PHYSICIANS: Physician entrepreneurship

And in just one tiny example of physician entrepreneurship, the LA Times reports on a new bill to close a loophole in California Workers’ Comp law. The Workers Comp problem is one of those perennial problems here in California, where we have too many doctors and too many lawyers, and they are able to hone their skills in separating the insurers from their money. It was "fixed" by Pete Wilson in the early 1990s, and then "fixed" again last year by Arnie. The latest round seems to have done some good, but one little loophole has been exploited allegedly to the tune of $250m.

The loophole is that pharmacy prices for drugs were capped in the law, but prices for those drugs dispensed directly by doctors were not. Well you know what’s coming next. Physicians were enticed by some wholesalers to start prescribing and dispensing drugs, and their mark-ups are a factor of three to ten what the pharmacies can charge. And it’s all paid for by the insurers. Here are some pricing examples from a Rand study quoted in the LA Times.

Pharmacy price vs. Doctor’s office priceSoma $44.68 vs $396.98Prozac $14.81  vs $131.82Darvocet  $12.65 vs $58.31Acetaminophen/Hydrocodone  $12.81 vs $58.31

Even the unions are opposed to this, as they correctly see this type of lilly-gilding as being the kind of thing that might lead to another round of attacks on employee benefits. The employers are of course siding with them.

But it does just show you that in American health care, if there’s a way to bill an extra buck or two, physicians are as quick as anyone else to figure out how. I don’t need to tell you the California Medical Association’s position on the bill…..

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Reed LigginhsfreyReed Liggingadfly Recent comment authors
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Reed Liggin
Reed Liggin

Harvey, You misunderstood my comments if you interpreted that I questioned whether physicians should be allowed to write prescriptions. Of course, physicians are well-trained to diagnose their patients and write prescriptions for them. My point is that pharmacists are well-trained to evaluate a patient’s prescriptions for drug-drug interactions and drug-disease interactions (among other things), thus making them a valuable asset to aid physicians and patients. If a physician dispenses prescriptions then the pharmacist is eliminated from the process, thus making the process less safe. I can think of three good reasons that the process may be less safe without a… Read more »


Reed: Your comments seem to have little to do with whether physicians should be allowed to “dispense” prescriptions – you question whether they should be allowed to “write” them. If not, who would you suggest? But the problem of overcharging on resale of drugs is hardly limited to physicians. I once calculated the markups on the drugs a hospital pharmacy charged me, based on the prices I would have paid, buying much smaller quantities than the hospital does. The AVERAGE markup was over 1000%! Of course, insurance companies and government payers ignore what the hospital charges, and pay what they… Read more »

Reed Liggin
Reed Liggin

I used to work for a healthcare company that owned a pharmaceutical repackager engaged in this business. It’s amazing to me that it has taken so long for the insurance companies to notice this. California is the first state to put a stop to it, but many other states still have these inflated reimbursement rates for worker’s comp prescriptions dispensed in the physician’s office. One point of clarification: the companies that sell the prepackaged meds to the docs are pharmaceutical repakcagers (which requires a drug wholesalers license), but not the wholesalers that first come to mine like McKesson, Cardinal, and… Read more »


What do you want to bet the doctor’s don’t even tell their patients the price? The patients just pick up the medication and get the bill from the doctor’s office (or the third party contractor they use for billing) later.