Capitalizing on New Physician Dispensing Models: Opportunities and Challenges for Oral Oncology Marketers 

Drug marketers must gain an understanding of how each retail distribution channel benefits patients while ensuring that drugs and drug services are available to the client through the channels that provide the greatest benefit.

By Richard A. Ford, MBA FLMI

PHYSICIAN DISPENSING OF ORAL ONCOLOGY drugs has reached material proportions. The resulting shift in the retail distribution channel has created both challenges and opportunities for the marketers of oral oncolytic drugs. Successful drug marketers in this broadening retail channel spectrum will be those who understand how it serves both patient and prescriber interests. Many market forces are converging to create incentives for physician practices to service self-administered drugs.

Market pressures include:

• Decreasing prices for practice-administered drugs
• An increasing market share for oral oncolytic drugs.

Market opportunities include:

• The increasing availability of health plan coverage for oral oncolytics (e.g., Medicare’s Part D benefit)
• The opportunity to add supportive care drugs to a practice service model for oral oncolytic drugs.

Patient servicing opportunities include:

• An increasing need to monitor and facilitate patient compliance with oral dosing regimens
• The convenience that oral oncolytics and practice dispensing can offer.

Practice Models for Servicing Self-Administered Drugs There are three prevalent models used by physician practices to distribute self-administered drugs to patients.

1. Direct practice distribution: The practice alone is responsible for distributing medication to patients for self-administered use. Many drug distributors that provide medication to practices will service patient-specific order quantities and even package the orders according to a patient-specific reference.

This model is excluded by law in the states of MA, MT, UT, and TX. It is allowed in NY and NJ, with certain restrictions. There may be laws or regulatory processes that limit the use of this model in other states.

The state Board of Pharmacy does not regulate the distribution of drugs to patients in the above model; no pharmacy license or Board of Pharmacy oversight is required. This model is not eligible to bill a patient’s pharmacy benefit plan because virtually all pharmacy benefit plans require dispensing by a licensed pharmacy. The vast majority of self-administered drugs, including oral oncology, is reimbursed by health plans under a pharmacy benefit plan. For this reason, this model is problematic even when permissible under state laws.

The next two models for practice servicing of self-administered drugs are subject to regulation by the state Board of Pharmacy and require the use of a licensed pharmacy. For this reason, these models qualify for payment that is made by a pharmacy benefit plan when all other requirements are met.

It should be noted that “Dispensing” is a statutory term in most or all states (i.e., “dispensing” is defined by law). It may be inconsistent with statutory definitions to refer to the above model as “Dispensing”; such a reference may misrepresent the service that is being provided to patients.

2. Closed-Door Pharmacy Distribution: The practice uses a licensed pharmacy to dispense medication to the practice’s own patients. While the practice must maintain a licensed pharmacy, some states may exempt this type of practice pharmacy from meeting all of the facility requirements incumbent upon an open retail pharmacy. These requirements may include appropriate signage, patient counseling areas and posting contact information to assist patients during non-business hours.

3. Affiliated Open Retail Pharmacy Distribution: These practice-affiliated pharmacies may fill prescriptions for any patient; many will fill prescriptions for other practices, and may use physician relationships as their source of external business. These pharmacies must meet all of the requirements for an open retail pharmacy, as defined under each state’s pharmacy laws.

An important distinction between open and closed pharmacy models is that each may be assigned its own “class of trade” for the purposes of pricing drugs acquired by the pharmacies. In closed retail pharmacies, the practice may be able to take advantage of the “own use” class of trade pricing. This classification may carry pricing discounts that are more favorable than pricing that is available to open retail pharmacies. Although there may be slightly different interpretations, “own use” generally means the provision of drugs for patients under the direct care of an owner-physician and servicing under the direct supervision of the owner-physician. A practice operating an open retail pharmacy may segregate the product it purchases and dispenses to its own patients to continue to take advantage of “own use” pricing for these patients. This adds significant complexity to pharmacy operations.

Many supportive care drugs dispensed by a practice pharmacy can be acquired and billed more profitably than many oral oncolytics. These may include drugs such as pain medicine, steroids, blood thinners, antiemetics, etc. The sales margins (as a percent of the drug sale price) on oral oncolytic drugs can be less than other drug categories. Including supportive care drugs in the practice pharmacy model can benefit practice economics.

Economic and Administrative Considerations
Before initiating a program to service oral oncolytics, there are a number of circumstances that need to be understood.

The two models that require the use of a licensed pharmacy are associated with significant capital requirements, including facility and inventory investments. The scope of drugs that will be serviced and the expected volume of prescriptions will help define capital requirements. The use of an automated pharmacy system is required for many pharmacy functions, including billing.

The standards of care used by the practice will determine whether a patient’s office visit schedule coincides with the timing of the patient’s need to access prescription drug supplies. The terms of the patient’s pharmacy benefit plan, including the method of assigning patient cost-sharing expense, often favor the dispensing of specific quantities that are unrelated to the patient’s office visit schedule (often, the maximum dispense quantity permitted by the benefit plan). The practice may need to provide home-delivery services if prescription fill/refill dates differ significantly from office visit dates. For home delivery, the pharmacy must be licensed in any state where the drug will be delivered. Some states and pharmacy benefit plans have specific requirements for the delivery of medication at locations other than the pharmacy. Understanding and complying with each benefit plan’s requirements for home delivery is an essential part of managing the pharmacy’s exposure to payment recoveries.

Practice pharmacies must contract with pharmacy networks to bill drugs to pharmacy benefit plans; existing practice payer contracts used to bill medical benefit plans will not apply. Distributors that contract with pharmacy networks on behalf of their customers can often include practice pharmacies in their existing provider network contracts for a relatively low cost to the provider (approximately $12,000 in start-up costs and several hundred dollars a month in ongoing support fees). Certain pharmacy networks seek to exclude practice pharmacies from their networks because these pharmacies focus on the dispensing of “specialty drugs” and therefore compete with the network’s own specialty pharmacy.

John Hennessy, Executive Director, and Allison Fetter, PharmD., Director of Pharmacy, of Kansas City Cancer Center, serving patients in Kansas and Missouri, have effectively used the “Any Willing Provider” laws to participate in pharmacy networks that otherwise seek to exclude practice pharmacies. Although pricing is non-negotiable, their two closed-door retail pharmacies have successfully contracted with all pharmacy networks in which their patient population participates. Not all states have “Any Willing Provider” laws that apply to pharmacy networks.

Drugs reimbursed by pharmacy benefit plans will be billed and collected using processes that are different from medical billing processes. The practice will often need to manage these processes. While the “NCPDP” (pharmacy) claim process is generally considered to be more timely and efficient than medical claim processes, a separate system of billing and accounts receivable management controls must be developed and administered. A successful practice pharmacy must employ strong administrative skills to ensure the integrity of both accounts receivable and inventory assets.

These are only a few of the circumstances that may impact the decision to go forward. The scope of practice pharmacy operations is often driven by the desired level of business penetration necessary to meet the practice’s economic goals.

Addressing Patient Servicing Needs
Many physician practices see the servicing of self-administered drugs as a value-added service rather than an economic opportunity.

An important benefit of a practice-affiliated pharmacy, according to David Downs, RPh Area Manager, Pharmacy Services at Texas Oncology, PA, is the coordination of care and the fact that practice clinicians observe and record the full scope of care provided to each patient. Compliance monitoring can be more easily done and corrective actions undertaken earlier than is the case for patients serviced by remote pharmacies. Many practices have also enjoyed the added benefits of additional clinical insights, regimen analyses and the opportunity to better understand the patient experience with self-administered regimens.

A primary motivation for practices to implement a pharmacy is the “ease of use” that a practice pharmacy provides the patient. Patients are often frustrated when attempting to fill prescriptions that require health plan “prior authorization.” Retail storefront pharmacies are often ill-prepared to pursue the prior authorizations that are often required for oral oncolytics. Mail order and specialty pharmacies are often cited by practices as a source of treatment delays. In a practice pharmacy, it is easier for the patient’s clinical team to understand the status of a prescription that has been presented for servicing and to address any challenges that may result in a treatment delay.

Practices, as well as drug marketers, are concerned about patient adherence and persistency for self-administered drugs. While IV treatments are scheduled by the practice, and administration is well controlled and documented, there may be little understanding of the patient’s success presenting and filling prescriptions that are serviced by third-party pharmacies. Large cost-sharing expenses imposed on patients by health plans often cause delays or limit the start of treatment all together. Patients may be hesitant to let practices know that they cannot afford to fill their prescriptions. While most practices do have protocols for a nurse or pharmacist to follow up with the patient to ensure the patient is complying with his prescription drug treatment plan, practices often find that their staff is better able to understand oral dosing compliance when prescriptions are filled at the practice pharmacy.

Practices are currently spending a significant amount of time and resources researching patient financial obligations and providing patients with financial counseling for treatments administered in the practice. When practice pharmacies service a patient’s self-administered drug, practice personnel can more adequately help a patient to understand and accommodate all of his financial obligations. It is very difficult for patients to understand all of their cost-sharing obligations when different providers are presenting information to the patient at different times.

To properly understand pharmacy benefit cost-sharing expenses, practices must train pharmacy staff on plan benefit design and benefit investigation processes; as mentioned, pharmacy benefit plans are often subject to very different benefit structures than medical benefit plans, and the benefit that is available to fund a prescription can change dramatically from one fill to the next.

Specialty pharmacies may have a better understanding of the financial resources that are available to assist patients who incur a significant financial hardship filling their prescriptions. Some of the funding that is available for uninsured or underinsured patients is offered only through certain specialty pharmacies. This opportunity should not be overlooked for patients who need financial assistance to fill their prescriptions.

Maximizing Opportunities
A shifting retail drug channel is challenging drug marketers to become familiar with new drug servicing models and the benefits they can provide to both practices and patients. Practice servicing of self-administered drugs adds another layer of complexity to the constantly changing dynamics of a physician’s practice.

The truth is that patients benefit far more from the implementation of practice pharmacies than the practices themselves. Drug marketers will gain an understanding of how each retail distribution channel benefits patients while ensuring that drugs and drug services are available to the client through the channels that provide the greatest benefit.

Rick Ford is the Director of Reimbursement Consulting at AccessMED/US Oncology. He welcomes comments at Rick.Ford@accessmed.com.