Should You Run An In-House Pharmacy?

Should You Run An In-House Pharmacy?

We recently received a query about the practicality of prescribing and filling prescriptions for your own direct care patients. Here’s why we do it, and why we encourage other doctors to as well.

46 states allow this type of operation.

Scratch the “Oh, it’s only allowed in Kansas” off your list of reasons not to give patients affordable meds. Currently, 92% of state governments are fine with doctors who prescribe the meds being the ones who provide them. (question, which states don’t allow it? We should add it if possible.)

Atlas MD sells essentially every prescription cheaper than Walmart.

How is this possible? Because we deal directly with wholesalers. Second, we do ZERO additional work to get paid for giving patients the prescriptions. The fact that no one has to bill a third party or get insurance authorization or keep track of deductibles/copays, etc., means no one else has to profit from the transaction. It’s a simple mano a mano exchange. In the case of Imitrex, a name brand pill for migraine relief, a box retails for $250. We can get the box wholesale for $7. Yes, we apply a markup, in our case $0.55.

For patients with chronic conditions, joining a direct care clinic can MAKE THEM MONEY.

The goal is to save patients so much, that it doesn’t make sense for them to even go through their yearly deductible buying prescriptions at a pharmacy (which in 2005 averaged $775). Instead we would prefer them to pay for our $50/month subscription, and get their migraine meds for $7.55 a box (that’s a slim markup. You are free to bump it up if you are compelled to). Now let’s look at a theoretical adult patient: Their first three boxes purchased will last three months, and cover most of what we’ll assume to be their $775 yearly deductible. Then assuming their plan has even a $10 copay and covers 100% of the pill cost afterwards, they would still pay ~$840 for a year supply of Imitrex.

An in-house pharmacy is a great marketing tool.

Alternatively, this theoretical adult patient could join Atlas MD for one year and purchase a year of migraine pills for a whopping total of $691 [($50/mo + $7.55/mo) x 12 mos]. Patients who don’t need to meet their deductible to save later in the year on prescriptions are patients who might not need their insurance at all, except in emergency. That means they can also get a wrap around plan (which can be paid for using a tax-free HSA) for around $300-$400/mo for an entire family. Let’s pretend this theoretical adult is 35, has a spouse the same age, and has two kids under 19. Assuming their only prescription is the Imitrex, they are looking at a monthly healthcare expense around $610/mo for EVERYONE now. And that means, unless something drastic comes up, there is little else to pay for.

Prescribing and distributing meds is one more way to connect with your patients.

Direct care works optimally if a doc has around 600 patients (this number shifts lower as more elderly patients are taken on, which take more time to treat, and therefore are charged more per month). A direct care doctor seeing a full roster will work on average 8-10 hours a day and earn ~$300,000 in revenue. We typically use about 30% of our revenue on overhead, leaving a considerably handsome salary. Now if that full roster of adult subscribers requires us to fill some prescriptions and get on the phone/computer to do some business, so be it. It’s rewarding to know we’re working to get our patients the care they deserve immediately, and freeing up money they can use to hedge against emergencies and unforeseen illness, with a wrap-around insurance plan.

Also, filling meds isn’t as much work as you think.

Assuming you invest in a pill counter, you’re looking at a few minutes of work for a patient who has a thyroid condition. You fill the Rx every 30 days, and send them a reminder that their pills are ready (assuming you invest in Atlas.md EMR, too, this can even be automated, or done quickly from your iPad or smartphone, and adds the affiliated invoice to their monthly statement). What this looks like is a world where your patient waits in no lines, pays nothing on arrival, and just takes home their medicine. They are billed every month for $50 + cost of monthly Rx electronically. Alternatively, you could still be in the red tape game, getting calls from stressed out pharmacists about that diabetic patient who needs more insulin, but is out of refills, and hasn’t seen you in 4 months because it costs him $100 to see you even with a PREMIUM PPO INSURANCE PLAN. By the time you get off the phone you might have been able to fill the prescription yourself.

7 thoughts on “Should You Run An In-House Pharmacy?

  1. Pingback: #directcare docs, here are five reasons you SHOULD… « Hippocrates Shrugged

  2. Kirby F says:

    I’m sure it’s been mentioned somewhere, either in podcast or blog or conference before, but what are the other 8% states? I heard TX, UT, AL….but wondered if there’s any others, and more importantly, WHY they don’t support this method…I think THIS is the patient ‘sales pitch’ to save them a ton of money….

    Thanks for all you do – I follow your blog, and podcast religiously and can’t wait to get out of residency so I can start doing what I thought I signed up for!

    • JoshMD says:

      Hi Kirby, great question!

      http://aaucm.org/Professionals/MedicalClinicalNews/DispensingRegulations/default.aspx is a great link that lists the laws for each state.

      Montana, Utah, Texas, Arkansas, NY and Mass.

      I can’t say why each state does this, i think in texas it was b/c of some ‘abuse’ of docs doing work-comp and overcharging (what ever that means) the ins companies. Which i find interesting, given the huge mark ups at the pharmacy compared to our wholesale prices.

      Wholesale meds is a huge savings for pts and definitely helps dpc practices to grow. I don’t think we’ve seen a dpc practice fail that does wholesale medications.

      thanks for your support! we’re here for all of you to help change the face of family medicine! 🙂

  3. Lori says:

    I’ve been trying to research this for my practice. Besides AndaMeds, would you be able to provide other reputable wholesale med suppliers? They were great to talk to and had most meds, but was hoping to compare prices. Thanks for your time and all you do to help.

    • Atlas MD says:

      Hi Lori!

      AndaMeds is the third largest supplier in the country and the first largest that works directly with physicians, so the pricing should be some of the best around. Combine that with our group purchasing organization (GPO) we have set up with them for all the Atlas.md users and prices get even lower.

      You could also be looking at meds that don’t have a generic so those are going to be high no matter what company you’re working with.

      Hope that helps. If you have any additional questions, Kirk (our “Easy Button”) is more than happy to help you directly. Just email him at kirk@atlas.md.

      Thanks Lori!

      – Atlas MD

  4. What is the initial investment to start in house dispensing for a small micro practice?

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