By Sandra P. Greenblatt, Esq.

The old adage “if it’s too good to be true, it probably is,” too often is forgotten when lucrative dispensing (and other) business proposals are evaluated by physicians, who are working harder and longer to earn less than in past years and facing additional future cuts in reimbursements. Dispensing prescription medications to patients, when done properly, can be an excellent source of new revenues to physician practices and a convenience to patients. Many physicians also find it improves their patients’ medication compliance, which is beneficial to both patients and physicians. Unfortunately, along with the ethical companies offering to assist physicians and group practices to add medication dispensing to their patient services in compliance with Florida and Federal laws, I have seen and heard of some disturbing dispensing business models and practices of which physicians should beware. What is legal in one state is not necessarily permitted under Florida law; what is permitted by one payor, e.g., Workers’ Compensation, may not be lawful under Medicare or Medicaid. Physicians should be cautious in starting their own dispensing practices or in selecting a third party manager or outside contractor as a “partner” to assist with their dispensing business, as a poor decision can lead to investigations and disciplinary action by professional licensing boards, professional liability exposure, or even criminal sanctions by Florida and/or Federal prosecutors!

This article highlights some Florida laws applicable to dispensing physicians, questions for physicians to ask of potential “partners” and issues to avoid when starting a dispensing business:

1.         Dispensing Physicians Must Comply with Pharmacy/Pharmacist Laws 
In general, a person may not dispense medicinal drugs in Florida unless he/she is licensed as a pharmacist, or otherwise is specifically authorized by Florida law. See, Chapter 465, F.S. Physicians rely on the “dispensing practitioner” exception to this prohibition, which requires the physician to register with his/her professional licensing board and pay a fee. Physicians who become dispensing practitioners also must comply with and be subject to all Florida laws and rules applicable to pharmacists and pharmacies. A physician could have both his/her dispensing registration suspended or revoked and face discipline against his/her medical license by the medical boards for a violation of the pharmacy laws and rules. “As a dispensing physician myself for many years, my main objective was to create a company that would teach physicians how to start and maintain a successful dispensing practice in compliance with the law without adding significant administrative and financial burdens,” said Paul M. Zimmerman, M.D., orthopedic surgeon and CEO of Prescription Partners/Assurance Financial Partners, LLCs, which contract with more than 800 Florida physicians with dispensing programs.

Physicians should look for a dispensing partner that highlights compliance, including providing in “real time” the pharmacy forms required by Florida law, such as printing out daily log sheets that must be signed by the physicians daily and providing secure electronic storage for required drug pedigree papers. Pharmacy inspectors can and do visit dispensing physician offices at least annually and such papers must be readily available.

2.         Can my PA or ARNP do the dispensing for me?
Physicians also should beware advice from non-physician dispensing company personnel which leads them to deviate from their traditional standard of care, such as “the PA can sign because in-house prescriptions don’t require a physician’s signature.” The Board of Medicine is currently investigating some physicians for this “recommended” practice. Physician extenders require their own dispensing practitioner registrations from the medical boards in order to dispense in the physician’s practice and are limited to non-Schedule II drugs. They are not permitted to do the dispensing as an extension of the registered dispensing physician!

3.         Does my malpractice insurance cover my dispensing activities?
Not necessarily. Physicians should check with their professional liability insurance carrier whether their existing policy will cover them as a dispensing practitioner, as this is not a standard risk of practicing medicine. Some dispensing companies offer dispensing “errors and admissions” policies to physicians. Beware dispensing companies that offer to assume all liability for your dispensing program. Regardless of what a contract may include, physicians cannot by law delegate away (except to another licensed and registered dispensing practitioner) their professional liability for their decisions to prescribe particular medications for a patient or their duties as a dispensing practitioner that can only be performed by a licensed physician, e.g., signing a prescription, being present in the office when medication is dispensed to your patients and signing off before the medication is handed to your patients.

4.         Can I select a formulary that meets my patients’ needs and my inventory capacity? Must I keep a large inventory?
Some dispensing management companies and their preferred drug repackagers offer physicians prescription drug formularies to stock and dispense which contain only limited medications or only less expensive generic medications. While many generic medications are equivalent in quality to brand name drugs and may even be more profitable for dispensing physicians, some brand name drugs may have no generic equivalent. Physicians should look for a dispensing business partner that will permit them to select their medication inventory to meet the needs of their patients. According to Dr. Zimmerman, “[i]t is very important to have a dispensing program that permits physicians to dispense both generic and brand name drugs needed by their patients, so they are not required to change the way they practice medicine.” Also, physicians should beware any requirement that their practice purchase and stock large amounts of medications, which are likely to become outdated on the shelf! Physicians should look for a dispensing partner whose software and systems help them to monitor drug inventory and assist in the reordering process.

5.         Beware Consignment Programs & Rent Payments
The sale, storage and dispensing of prescription drugs is heavily regulated by the state and Federal governments. Only certain licensed individuals and entities are permitted to be in the chain of possession or ownership of medications, including licensed drug manufacturers, wholesalers, repackagers, pharmacies, dispensing practitioners, and patients pursuant to valid prescriptions. Physicians should be cautious of dispensing companies that offer to place prescription drugs in a physician’s office “on consignment” and not require the physician to purchase or pay for the drugs until he/she dispenses the drugs to a patient and receives payment. Some dispensing companies even offer to pay “rent” to physicians for the office closet space for consignment drugs they cannot own or possess. In essence, the physician is either receiving “rent” for storing his own medications or is storing the wholesaler’s medications in space that likely would not meet regulatory storage standards. Such “rent” payments could be viewed by the government as unlawful remuneration paid indirectly from the wholesaler/repackager to the physician to induce the physician’s purchase of drugs. If Medicare or Medicaid is billed, this practice may constitute a violation of the felony Federal Anti-Kickback Statute. Even if no government funds are involved, violating the Florida Patient Brokering Act and professional licensure anti-kickback statutes could result in serious civil and/or criminal penalties for both the physicians and the licensed repackagers, which are licensed entities.

6.         Beware “Turn-Key” Dispensing Programs
Whose business is it anyway? Especially if dispensing prescription drugs that are paid for by Medicare (remember Part D) or Medicaid, the Office of Inspector General of DHHS looks suspiciously at contractual business ventures between physicians and suppliers of goods or services where the physician contracts out substantially all of the services and obligations of the new business, such as “turn-key” management models where the third party supplier contributes all of the supplies (drugs), personnel (pharmacy tech) and services (billing, collecting, managing, etc) and the physician makes little or no investment of monies or resources other than his patients, yet profits from prescribing for his patients! See, OIG Special Bulletin, “Contractual Joint Ventures,” April 2003. Remember, Florida regulatory agencies regularly look to Medicare standards when enforcing similar Florida laws, such as the FL Patient Brokering Act and FL Anti-Kickback Statute.

7.         Beware “Mail Order” Dispensing Programs
Although allegedly legal in other states, such as California, it is unlawful in Florida, under multiple authorities, for a physician to hold himself/herself out as the dispensing physician (for billing or other purposes) when the actual filling of the physician’s prescription and shipment to the patient’s place of residence is performed by a mail order pharmacy. Informal consultations with the FL Board of Pharmacy indicated that they would not consider the physicians to be the dispensing practitioners under that model. Florida pharmacy regulation, Rule 64B16-28.450, F.A.C., expressly prohibits a mail order pharmacy that is filling prescriptions for another pharmacy (or dispensing physician), known as “centralized prescription filling,” from shipping medications directly to patients. The mail order pharmacy is required to ship such medications ONLY back to the original pharmacy (or dispensing physician) that is the source of the prescription to be dispensed!! In addition, the mail order model does not comply with the FL law definition of “dispensing” in Section 465.003(6), F.S., which requires the “transfer of possession of” a medicinal drug by a pharmacist [or dispensing practitioner] to the ultimate consumer.?” Remember, a dispensing physician is subject to all pharmacy/pharmacist laws in FL and violation of the pharmacy laws and regulations subjects physicians to disciplinary action by their own licensing boards. There is also a danger that such mail order program could implicate both FL and Federal Anti-Kickback Statutes, discussed above in Item 5, and that third party payors who learn of the arrangement could allege fraudulent insurance billing by the physicians who bill under this arrangement as the dispensing practitioners.

8.         Beware “Legal Opinions”!
As a health law attorney, I have seen unfortunate circumstances where companies seeking to do business with physicians, including some national dispensing management companies, advise physicians of, and even share with them “legal opinions” ostensibly blessing their business models. Frequently, physicians neither carefully review nor have their own attorneys review such opinions, but wrongly assume they can rely on them. Legal opinions are tailored to fit specific facts and circumstances made known to the attorney at a specific point in time. They are also written only for the benefit of the party requesting the opinion, unless the document indicates otherwise. Physicians should not rely on or be influenced by the mere “existence” of a document written by someone else’s attorney, but should have their own qualified health law attorney review any “opinion” to assure it applies to the physician’s own situation and addresses the specific concerns of the physician or group practice. Remember, that attorney’s duty is to represent and protect the interests of his or her client, not the physician, unless otherwise clearly stated!

As stated at the start of this article, dispensing prescription medications can be a lucrative source of revenue for physicians and good patient service, when done properly. However, care must be taken: dispensing is lucrative not only for the physicians and group practices, but also for the drug wholesaler/repackagers and the companies that seek to assist physicians in this new line of business. Physicians should take the time and invest the resources, BEFORE they commit, to consult a health lawyer with experience in such matters who will protect their interests regarding compliance with applicable laws and negotiating suitable contracts with any third party dispensing “partner” selected. Remember, if it sounds too good to be true, IT IS!!


Sandra P. Greenblatt is a Board Certified Health Lawyer and President of the boutique health law firm of Sandra Greenblatt, PA in Miami, FL. She can be reached at 305-577-9995 or [email protected]. Ms. Greenblatt represents physicians, pharmacies, dispensing companies and other health care businesses in their transactional, regulatory and contractual matters. This article is an overview of the subject matter and is not intended and does not constitute legal advice, which must be tailored to a particular party and factual situation after individual consultation.