samples. However, some legal restrictions do apply (e.g., keeping non-controlled substances behind a single set of locks), as I have discussed in previous articles on dispensing prescription medications.
Yet, many legal restrictions do not apply.
State law and state courts do not deem that a physician suffers from an inherent conflict of interest by dispensing medications for profit, which effectively casts the physician in the role of pharmacist. States basically consider the act of dispensing by a physician to be part of the practice of medicine and the provision of care to patients governed by the professional codes of conduct that govern physicians.
A Look at a Lawsuit
This article discusses dispensing in California. As the largest state in the Union, California provides a good model for observation because it often sets the pattern that other states follow.1 California has a well-established legal framework for physician dispensing. (See Tables 1, 2 and 3.) However, despite the fact that California law is well settled in allowing physicians to dispense, a pharmacy challenged this legal regimen in a case report in 2002 by the California Court of Appeals.
Park Medical Pharmacy v. San Diego Orthopedic Associates Medical Group, Slip Op. No. D038051 (June 11, 2002), 2002 Cal App 4225
The San Diego Orthopedic Associates Medical Group was the defendant medical group. This medical group was composed of physicians who operated an outpatient clinic in a San Diego medical building. Several other physician groups had unrelated clinical practices in the same building. The building also housed an outpatient pharmacy.
Individual physicians in the medical group regularly dispensed prescription-only drugs to workers’ compensation patients on a for-profit basis. Each patient was given a disclosure form upon registration with the clinic, which informed patients that physicians working in the clinics may dispensed some of the prescribed medications; the form also indicated that patients had the option of obtaining a prescription and having it filled at the pharmacy of their choice. Each physician purchased his or her own medications on an individual basis and kept these drugs separate from the stocks of other physicians in the practice. All of the drugs were stored in a secured room designated the “physician-dispensing unit.”
Case Highlights
The plaintiff, Park Medical Pharmacy, noticed a decline in prescription drug volume soon after San Diego Orthopedic Associates Medical Group started directly dispensing medications to its patients. Park Medical Pharmacy filed a complaint against the medical group in September 2000 claiming, among other things, that the group was violating subsection 3 of the above statute by operating a retail pharmacy within its clinic.
Park Medical Pharmacy claimed that the physician-dispensing unit constituted a pharmacy within the meaning of the statute. It also claimed that the legislature had expressed its intent to not allow physicians to dispense prescription drugs on a for-profit basis. Park Medical Pharmacy asked the trial court to institute an injunction preventing the physicians from continuing the practice. The trial court judge refused and dismissed Park Medical Pharmacy’s complaint and lawsuit.
What Happened After the Appeal
Park Medical Pharmacy appealed the trial court judge’s ruling. The California Court of Appeals determined that its role in resolving the conflict between the parties was to interpret the meaning and intent of the legislature at the time the statute was adopted. Statutory interpretation is a core function of the judicial branch of government, and a whole set of rules defining this interpretation have been developed by the courts. One rule stated that the words in a statute are to be read using ordinary definitions unless they are susceptible to more than one interpretation. In the latter event, courts consider extrinsic evidence, such as the legislative history of the statute, remarks made by legislators when the statute was debated, and amendments or deletions to the statute proposed before it became finalized.
In undertaking its task, the court of appeals initially noted that it would not make sense to assume that the mere existence of a room to store medications in a dispensing physician’s office constituted a pharmacy when the legislature expressly required a dispensing physician to maintain a secured, separate area to store the drugs. The court also noted that the statutory definition of pharmacy had remained unchanged since 1905, when the legislature first regulated the dispensing of drugs in California.
At that point in time, “pharmacy” was synonymous with “drugstore,” and the term referred to a place where drugs were sold to the general public pursuant to a physician’s prescription. It should be noted that in the 1920s, almost 40% of physicians dispensed medications.
Based on these common definitions, the court concluded that the “legislature’s intent in stating that physicians could not keep a ‘pharmacy, open shop, or drugstore’ was to prohibit physicians from having a place where they sold drugs to the general public and to limit physicians to dispensing drugs to their own patients for the condition for which the patient was seeking treatment.” It also stated that nothing in the language of the statute indicates that the legislature’s prohibition on physicians’ keeping a pharmacy was intended to address or to limit the profits a physician could make from dispensing drugs to his or her patients.
Park Medical Pharmacy also argued that the prohibition on physicians’ “retailing of dangerous drugs” meant that physicians should be barred from selling drugs to patients for a profit. The pharmacy reasoned that “profit is inherent in retailing.” The court of appeals rejected the argument, stating that while retailers typically hope to make a profit from selling goods, retailing does not necessarily entail making a profit. It also could find no evidence that the legislature ever intended the term “retail” to mean a sale for profit as opposed to a sale to the general public.
The court of appeals also believed that if the legislature had intended to prohibit physicians from selling drugs for profit, it would have said so in much plainer terms. For example, the legislature plainly stated that physicians cannot charge a fee for distributing samples obtained from manufacturers. Moreover, the legislative history of regulating physician dispensing showed that no agreement had ever been reached on limiting physician profits for the activity. At least two bills were introduced in the 1980s that would have capped dispensing fees by physicians. Neither bill passed.
The pharmacy also claimed that permitting physicians to profit from the drugs they prescribed and dispensed raised an inherent conflict of interest that could lead to public harm. In essence, the pharmacy was asking the court to interpret the statute from a public policy perspective rather than consider the plain language of the words used. In support of the claim, the pharmacy introduced the legislative history of an earlier version of the code prohibiting physician ownership of pharmacies. The 1988 legislative findings section states:
“The [California Legislature] finds and declares that the licensed pharmacist plays a critical role as the advocate of the patient-consumer and that when, in whatever manner, the oversight of the pharmacist is not available, the patient-consumer may be deprived of essential consultation. The Legislature further finds and declares that the prescriber’s role of patient advocate may be diminished when the prescriber has a financial interest in medications ordered for the patient. Amendment to §§2191 and 4051 [predecessor to section 4170] of the Business and Professions Code.” (Stats.1988, ch. 1600, § 1, pp. 5793-5794.).
This argument did not persuade the court of appeals. The court noted that subsections 6 and 7 represent the legislature’s cure for any conflict that might exist. Those sections require the disclosure of the choice patients have and an offer to write prescriptions to permit patients to go to the pharmacy of choice. Finally, the court noted that both the attorney general and the board of pharmacy in California had also issued written opinions concluding that the law does not prohibit physicians from charging for drugs they dispense. Accordingly, the decision of the trial court judge to dismiss the case was upheld.
Physician Dispensing Holds Its Ground
For purposes of this series, I suggest that this case raises important legal themes that include the following:
1. the “turf” battle between “professions” licensed by the state
2. the persistence of legal provisions for what may appear to be anachronistic practices
3. efforts by physicians to find revenue sources in an age of stagnant reimbursements.
Turf battles rage between office-based cosmetic dermatologists and hospital-based plastic surgeons over where surgery should take place. This case is no different. Whenever money is concerned, competitors will wrap themselves in the mantle of the public good to maintain incomes.
Over the last 2 years, I have highlighted that compounding medications is beyond the regulatory authority of the FDA. Compounding medications and physician dispensing were norms before the FDA was created, and while the world has changed, the rationales for them — patient convenience and tailoring a therapy to a specific patient — are legally valid in 2007 and are provided for in the law.
Lastly, in the 21st century, we see a recapitulation of 19th century medicine (an age that for most physicians was not lucrative), a difficulty in maintaining medical incomes and a gravitation towards the provision of medical goods (in this case, the lucrative Worker’s Compensation prescription reimbursement scheme) that can supplement incomes. The cliché “the more things change, the more the stay the same” is valid without update.
This article is based on a case discussion and article in U.S. Pharmacist Physician-Owned Pharmacies Vol. 27:08, August 15, 2002. by Jesse C. Vivian, and sections of that article are used in this article by permission of the publisher of U.S. Pharmacist. I thank the publisher for this permission.
