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Physician Dispensing: Issues of Law, Legislation and Social Policy

Published online by Cambridge University Press:  24 February 2021

Richard R. Abood
Richard R. Abood*
Affiliation:
Wyoming Pharmaceutical Association, School of Pharmacy, University of Wyoming
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Abstract

Despite the fact that physicians have dispensed prescription drugs for profit for several years, the practice is currently under intense challenge and controversy. This recent flare-up can be explained by several factors including the involvement of the Federal Trade Commission (FTQ, increased competition among physicians, alternative delivery systems and drug repackagers.

Federal laws including the Food Drug and Cosmetic Act and Controlled Substances Act regulate dispensing practices, but have been interpreted to regulate dispensing by pharmacists, not physicians. All states have laws applicable to the dispensing of prescription drugs by physicians, but the wording of these laws raises unclear legal issues. Both uncertainty about these legal issues and pharmacists' concern over the increase in physician dispensing has promoted state legislative efforts to restrict or regulate the practice. These legislative efforts and the corresponding regulatory actions by state boards have triggered FTC involvement.

From a social policy perspective physician dispensing raises significant concerns of ethics, conflicts of interest, patient welfare and economics. Based upon social policy, physician dispensing for profit is not a practice which should be condoned or allowed to flourish.

Type
Articles
Information
American Journal of Law & Medicine , Volume 14 , Issue 4 , 1989 , pp. 307 - 352
Copyright
Copyright © American Society of Law, Medicine and Ethics and Boston University1989

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References

1 The definition of what constitutes physician dispensing varies depending upon how restrictive opponents of the practice want to be. Drug samples, which physicians distribute free to patients, are not included within the definition in even the most restrictive states. Drug samples are now controlled under a recently passed law entitled The Prescription Drug Marketing Act of 1987. The Prescription Drug Marketing Act of 1987, Pub. L. No. 100-293, reprinted in 1988 U.S. CODE CONG. & ADMIN. NEWS 95 (to be codified at 21 U.S.C. § 353 (c)(d)(e)). Nor does physician dispensing include most injectables as these are considered a function of the practice of medicine. Even most opponents to the practice concede a need for physician dispensing in remote rural areas or in emergency situations where pharmacy services are unavailable or impractical to obtain.

2 For a compilation of articles and editorials on many of these issues, see NARD, PHYSICIAN DRUG SALES FOR PROFIT: A GUIDE FOR PHARMACISTS (1987).

3 SCHERINC LABORATORIES, PHARMACISTS AND PHYSICIANS: ATTITUDES AND PERCEPTIONS OF Two PROFESSIONS (1986). A large percentage of physicians describes the relationship with pharmacists as good to excellent.

4 Pharmacists Rank #1 in Public Opinion Poll, APhA News Release No. 87-66 (Dec. 8, 1987)(reporting on the findings of a Gallup Poll).

5 Consumers Overwhelmingly Affirm That Pharmacists, Not Doctors, Are Their Preferred Source of Prescriptions, 110 NARD J., Mar. 1988, at 27 (reporting on the findings of a Roper Organization Survey).

6 See infra notes 94-107 and accompanying text.

7 Scientific studies have not been performed to document whether the trend of physician dispensing is increasing. Nonetheless, considerable evidence exists that the practice is on the rise. A survey by the National Council of State Pharmaceutical Association Executives (NCSPAE), released on March 30, 1987, polled the state pharmacy association executives in the fifty states, and of the 33 respondents, 26 indicated that they believe the incidence of physician dispensing has increased in their states. James Roberts, president of Direct Pharmaceutical Corporation, a repackager that supplies physicians’ offices, informed the Joint Commission of Pharmacy Practitioners in May 1986, that physician dispensing is on the rise. Drug Repackagers on the Make, 109 NARD J., Mar. 1987, at 17. Physician dispensing is predicted to increase in the next five to seven years. Id. at 18. There is, however, no reliable data as to what the current level of physician dispensing is or what the exact growth will be. Id.; see also Wyden, When Doctors Sell Drugs: A Conflict of Interest, Wash. Post, Apr. 28, 1987, (Health), at 6. Some drug repackagers are reporting sales increases. For example, Physicians’ Pharmaceutical Services, Inc. reported sales increases of $1.7 million representing a 52% increase for the quarter. Physician's Pharmaceutical, 36 WEEKLY PHARM. REP., July 20, 1987, at 1. A study of Ambulatory Care Centers (ACCs) predicts that the number of ACCs dispensing will increase from 39% to 65% by 1988. See infra note 15.

8 The U.S. now has one physician for every 485 people compared to 1 for every 715 in the 1950's. Enright, Supply of Physicians, 43 AM. J. HOSP. PHARM. 3042-45 (1986). A 1980 report estimated that by 1990 the nation will have a total of 536,000 physicians, 79% more than in 1970. This would exceed need and demand by approximately 70,000 and this surplus was projected to double to 145,000 by the end of the century. U.S. DEP't HEALTH & HUMAN SEV., REPORT OF THE GRADUATE MEDICAL EDUCATION NATIONAL ADVISORY COMMITTEE 81-651 (1980-83).

9 A survey of physicians’ incomes showed that income rose only 1.4% to a median of $94,580. Robinson, Pharmacy Moves to Stop Spread of Physician Dispensing, 128 DRUG TOPICS 10 (1984). This rise did not even keep pace with the cost of living increase which was 3.8%. Id. Physician income in 1985 averaged $141,150. This is a 37% increase from 1980. When accounting for actual spending power, however, the increase actually represented a 4.7% increase. See Are Physicians Better Off?, 4 HEALTH SPAN 41 (1987). Some economists show that the increased supply of physicians will not lower physician earnings overall and will increase the cost of health care. See Enright, supra note 8, at 3043; Owens, What Competition is Doing to Earnings, 64 MED. EcoN.,Jan. 5, 1987, at 158.

10 Drug repackaging firms buy drugs in bulk and repackage the drugs in convenient size vials for the physician to dispense directly to the patient. The repackagers manage inventory levels for the physicians, replenishing drug stock as needed. There are currently about 23 repackaging companies in the country, there were only three companies just two years ago. See Rayburn, Druggists Fact New Trend: Doctor-Filled Prescriptions, Bus. FIRST, Apr. 20, 1987, at 29. There is evidence that some of the repackagers may be involved in illegal drug diversion schemes. Drug Diverters, Drug Repackagers Linked, NARD J., July 1987, at 51. These repackagers may have obtained their drug supplies outside the traditional distribution system from brokers who have stole, counterfeited and obtained drugs fraudulently from nonprofit organizations. Id.

11 For example, a brochure from Physicians’ Pharmaceutical Services, Inc., a repackager in Rockville, Maryland, proclaims that a physician seeing 115 patients a week can expect to earn in excess of $15,500 annually. Pharmaceutical Corporations of America similarly announced that physicians who dispense 10 prescriptions a day will net $61,000. The ad states: “[E]ach script you write is like a check to the pharmacy; why not write that check to your practice instead?” Drug Repackagers on the Make, supra note 7, at 18.

12 Generally, states which have generic substitution laws mandate that a pharmacist substitute generic drugs for brand names unless the prescribing physician has mandated the use of a brand name drug. See ALA. CODE § 34-23-8 (1985) (requires physician to write “no substitution“ on prescription); ARK. STAT. ANN. § 17-91-503 (1987); FLA. STAT. § 465-025 (1981); MASS. GEN. L. ch. 112, § 12D (1986) (requires physician to write “no substitution” on prescription); MONT. CODE ANN. § 37-7-505 (1987); N.Y. EDUC. LAW § 6816-a (McKinney Supp. 1989); R.I. GEN. L. § 5-19-38 (1987); S.D. CODIFIED LAWS ANN. § 36-11-40.3 (1986)(requires physician to sign on a specific line on prescription in order for the substitution of a generic drug to be permitted); N. VA. CODE § 30-J-12(b) (1986)(requires physician to deem brand name to be medically necessary). In reality, if a physician uses a repackager it is difficult to see how the physician will have any better control over the particular generic dispensed, since repackagers are likely to sell different brands of generics.

13 Pharmacists in Florida have obtained statutory authority to perform limited prescribing. FLA. STAT. § 465.186 (1985). Nationwide, there is a movement by some pharmacists to obtain the right of therapeutic substitution. Therapeutic substitution is substituting a drug, which is perhaps different generically, but which has the same therapeutic indications for the drug which is prescribed.

14 Scottie Steinberg of Pharma-Pac estimates that 5% of physicians dispense for profit. Drug Repackagers on the Make, supra note 7, at 18. A poll by AMERICAN MEDICAL NEWS showed that 21% of physicians reporting said that they did dispense. Id.; Are More MDs Dispensing Drugs?, 194 AM. DRUGGIST 22 (1985). The poll did not indicate what percentage of these physicians charged for the medication. Another study indicated that 8% of the patients who had prescriptions filled were given a full supply of medicine by their doctor during the visit and half of this group paid the doctor directly for the medication. SCHERING LABORATORIES, THE FORGETFUL PATIENT: THE HIGH COST OF IMPROPER PATIENT COMPLIANCE (1986). A study by the California Medical Association in May of 1986 showed that approximately 9.9% of physicians in major metropolitan areas and 12.9% in rural areas purchase medications for dispensation and charge their patients for them. CALIF. MED. ASS'N BUREAU OF RES. & PLANNING, 26 SOCIOECONOMIC REPORT 3 (1986). A recent study indicates that perhaps the 5% figure has increased to 6.6%. Chi, Pharmacists Will Still Recommend M.D.'s Who Dispense, Study Finds, 131 DRUG TOPICS, Sept. 21, 1987, at 21. Another recent study puts the figure at 8.5%. Latelines, 131 DRUG TOPICS, Sept. 21, 1987, at 6.

15 Phillips, Dispensing with the RPH's Services, 196 AM. DRUGGIST 46 (1987). Only one-third of the dispensing (ACCs) dispensed to ,nore than 50% of their patients. Id. at 47. Fifteen percent of the ACCs surveyed was planning to start offering dispensing services in the near future. Id. at 46. A study by the National Association for Ambulatory Care (NAFAC) published in April of 1986 showed 47.3% of ambulatory care centers dispensed and that 65% were predicted to be doing so by 1988. Ambulatory Care Center Dispensing Trends: 41.6% of Survey, 35 WEEKLY PHARM. REP., Sept. 22, 1986, at 3.

16 Schwartz & Hager, Now, One-Stop Medicine?, NEWSWEEK, May 25, 1987, at 32.

17 For a detailed history of the profession of pharmacy, see E. KREMERS & G. URDANG, HISTORY OF PHARMACY (G. Sonnedecker ed. 3d ed. 1963). For a more condensed accounting, see Sonnedecker, Evolution of Pharmacy, 14 REMINGTON's PHARMACEUTICAL SCI. 8-19 (1970).

18 E. KREMERS & G. URDANG, supra note 17, at 9.

19 Id. at 17.

20 Id. at 28.

21 Id. at 39.

22 England was an exception and did not recognize pharmacy as a separate profession until the 19th Century.

23 E. KREMERS & G. URDANG, supra note 17, at 92-110.

24 Id. at 146.

25 Id. at 147. Morgan likely was aware of the French pharmacist Antoine Baume who stated in the introduction to his famous ELEMENTS DE PHARMACIE THEORIQUE ET PRATIQUE: “[T]hose who iii the early times devoted themselves to the art of healing, practices simultaneously medicine, pharmacy, and surgery; but gradually it became obvious that each one of these different branches requires the entire devotion of an individual person.” A. BAUME, ELEMENTS DE PHARMACIE THEORIQUE ET PRATIQUE, cited in E. KREMERS & G. URDANG, supra note 17, at 147.

26 E. KREMERS & G. URDANG, supra note 17, at 164.

27 See GLASSMAN-OLIVER ECON. CONSULTANTS, PHYSICIAN DISPENSING OF PRESCRIPTION DRUGS: AN ECONOMIC AND POLICY ANALYSIS 11-13 (1987).

28 MEDICINE IN THE PUBLIC INTEREST, INC., CHECKS AND BALANCES IN THE PRACTICE OF MEDICINE AND PHARMACY: ISSUES IN PRESCRIBING AND DISPENSING DRUGS 2-3 (1988).

29 GLASSMAN-OLIVER ECON. CONSULTANTS, supra note 27, at 5.

30 See Regulation of Trade in Drugs: Hearings Before the Consumer Subcomm. of the Comm. on Commerce, 91st Cong., 2d Sess. (1970); The Medical Restraint of Trade Act: Hearings Before the Subcomm. on Antitrust and Monopoly of the Comm. on the Judiciary, 90th Cong., 1st Sess. (1967); Physician Ownership in Pharmacies and Drug Companies: Hearings Before the Subcomm. on Antitrust and Monopoly of the Comm. on the Judiciary, 88th Cong., 2d Sess. (1964); see also infra note 116 and accompanying text.

31 See infra note 127 and accompanying text.

32 N.D. CENT. CODE § 43-15-35(5) (1978). This statute was upheld when challenged. See North Dakota Pharm. Bd. v. Snyder's Stores, 414 U.S. 156 (1973); Snyder's Drug Stores, Inc. v. North Dakota State Bd. Pharm., 219 N.W.2d 140 (N.D. 1974). Characteristic of the general return to allowing states to legislate against injurious practices in commercial and business affairs without running afoul of substantive due process principles, the North Dakota Pharmacy decision overturned Liggett v. Baldridge. North Dakota Pharmacy, 414 U.S. at 165-67, overruling Liggett, 278 U.S. 105 (1928).

33 See infra notes 61-63 and accompanying text.

34 21 U.S.C. §§ 301-92 (1982).

35 Federal Food, Drug, and Cosmetic Act (FFDCA), 21 U.S.C. § 503(b)(2) (1964), repealed by Pub. L. No. 91-51; § 1101(a)(10), 84 Stat. 1292 (1970); 21 U.S.C. § 353(b)(2) (1951)(provides an exemption from some § 352 requirements if the information listed in the section is provided on label of drug being sold).

36 “Although Section 503(b) is applicable to physicians, we have long considered physicians who dispense drugs to patients pursuant to a bona fide doctor-patient relationship to be exempt from strict compliance with the labeling requirements for prescription drugs under 503(b)(2).” Letter from Albert Lavender, Chief, Prescription Drug Compliance Branch, Division of Drug Labeling Compliance, Food & Drug Administration Bureau of Drugs to J. Tyrone Gibson, Ph.D., (Nov. 15, 1979) (available at the offices of the Food & Drug Administration); see also Fink, , Physicians Who Dispense Medications Can't Dispense with the Law, 7Google Scholar LEGAL ASPECTS PHARM. PRAC, Jan.-Feb. 1984, at 3.

37 National Ass'n Bds. Pharm. Newsletter (Apr. 1985) (available at the offices of the National Association of Boards of Pharmacy, Chicago, Illinois).

38 See U.S. DEP't H.E.W., 11 LEGISLATIVE HISTORY OF THE FEDERAL FOOD, DRUG AND COSMETIC ACT AND ITS AMENDMENTS (1982). The co-sponsor of the bill, the Honorable Carl T. Durham, stated when he introduced this bill to the Committee: “[T]he prescription drug law of the Food, Drug and Cosmetic Act is essentially in 503(b); and, of course it finally applies to the dispensing of such a drug by the pharmacist.” Id. at 39.

39 Food and Drug Administration Trade Correspondence 174, in V. KLIENFELD & C. DUNN, FEDERAL FOOD, DRUG AND COSMETIC ACT 637 (1949), cited in DeFreese v. United States, 270 F.2d 730, 734 n.7 (5th Cir. 1959); see also Fink, , supra note 36, at 2.Google Scholar

40 FFDCA, 21 U.S.C. § 352 (1988).

41 Id. at §§ 503(b)(2) (repealed 1970), 353(b)(2).

42 Id. at §352(g).

43 21 C.F.R. § 201.100(7) (1988).

44 Id. at §201.100(b)(6), (b)(7).

45 Fink, , FDA's Dispensing Container Specifications and the Pharmacist, 152 PHARM. MGMT. 197-98 (1980).Google Scholar

46 Letter from Joseph G. Valentino, J.D., Executive Associate, USP to Stuart L. Nightingale, M.D., Associate Commissioner for Health Affairs, Food and Drug Administration (June 4, 1985).

47 Letter from Stuart L. Nightingale, M.D., Associate Commissioner for Health Affairs, Food and Drug Administration to Joseph F. Valentino, J.D., Executive Associate, USP (Aug. 27, 1985). The letter stated: “[F]urther, as you know, 21 C.F.R. [§ ] 201.100(b)(7) required that the label of a prescription drug bear a statement directed to the pharmacist specifying the type of container to be used in dispensing the drug … .” Id.

48 Id.

49 FFDCA, 21 U.S.C. §§ 502(p), 352(p) (1972 & Supp. 1988). so Poison Prevention Packaging Act § 5, 15 U.S.C. § 1474(b) (1982 & Supp. 1988).

51 Controlled Substance Act (CSA) § 101, 21 U.S.C. § 801 (1980 & Supp. 1988). The CSA creates procedures for dispensing certain prescription and nonprescription drugs that have documented abuse potential. The Act divides these drugs into five schedules depending upon their relative abuse potential. For example, drugs in Schedule II include narcotics, cocaine and amphetamines. Drugs in Schedule V, on the other hand, include certain opiate containing antidiarrheals and codeine cough syrups.

52 The term “individual practitioner” is defined in the regulations as a “physician, dentist, veterinarian, or other individual licensed, [or] registered … to dispense a controlled substance in the course of professional practice, but [it] does not include a pharmacist, a pharmacy, or an institutional practitioner.” 21 C.F.R. § 1304.02(d) (1988).

53 Controlled Substance Act § 102, 21 U.S.C. at § 802(10). The term “dispense” means “to deliver a controlled substance to an ultimate user … pursuant to the lawful order of, a practitioner, including the prescribing and administering of a controlled substance and the packaging, labeling, or compounding necessary to prepare the substance for such delivery.“

54 Id. at § 827(c)(l)(A)-(B). “Institutional practitioner” is defined to mean a “hospital or other person (other than an individual) licensed … to dispense controlled substances.” This regulation does not include a pharmacy. 21 C.F.R. at § 1304.02(3) (1988).

55 21 C.F.R. at § 1304.24(b)-(c). A record must be kept of the name and number of commercial containers of each controlled substance received in finished form, the date and number of containers in each receipt, and the name, address and registraton number of the shipper.

56 Id. at § 1304.11-.14. Institutional practitioners are required to take an initial inventory followed by biennial inventories.

57 W. at § 1304.24(d)-(e). The institutional practitioner must maintain records of: (1) the number of units dispensed; (2) the name and address of the person to whom to whom the drug was dispensed; (3) the written or typewritten name or initials of the individual who dispensed or administered the substance; (4) the date of dispensing; (5) the number of units and volume dispensed; and (6) records of any other kind of dispersal.

58 Some states have tightened up this loophole with more restrictive requirements. See Wyoming Controlled Substance Regulations, § 4.01(b) (1986)(providing that individual practitioners must keep records of controlled substances prescribed or administered).

59 21 C.F.R. at § 1301.75(a)-(b).

60 Id. at §§ 1306.11(b) & 21(b).

61 According to a report by the Office of Inspector General (OIG), which was released in draft form in October 1988, 20 states have strengthened their regulation of the practice since 1986 and several other states are attempting or considering strengthened regulations. OFFICE OF INSPECTOR GENERAL, PHYSICIAN DRUG DISPENSING: AN OVERVIEW OF STATE REGULATION 5 (1988) (draft).

62 A survey published by the National Association of Boards of Pharmacy (NABL) which was updated by the American Pharmaceutical Association (APhA) shows that approximately 20 states allow physicians to dispense without restriction and that about twenty-two states allow physician dispensing so long as labeling and other requirements are followed. Eight states allow physician dispensing only in an emergency, in special situations, or for a very limited time period. Nat'l Ass'n Bds. Pharm., Survey of State Boards, NABL NEWSLETTER, Nov. 1986, at 145-52; AM. PHARM. ASS'N, STATE TRACKING REPORT (1987). A more thorough report by the OIG reports that 7 states have extremely or very restrictive regulation, 13 states have moderately restrictive regulation and 31 states have minimal to no regulation of the practice. See OFFICE OF INSPECTOR GENERAL, supra note 61, at 11.

63 See OFFICE OF INSPECTOR GENERAL, supra note 61, at 14-16.

64 The method used to determine the sale price of a prescription varies from pharmacy to pharmacy. Many pharmacists price prescriptions by computing the ingredient cost and adding this cost to some predetermined professional fee. Other pharmacists employ a markup system similar to other retail establishments.

65 Ye Olde Apothecary v. McClellan, 253 S.E.2d 545 (W. Va. 1979).

66 Id. at 546.

67 Id.

68 Id. at 547.

69 Id.

70 Id at 547.

71 MW-410 Op. Att'y Gen. 1397 (Tex. 1981).

72 TEX. REV. CIV. STAT. ANN. art. 4542a-l, § 5(29) (Vernon 1981).

73 MW-410 Op. Att'y Gen., at 1399.

74 TEX. REV. CIV. STAT. ANN. art. 4542a-l, §§ 19(c) & 33(c) (Vernon 1983).

75 JM-304 Op. Att'y Gen. 1379 (Tex. 1985).

76 Id. at 1382.

77 Physician Dispensing, 14 Rx IPSA LOQUITUR 1 (1987); see also Rundel, , Doctors Stir Controversy by Selling Drugs Directly to Their Patients, Wall St. J., Sept. 29, 1986, at 45, col. 4.Google Scholar

78 Parr v. Spires, 41 So. 2d 336 (Fla. 1949).

79 Id. at 336.

80 Id. at 337.

81 157 So. 2d 205 (Fla. Dist. Ct. App. 1963).

82 Id. at 207.

83 Id.

84 Op. Att'y Gen. 269 (Iowa 1979).

85 This opinion created an uproar with the state's medical community and prompted the Iowa Medical Society (IMS) to seek a change in the law allowing physicians the authority to delegate the total dispensing function. See The Drug Dispensing Issue, A White Paper, 37 IOWA PHARMACIST 1920 (1983). The result was a 1980 law which imposed a moratorium on the Attorney General Opinion until the issues could be worked out. After four years of sparring between the IMS and IPhA, a law was passed in favor of the pharmacists which allows pharmacists and medical practitioners to delegate nonjudgmental dispensing functions to assistants, but only when the professionals are present physically to verify the accuracy and completeness of the finished presentation. For a similar Attorney General ruling, see Op. Att'y Gen. 44 (Mo. 1982).

86 In New Mexico Pharm. Ass ‘n v. State, the New Mexico Supreme Court invalidated a rule passed by the State Board of Medical Examiners which allowed physicians to delegate the dispensing function to physician assistants. The court found that the rule exceeded the scope of the Board's authority in light of the specific language contained in the medical practice act. New Mexico Pharm. Ass'n, 106 N.M. 73, 738 P.2d 1318 (1987).

87 See MW-410 Op. Att'y Gen. 1397 (Tex. 1981); Op. Att'y Gen. (Iowa 1979); Ye Olde Apothecary v. McClellan, 253 S.E.2d 545 (W. Va. 1979); Love v. Escambia County, 157 So. 2d 205 (Fla. Dist. Ct. App. 1963); Parr v. Spires, 41 So. 2d 336 (Fla. 1949); People v. Moorman, 86 Mich. 433, 49 N.W. 263 (1891).

88 Each state has a pharmacy practice act which serves to regulate the practice of pharmacy and is enforced by a state pharmacy board. Pharmacy practice acts focus primarily upon the licensure requirements of pharmacists and pharmacies, as opposed to federal laws which focus primarily on the drug product.

89 For example, Iowa law excludes “persons licensed to practice medicine … as an incident to the practice … .” IOWA CODE ANN. § 155.2 (2) (1974).

90 For example, § 33-24-129 of the Wyoming Pharmacy Act provides that the Act ”… does not apply to physicians … licensed by law to practice their professions within this state ” Wyoming Pharmacy Act, WYO. STAT. § 33-24-129 (1987).

91 Letter from Jeffrey I. Zuckerman, Director, Bureau of Competition, FTC to William G. Miller, Jr., Joint Secretary of the State Examining Boards, State of Georgia (Nov. 26, 1986) (available at the offices of the Federal Trade Commission, Bureau of Competition) [hereinafter Zuckerman/Miller Letter No. 1].

92 See id; Zuckerman/Hill Letter, infra note 102; Zuckerman/Leslie Letter, infra note 107.

93 Zuckerman/Miller Letter No. 1, supra note 91.

94 See id.

95 GA. CODE ANN. § 26-4-4 (1985).

96 The position espoused in this letter was confirmed in a January 29, 1987 address to the National Health Lawyer's Association in Washington, D.C. FTC Chairman Daniel Oliver called physician dispensing “a traditional aspect of medical practice” and said that “the benefits to consumers in terms of increased convenience are obvious … .” APhA Concerned With MD Dispensing Action, 26 PHARM. WEEKLY, Feb. 13, 1987, at 21.

97 See Zuckerman/Miller Letter No. 1, supra note 91, at 3.

98 The Georgia law required that practitioners who dispense must adhere to the same record-keeping, labeling, packaging and storage requirements as pharmacists and pharmacies. The Board of Examiners proposed a regulation providing that:

(a) The practitioner must personally perform the complete act of dispensing drugs, including drug selection, drug labeling, and counseling of the patient for whom the drug is prescribed. The practitioner's assistant may be permitted to type a label or count or pour ingredients for medication only under the direct supervision of the dispensing practitioner, (b) The practitioner may dispense only his privately owned medication to his own patients.

GA. COMP. R. & REGS. r. 480-28-06 (proposed 1986).

99 Mr. Zuckerman opposed several portions of the regulation. In particular he could see no reason why one practitioner had to personally perform the complete act of dispensing as this requirement could frustrate the efficient use of a practitioner's time and expertise in a group practice. Mr. Zuckerman felt that it would be perfectly appropriate for one practitioner to perform part of the dispensing function and another practitioner to perform the other functions. Zuckerman/Miller Letter No. I, supra note 91, at 3. This especially is true because there is no corresponding dispensing requirement for pharmacists.

Although Mr. Zuckerman's concern is valid, it misses the point of this regulation. In practice, practitioners do not divide up the dispensing function, they tend to delegate the entire function to office personnel. The Board's intent in writing this regulation most likely was to prevent the practitioner from delegating the dispensing function, in the same manner that a licensed pharmacist cannot delegate the dispensing function. Mr. Zuckerman further objected to the fact that the practitioner must counsel the patient, yet the pharmacist does not. Id. Unquestionably, such a double standard should not exist in the law.

In the letter, Mr. Zuckerman also opposed subsection (b) of the proposed regulation based on the fact that it could be interpreted to require each dispensing practitioner to individually own an inventory of prescription drugs. In his opinion this practice would result in needless duplicative inventories and costs for group practices. Moreover, this requirement is not imposed upon pharmacies employing more than one pharmacist. Id. at 3-4. The Board likely proposed this regulation out of concern for the audit and accountability of drug inventories. Nonetheless, Mr. Zuckerman's point appears valid and this regulation appears to be unduly restrictive and does not serve a valid public health purpose. Mr. Zuckerman also did not favor subsection (b)'s requirement that a practitioner dispense only to his own patients, as this might frustrate efficient methods of group practice. “A group practice might use the time and expertise of its members more efficiently by allowing one practitioner to dispense medication prescribed by another practitioner, for example when a patient seeks a refill.” Id. at 4.

Despite Mr. Zuckerman's concerns, allowing physicians to dispense to others than their own patients constitutes the operation of a pharmacy without a license. Such a practice also would violate the enabling legislation which provides that various parts of the pharmacy act “shall not apply to practitioners of the healing arts prescribing or compounding their own prescriptions and dispensing drugs except as provided … .” GA. CODE ANN. § 26-4-4(b) (1986) (emphasis added). Although slightly ambiguous, the intent of the legislation appears to allow practitioners to dispense only when the patients are the practitioner's own patients. As indicated previously, most state statutes which provide pharmacy act exemptions for practitioners, refer either explicitly or impliedly to the practitioner dispensing only to his own patients.

100 GA. COMP. R. & REGS. r. 480-28-02 to -11 (1987); see Pharmacy Board Adopts Practitioner Regulations, 9 GA. PHARM. J. 12 (1987).

101 Letter from Jeffrey I. Zuckerman, Director, Bureau of Competition, FTC to William G. Miller, Jr., Joint Secretary, Georgia State Examining Boards (June 26, 1987) (available at the offices of the Federal Trade Commission, Bureau of Competition) [hereinafter Zuckerman/ Miller Letter No. 2].

102 Letter from Jeffrey I. Zuckerman, Director, Bureau of Competition, FTC to C. Earl Hill, M.D., President, Maryland State Board of Medical Examiners (Dec. 31, 1986) (available at the offices of the Federal Trade Commission, Bureau of Competition) [hereinafter Zuckerman/ Hill Letter].

103 id.

104 MD. HEALTH OCC. CODE ANN. § 12-102 (1986)(law also requires that the dispensing physicians meet certain labeling and record-keeping requirements).

105 Zuckerman/Hill Letter, supra note 102, at 4.

106 The term “public interest” also appears in the Federal Controlled Substances Act and has been criticized as giving the DEA too much discretion. Federal Controlled Substances Act, 21 U.S.C. § 801 (1982); see J. NIELSEN, HANDBOOK OF FEDERAL DRUG LAW 42 (1986).

107 Letter from Jeffrey I. Zuckerman, Director, Bureau of Competition, FTC to the Honorable Tim Leslie, California Assembly (May 1, 1987) (interpreting Assembly Bill No. 1732) (available at the offices of the Federal Trade Commission, Bureau of Competition) [hereinafter Zuckerman/Leslie Letter]. The assembly bill would require dispensing physicians to be licensed by the Board of Pharmacy, permit dispensing only if no pharmacy is located within 5 miles, if no more than a 72 hour supply of medication is dispensed, and if the patient is not charged a dispensing fee.

108 FTC Must Defend Its Policy Backing Physician Dispensing, 4 GENERIC LINE, Mar. 17, 1987, at 2; see also FTC Lobbying Restriction in Form of Notification To Congress, 36 WEEKLY PHARM. REP., Apr. 20, 1987, at 3 (reports on a letter sent from NARD to Senator Gore (D-Tenn), where NARD reported that state boards in Oklahoma, Indiana, California, Nevada and Virginia had stopped addressing the issue of physician dispensing because of intimidation concerning the letters).

109 The FTC Act gives the FTC the authority to promulgate substantive rules regulating unfair or deceptive acts or practices under the Magnuson-Moss Warranty-Federal Trade Commission Improvement Act. Magnuson-Moss Warranty-Federal Trade Commission Improvement Act, Pub. L. No. 93-637, § 202(a), 88 Stat. 2193 (1975)(codified as amended at 15 U.S.C. § 57(a) (1982)). The FTC Act also gives the FTC authority to issue cease and desist orders. 15 U.S.C. § 21(b) (1982). The FTC, however, may choose a less formal means of nonadjudication by educating parties about the law. See E., KINTNER, FEDERAL ANTITRUST LAW §§ 45.15-44.17 & .46-45.49 (1986).Google Scholar

110 E., KINTNER, supra note 109, at §§ 45.23–45 & 46.28-.62.Google Scholar

111 Staff Opinion Letters usually are issued when the FTC will not issue an advisory opinion. The staff then is authorized to render advice where practicable. 16 C.F.R. § 1.1(b) (1988). Such advice letters do not bind the Commission which has the right to later rescind them. Id. at § 1.3(c). Advisory Opinions are formal, written statements signed by the Secretary of the Commission at the direction of the Commission. See id. at § 1.1(a). The FTC also dehas the authority to engage in the monitoring of various activities. See E., KINTNER, supra note 109, at § 46.60.Google Scholar

112 See Zuckerman/Miller Letter No. 1, supra note 91; Zuckerman/Hill Letter, supra note 102.

113 fxc Staffer Concedes Warning Letters Lack Legal Force, 4 GENERIC LINE, Mar. 31, 1987, at 6.

114 See Lerner, , Federal Trade Commission Antitrust Activities in the Health Care Services Field, 29Google Scholar ANTITRUST BULL. § 205, 207-09 (1984). FTC Chairman Daniel Oliver indicated in an address before the National Health Lawyers Association that the Commission currently is investigating other aspects of state pharmacy regulation which may stifle competition besides just physician dispensing. See Physician Dispensing: “Stifling” Restrictions Will be Opposed by FTC, 36 WEEKLY PHARM. REP., Feb. 16, 1987, at 2.

115 The National Association of Retail Druggists (NARD) filed a Freedom of Information Act request in December of 1986. The Agency provided limited documentation but claimed exemptions for other important documents. NARD then filed a lawsuit which ultimately was settled. National Ass'n of Retail Druggists v. Federal Trade Comm'n, C.A. No. 87-3269 (D.C. Cir. 1988).

116 See Regulation of Trade in Drugs: Hearings Before the Consumer Subcomm. of the Comm. on Commerce, 91st Cong., 2d Sess. 13 (June 1970). Senate bill 1575 would have prohibited practitioners, except in special circumstances, from: dispensing drugs and devices, holding a pecuniary interest in drug companies, and holding a pecuniary interest in pharmacies. The FTC's position on S. 1575 generally was more supportive than its position on a similar bill in 1965. See Hearings Before the Subcomm. on Antitrust and Monopoly of the Comm. on the Judiciary, 90th Cong., 1st Sess. 22-24 (Jan. & Feb. 1967)(letter from FTC Chairman Dixon). For the hearings on an earlier bill, see Physician Ownership in Pharmacies and Drug Companies Hearings Before the Subcomm. on Antitrust and Monopoly of the Comm. on the Judiciary 88th Cong., 2d Sess. (Aug. 1964).

117 See FTC Voices Concern Over Physician Dispensing, 101 NARD NEWSLETTER 1 (1979).

118 Comments of R. Donlan, Assistant Director of the Federal Trade Commission Bureau of Competition, Remarks at the 11th Annual Legislative and Public Affairs Conference of the National Association of Retail Druggists (1979), quoted in FTC Probes Merchandising of Drugs by Physicians, 185 AM. DRUGGIST 15 (1979).

119 Brownman, Stephens & Bangert, Physician Merchandising (Apr. 23, 1979)(Federal Trade Commission Memorandum No. CH80007).

120 “A refractionist is any doctor of medicine, osteopathy or optometry or any other person authorized by state law to perform eye examinations.” 16 C.F.R. § 456.1 (1988).

121 Id. at § 456.

122 Id. at § 456.7.

123 NARD, AMA, NACDS Concur on Physician Dispensing, 109 NARD NEWSLETTER, Mar. 1, 1987, at 1. NARD and NACDS also jointly commissioned a legal memorandum regarding the FTC Staff Letters. Patton, Boggs & Blow, Memoranda on the FTC Staff Letters Concerning Physicians Dispensing Prescriptions (Mar. 20, 1987)[hereinafter FTC Staff Letter Memo].

The AMA has commented further since its joint statement with NARD and NACDS. At the AMA's House of Delegates December session, the Council on Ethical andjucidial Affairs recommended that

Although there are circumstances in which physicians may ethically engage in the dispensing of drugs, devices, or other products, physicians are urged to avoid regular dispensing and retail sale of drugs, devices or other products when the needs of patients can be met adequately by local ethical pharmacies or suppliers.

Dispensing by Physicians Raise Ethical Issues, 30 AM. MED. NEWS, Feb. 6, 1987, at 4. The report was filed which means that it does not have binding force but rather it is to serve as guidance.

At the AMA's House of Delegates mid-year meeting in Chicago in July 1987, the delegates softened this approach by passing a resolution supporting the physicians right to dispense “when it is in the best interest of the patient and consistent with ethical guidelines.“ AMA Endorses MD Dispensing Via Resolution, 36 WEEKLY PHARM. REP., July 13, 1987, at 2.

124 APhA News Release, No. 87-16 (Feb. 27, 1987). The two consultants are Lewis A. Engman and Michael F. Glassman with the consulting firm of Glassman-Oliver. Mr. Engman is a former FTC chairman and currently practicing with a Washingon, D.C. law firm. Mr. Glassman is a former Assistant Director for Economic Evidence with the FTC. The firm published the results of its study in PHYSICIAN DISPENSING OF PRESCRIPTION DRUGS: AN ECONOMIC AND POLICY ANALYSIS. GLASSMAN-OLIVER ECON. CONSULTANTS, INC., supra note 27.

125 GLASSMAN-OLIVER ECON. CONSULTANTS, INC., supra note 27, at 3.

126 APhA News Release, No. 87-24 (Apr. 10, 1987).

The Policy statement provides:

1. APhA supports the principle that all patients receiving prescription medications are entitled to comprehensive pharmaceutical services. These services include, but are not limited to, patient counseling, maintaining patient profiles, and providing the check and balance system with other health professionals to help prevent prescriber errors and adverse drug interactions.

2. APhA opposes nonpharmacist dispensing of prescription medications. Id.

127 H.R. 2168 was introduced to the Committee on Energy and Commerce in the first session of the one hundredth Congress. In June of 1987, the House of Energy and Commerce Committee approved the bill for consideration by the House of Respresentatives. Congressional opponents argued that the issue needs more study and a law should not be passed based on a few anecdotes. See Lent, In Defense of Doctors Who Also Sell Medicine, Wash. Post, May 5, 1987, (Health), at 6. The American Medical Association, although not in support of the practice of physician dispensing for profit, opposes the bill. The AMA has stated that “such legislation would constitute an inappropriate intrusion into an area properly subject to state regulation and would ignore real differences in circumstances between states.” AMA Opposes Federal Regulation of MD Dispensing At Wyden Hearing, 36 WEEKLY PHARM. REP., May 4, 1987, at 2.

The FTC also is opposed to the bill. FTC Chairman Daniel Oliver stated that banning physician dispensing “would injure the American people by unnecessarily restricting their options as consumers.” Physician Dispensing Regulatory Authority Would Be Left To States, 36 WEEKLY PHARM. REP., May 4, 1987, at 2.

The Consumer Federation of America, the largest consumer membership organization, has announced that it would support the bill. Nation's Largest Consumer Organization Announces Support for Wyden Physician Dispensing Bill, 109 NARD J., June 1987, at 47

128 S. 677 passed the Senate in April, 1987 and the House version, H.R. 2897, passed in the Fall of 1987. See NARD Newsletter No. 110 (Mar. 15, 1988).

129 133 CONG. REC. 4,686 (1987).

130 Letter from Alfred J. Kiessel, M.D., Chairman, Illinois State Medical Society to Alan L. Granat, Executive Director, Illinois Pharmacists Association (Oct. 8, 1986)(available at the offices of the Illinois Pharmacists Association).

131 See, e.g., Klamath-Lake Pharmaceutical Ass'n v. Klamath Med. Serv. Bureau, 701 F.2d 1276 (9th Cir. 1983); United States v. Northern Calif. Pharmaceutical Ass'n, 235 F. Supp. 378 (N.D. Cal. 1964); United States v. Hawaii Retail Druggists, 1963 Trade Cas. (CCH) ¶ 70,914, at 78,665 (D. Utah 1963); In Re Michigan State Med. Soc'y, 48 Fed. Reg. 8,997 (1983).

132 Id.; see also Attorney General v. New Jersey Pharm. Ass'n, 1981-82 Trade Cas. (CCH) ¶ 64,376, at 74,727 (N.J. 1981); In Matter of Sherman A. Hope, 98 F.T.C. 58 (1981).

133 See In Matter of American Med. Ass'n, 94 F.T.C. 701 (1979), aff'd as modified, 638 F.2d 443 (2d Cir. 1980), aff'd, 455 U.S. 676 (1982); Virginia State Bd. of Pharm. v. Virginia Citizens Consumer Council, 425 U.S. 748 (1976).

134 American Med. Ass'n v. United States, 317 U.S. 519 (1943); American Med. Asss'n, 94 F.T.C. at 701; Blue Cross of Wash. & Alaska v. Kitsap Physicians Serv., 1982-1 Trade Cas. (CCH) ¶ 64,588, at 73,205 (W.D. Wash. 1981).

135 See Arizona v. Maricopa County Med. Soc'y, 457 U.S. 332 (1982); National Soc'y Professional Eng'rs v. United States, 435 U.S. 679 (1978); Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975); American Med. Ass'n v. United States, 130 F.2d 233 (D.C. Cir. 1942), aff'd, 317 U.S. 519 (1943).

136 United Mine Workers v. Pennington, 381 U.S. 657 (1965); Eastern R.R., Presidents Conference v. Noerr Motor Freight, 365 U.S. 127 (1961);Google Scholar see also California Motor Transport Co. v. Trucking Unlimited, 404 U.S. 508 (1972)(Stewart, J., concurring)(reinterpreted the theoretical basis of the Noerr-Pennington Doctrine).

137 See supra notes 133-34.

138 See NARD Newsletter, supra note 123 and accompanying text. The three associations carefully worded their joint statement to mitigate antitrust dangers by including the statement “[I]ndividual physicians and pharmacists must make their own decisions on this issue based on applicable laws and the health needs of their patients.” Id.

139 The American Optometric Association has indicated that it will take legal action against the FTC for its ruling which requires states to repeal laws prohibiting optometrists from practicing in malls, forming corporate affiliations, or using trade names. News From Washington, NARDJ., Apr. 1, 1988, at 75.

140 U.S. CONST, art. VI, cl. 2.

141 See, e.g., California Coastal Comm'n v. Granite Rock Co., 480 U.S. 572 (1987); California Fed. Savings & Loan Ass'n v. Guerra, 479 U.S. 272 (1987); Louisiana Pub. Serv. Comm'n v. F.C.C., 476 U.S. 355 (1986); Lawrence City v. Lead-Deadwood School Dist. No. 40-1, 469 U.S. 286 (1985).

142 Capital Cities Cable, Inc. v. Crisp, 467 U.S. 691 (1984).

143 317 U.S. 341 (1943).

144 Id. at 352. In Parker, a California producer and packer of raisins brought suit to enjoin the State Director of Agriculture from enforcing a marketing program for raisins. Under the program, the growers sold their raisins to packers, who in turn marketed the raisins through middlemen. California law authorized the establishment of regulatory programs, by state officials, for the marketing of various agricultural commodities in order to restrict destructive competition and to maintain prices at acceptable levels. The California law also established a Commission which would administer the program. The Commission's plan, however, could not be adopted without the petition often producers in the relevant geographical areas.

Although this program involved private action, the Supreme Court had no difficulty in finding that the program “derived its authority and its efficacy from the legislative command of the state,” id. at 350, and that “[w]e find nothing in the language of the Sherman Act or in its history which suggests that its purpose was to restrain a state or its officers or agents from activities directed by its legislature.” Id. at 350-51.

145 See Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985); Southern Motor Carriers Rate Conference, Inc. v. United States, 471 U.S. 48 (1985); Bates v. State Bar Ariz., 433 U.S. 350 (1977); Cantor v. Detroit Edison Co., 428 U.S. 579 (1976); Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975); but see California Retail Liquor Dealers Ass'n v. Midcal Aluminum, Inc., 445 U.S. 97 (1980); Lafayette v. Louisiana Power & Light Co., 435 U.S. 389 (1978).

146 445 U.S. 97 (1980). In Midcal, a California wine distributor sought to enjoin a state agency from enforcing a California law which provided that all wine producers and wholesalers must file price schedules or fair trade contracts and that they could not sell wine to a retailer other than at the established price. The Supreme Court found that the state did not play a role in setting the prices or reviewing the reasonableness of the wine dealers activities, and thus found that the program was not immune from the Sherman Act under the Parker doctrine.

147 Id. at 105 (quoting Lafayette v. Louisiana Power & Light Co., 435 U.S. 389, 410 (1978)).

148 Id.

149 471 US. 481 (1985). In Southern Motors, the United States challenged the collective ratemaking practices of rate bureaus in the Southeast, not compelled by any of the states. The Supreme Court found that Midcal standards applicable to the actions of private parties and established that a specific, detailed authorization by the state legislature was not necessary, only a clear intent by the state to displace competition.

150 Id. at 64-65.

151 See Town of Hallie v. City of Eau Claire, 471 U.S. 34 (1985).

152 15 U.S.C. § 45 (1976).

153 Pub. L. No. 93-637, § 202(a), 88 Stat. 2193 (codified as amended at 15 U.S.C. § 57(a) (1982)).

154 S. REP. NO. 597, 63d Cong., 2d Sess. 10 (1914); H.R. REP. NO. 1142, 63d Cong., 2d Sess. 3 (1914).

155 S. REP. No. 1408, 93d Cong., 2d Sess. (1974), H.R. REP. NO. 1606, 93d Cong., 2d Sess. (1974), reprinted in 1974 U.S. CODE CONG. & ADMIN. NEWS 7702, 7726. Reference to preemption is made in the House and Senate Reports discussing § 201 which extends the FTC's jurisdiction to “in or affecting commerce.” The House Report states: “[t]he expansion of the FTC's jurisdiction made by § 201 is not intended to occupy the field or in any way to preempt the state or local agencies from carrying out consumer protection or other activities within their jurisdiction which are also within the expanded jurisdiction of the Commission.“ H.R. REP. NO. 93-1107, 93d Cong., 2d Sess. 45 (1974). For a discussion of legislative proposals to include preemption language in the FTC Improvement Act, see Verkuil, Preemption of State Law by the Federal Trade Commission, 1976 DUKE LJ. 225 (1976).

156 See Peerless Prods., Inc. v. Federal Trade Comm'n, 284 F.2d 825 (7th Cir. 1960), cert, denied, 365 U.S. 844 (1961), aff'g In Re Peerless Prods., Inc., 56 F.T.C. 1070 (1960). In Peerless, the FTC prohibited the use of particular devices used to promote gift and lottery practices. “Unless Congress specifically withdraws authority in particular areas, the Commission … can restrain unfair business practices in interstate commerce even if the activities or industries have been the subject of legislation by a state or even if the intrastate conduct is authorized by state law.” Peerless, 284 F.2d at 827; see also Chamber Commerce v. Federal Trade Comm'n, 13 F.2d 673 (8th Cir. 1926); Royal Oil Corp. v. Federal Trade Comm'n, 262 F.2d 741 (4th Cir. 1959). In Chamber Commerce, the court upheld an FTC order against the appellant and stated: “[C]ongress, in the Federal Trade Commission Act, has assumed to legislate concerning “unfair methods of competition … “ and if any action … has that effect, it is certainly subject to that act, no matter what the state has or has not authorized or permitted in that respect.“ Chamber Commerce, 13 F.2d at 684.

157 See also Asheville Tobacco Bd. of Trade v. Federal Trade Comm'n, 263 F.2d 502 (4th Cir. 1959). In Asheville, the court considered whether regulations adopted by a local trade board were exempt from FTC action under Parker. The court refused to apply Parker, but only because the board's regulations were found not to be within the scope of state action.

158 612 F.2d 658 (2d Cir. 1979), rehg denied, 628 F.2d 755 (2d Cir. 1979).

159 612 F.2d 658 (2d Cir. 1979).

160 Id. at 666-68.

161 Id. at 666-67.

162 Id. at 667.

163 Id.

164 Id.

165 626 F.2d 896 (D.C. Cir. 1980).

166 Id. at 910.

167 The FTC issued the rule pursuant to its authority under the Magnuson-Moss Act. Magnuson-Moss Warranty-Federal Trade Commission Improvements Act, 15 U.S.C. § 57a (1982). In general, the rule makes it an unfair practice for a state or local entity to enforce restrictions on the dissemination of information regarding eye examinations and ophthalmic goods and services. The rule went on to provide that “[i]t is the intent of the Commission that this part shall preempt all state and local laws, rules, or regulations that are repugnant to this part… .” American Optometric, 626 F.2d at 903

168 433 U.S. 350 (1977).

169 American Optometric, 626 F.2d at 910. In Bates, the Supreme Court extended its Virginia State Bd. of Pharmacy v. Virginia Citizens Consumer Council decision. Virginia State Bd., 425 U.S. 748 (1976). In Virginia State Bd., the Court held that a Virginia law, which made it a violation of the professional conduct standards for a pharmacist to advertise the price of prescription drugs, was a violation of pharmacists’ constitutional rights under the first amendment. Bates extended the Virginia State Bd. decision to include the right of lawyers to advertise the prices of services.

In light of the Bates decision several states were in the process of changing their ophthalmic laws. In American Optometric, the Court of Appeals for the District of Columbia Circuit felt that it was necessary to remand the rule not only because it would duplicate the revised state laws, but also because “the rule intensifies questions which go to the very heart of the case in at least two areas.” American Optometric, 626 F.2d at 910. Those two areas include the preemption of state law and the adequacy of evidence submitted by the FTC.

170 American Optometric, 626 F.2d at 910.

171 Id.

172 See Funeral Industry Practices, 16 C.F.R. §453 (1982); Advertising of Ophthalmic Goods & Serv., 16 C.F.R. § 456 (1978); Disclosure Regulations Concerning Retail Prices for Prescription Drugs, 40 Fed. Reg. 24,031 (1975)(proposed 16 C.F.R. § 447); see also R. EASTON & B. CHADWICK, FTC STAFF REPORT ON PRESCRIPTION DRUG PRICE DISCLOSURES (1975)[hereinafter FTC STAFF REPORT]. THE FTC STAFF REPORT ON RETAIL PRICES FOR PRESCRIPTION DRUGS stated that even though the FTC had preemption authority, it would consider the interests of federalism and limit rulemaking authority to areas that are neither “vital” or “important” to the states. FTC STAFF REPORT, supra, at 29. Such an attitude by the FTC angered some in Congress to attempt legislation specifically stating that the FTC did not have preemptive authority. See Verkuil, , supra note 155, at 226-27.Google Scholar

Despite these assertions, the FTC also has issued statements which suggest that it does not have preemption authority. In Advisory Opinion 154, the FTC stated: “[i]n the Commission's view, it is well settled that the antitrust laws have application to the actions of individuals, partnerships, and corporations and not to the activities of a State.” 16 C.F.R. § 15.154 (1978). An article by an FTC staff member indicates that the FTC recognizes that the state action doctrine shields state regulation over health professionals, except where the stateagency regulatory activities exceed state action. See Lerner, 29 ANTITRUST BULL. 205, 221 (1984). Also, in a speech before the National Health Lawyers Association on January 29, 1986, FTC Chairman Daniel Oliver said that “when our jurisdiction and the state action doctrine permit, the commission will challenge government actions that restrain competition unreasonably.“ FTC Chairman Pledges to Promote Competition in Health Care Area, 3 NACDS Legislative Newsletter 4 (Mar. 1987). Moreover, the FTC Opinion letter to the Georgia Board states, “[T]he proposed regulations impose restraints on competition that do not appear to reflect a clearly articulated and affirmatively expressed policy of the Georgia legislature. …” See Zuckerman/Miller Letter No. 1, supra note 91. One can interpret this to mean that if the regulations do reflect a clearly articulated and affirmatively expressed policy then the FTC would consider the regulations valid under the state action doctrine, regardless of any anticompetitive ramifications.

173 E., KINTNER, supra note 109,Google Scholar at § 46.43; Badal, Restrictive State Laws and the Federal Trade Commission, 29 ADMIN. L. REV. 239 (1977); Note, The State Action Exemption and Antitrust Enforcement Under the Federal Trade Commission Act, 89 HARV. L. REV. 715 (1976) [hereinafter The State Action Exemption],

174 See The State Action Exemption, supra note 173, at 731-44.

175 Id. at 736-77.

176 Id See id.

177 Id. at 737.

178 15 U.S.C. § 46(g) (1982). Section 6(g) of the FTC Act gives the FTC the power to “make rules and regulations for the purpose of carrying out the provisions of this subchapter.“ National Petroleum Refiners Ass'n v. Federal Trade Comm'n, 482 F.2d 672 (D.C. Cir. 1973), cert, denied, 415 U.S. 951 (1974)(holding § 6(g) gives the FTC the power to promulgate binding substantive rules having the force of law). Substantive rules by a federal administrative agency have the same force as law and thus may preempt a state law. The State Action Exemption, supra note 173, at 740-43. Proponents of FTC authority to preempt state law also point to the Magnuson-Moss Warranty-Federal Trade Commission Improvement Act, which expressly gives the FTC substantive rulemaking authority. Pub. L. No. 93-637, § 202(a), 88 Stat. 2193 (codified as amended at 15 U.S.C. § 57(a)(1)(B) (1975)).

179 The State Action Exemption, supra note 173, at 731-44.

180 pora discussion of the applicability of Parker to the FTC Act, see Young, The Federal Trade Commission and the States: The Search for Regulatory Authority, 38 FED. BAR. J. 1 (1979); Young & Troy, Federal Trade Commission Preemption of State Regulation: A Reevaluation 12 SUFFOLK U.L. REV. 1248 (1978); Verkuil, , supra note 155;Google Scholar The FTC Proposed Regulation of Prescription Drug Price Disclosure by Retail Pharmacists, 43 U. CHI. L. REV. 401 (1976); P. AREEDA & D. TURNER, 1 ANTITRUST LAW 114-19 (1978). One legal commentator has stated that even if Parker were applicable to the FTC Act it would not necessarily preclude the FTC's preemptive authority. Badal, supra note 173, at 257-58.

181 Federal Trade Comm'n v. Motion Picture Adv. Co., 344 U.S. 392, 394-95 (1953)(the FTC Act is “intended to supplement and bolster the Sherman and Clayton Acts by stopping in their incipiency, the acts and practices which, when fullblown, would violate those Acts …“); see generally 5 THE LEGISLATIVE HISTORY OF THE FEDERAL ANTITRUST LAWS AND RELATED STATUTES (E. Kintner ed. 1981).

182 Those advocating that the FTC Improvement Act gives the FTC preemptive rulemaking authority wrongly compare the FTC with other agencies. For example, some advocating preemption find support in Capital Cities Cable, Inc., v. Crisp. 467 U.S. 691 (1984). In Capital Cities, an association of broadcasters sought to invalidate an Oklahoma law prohibiting the advertising of alcoholic beverages. The Oklahoma Attorney General concluded that the law would prohibit cable television systems operating in Oklahoma from retransmitting out-ofstate signals containing alcoholic beverage commercials. Id. at 695. The Court determined that the rules of the FCC preempted the Oklahoma law. Id. at 716. The Court held that unless the federal statute or its legislative history indicated otherwise, a federal regulation will preempt a conflicting state law. Id. at 698-700. Further, “when federal officials determine, as the FCC has here, that restrictive regulation of a particular area is not in the public interest, 'States are not permitted to use their police power to enact such a regulation.’ “ Id. at 708.

Capital Cities, however, should not be applicable to a case involving the FTC Act. The decision is consistent with several prior non-antitrust related cases where the Supreme Court invalidated state laws because the law disrupted a comprehensive scheme of federal regulation. See Free v. Bland, 369 U.S. 663 (1962)(held that U.S. Treasury regulations governing survivorship rights to savings bonds preempted conflicting state law); see also Public Utils. Comm'n v. United States, 355 U.S. 534 (1958). A contrary finding in Capital Cities would have compelled Oklahoma cable operators to abandon carrying out-of-state broadcasts, clearly violating Congressional policy. Regulating unfair trade practices does not present the same problems of preserving essential national uniformity as in the FCC's situation. Congressional intent to preempt, present in the laws administered by the FCC, is absent in the FTC Act.

183 P. AREEDA & D. TURNER, supra note 180, at f 218C. Similarly, no legislative intent to allow preemption can be found in the Magnuson-Moss Act. See Young, , The Federal Trade Commission and the States: The Search for Regulatory Authority, 38Google Scholar FED. BAR. J. 1 (1979). In response to a request from the Texas State Board of Pharmacy (TSBP) regarding the Texas physician dispensing law and regulations, the Texas Attorney General's Office issued a letter concluding, “as a general rule, the FTC lacks jurisdiction over restrictions, no matter how anticompetitive, if they are directly sanctioned by state statute. For this reason, we believe TSBP need not be overly concerned about the FTC's recent proclamations regarding physician dispensing of drugs.” Letter from Steven Baron and John J. White, Assistant Attorneys General to Fred S. Brinkley, Executive Director, Texas State Board of Pharmacy (Mar. 19, 1987).

184 See Brushwood & Abood, Strict Liability in Tort: Appropriateness of the Theory for Retail Pharmacists, 42 FOOD DRUG & COSM. LJ. 269 (1987).

185 physicians who delegate the dispensing function to office personnel also might face punitive damages, much as have pharmacists who delegate the dispensing function in violation of state laws. See Duensing v. Huscher, 431 S.W.2d 169 (Mo. 1968).

186 The transaction between repackagers and physicians also raises a statutory liability issue. Under the federal Food Drug and Cosmetic Act, repackagers become guarantors that the drug is not misbranded or adulterated. 21 U.S.C. § 331(a)-(d) (1982). A question arises whether that statutory guarantee will extend to physicians who purchase from the repackagers. The statute allows pharmacists to avoid this guarantor status if they receive the drugs in good faith and report the supplier to the Food and Drug Administration. 21 U.S.C. § 333(c) (1982).

187 Malpractice insurance premiums for pharmacists are only about $150 per year in 1988. A $5 million lawsuit has been filed against a drug repackager and a clinic for an alleged labeling error. Wilson, The Five Million Dollar Lawsuit, 198 AM. DRUGGIST 58 (1988).

188 133 CONG. REC. 2,735-36 (daily ed. July 1, 1987)(letter from A. Relman, Editor of the NEW ENG. J. MED. to Rep. R. Wyden); see also Physician Dispensing of Drugs: Hearings before the Subcomm. on Health and the Environment, and the Comm. on Energy and Commerce, 100th Cong., 1st Sess. 142-47 (1987)(statements of M. Weinstein & R. Fields).

189 133 CONG. REC. at 2,736.

190 Zuckerman/Miller Letter No. 1, supra note 91.

191 Id.

192 See Brownman, Stephens & Bangert, supra note 119; see also GLASSMAN-OLIVER ECON. CONSULTANTS, supra note 27, at 33-34.

193 Catching Prescribers’ Errors, 131 DRUG TOPICS, NOV. 16, 1987, at 15.

194 Id.

195 A study showed that out of 15 reasons for selecting a pharmacist or pharmacy, consumers rated fifth that their selection was based on their confidence that the pharmacist would detect prescription errors. See SCHERING LABORATORIES, PHARMACIST PERCEPTIONS VS. CONSUMER REALITIES (1982)[hereinafter PHARMACIST PERCEPTION].

196 See Zuckerman/Miller Letter No. 1, supra note 91.

197 Pharmacists can make errors of course. In one study which compared the error rates of pharmacists and technicians in an outpatient hospital pharmacy, the error rate for pharmacists was found to be 5.17%. Most of the errors, however, appeared to be quite minor. McGhan, Smith & Adams, A Randomized Trial Comparing Pharmacists and Technicians as Dispensers of Prescriptions far Ambulatory Patients, 21 MED. CARE 445 (1983). In a 12 day peer-review audit of 9,394 prescriptions in an outpatient pharmacy in a large teaching hospital, a total of 1165 dispensing errors were detected. This amounted to 12.4% with 1.5% of these being serious. The study projected that from the sample size this meant that 1 in every 66 prescriptions may contain a potentially serious dispensing error. Guernsey, Ingrim, Hokanson, Doutre, Bryant, Blair & Galvan, Pharmacists’ Dispensing Accuracy in a High-Volume Outpatient Pharmacy Service: Focus on Risk Management, 17 DRUG INTELL. & CLINICAL PHARM. 742, 745 (1983); see also Betz & Levy, An Interdisciplinary Method of Classifying and Monitoring Medication Errors, 42 AM. J. HOSP. PHARM. 1724 (1985).

198 A study showed that clinically significant drug interactions were found in 22% of nursing home outpatients and 6.2% of all ambulatory care patients. Laventuries & Talley, Drug Utilization and Potential Drug Interactions, 16 J . AM. PHARM. ASS'N 77 (1976). Another study found 1219 potential drug interactions and 9.5% of those potentially were clinically significant. Greenlaw, , Evaluation of a Computerized Drug Interaction Screening System, 38 AM. J. HOSP. PHARM. 517 (1981).Google Scholar

199 Not all patients purchase all of their prescription and OTC medications from one pharmacy. In these cases, the ability of the pharmacist to detect drug-drug interactions seriously is compromised.

200 See West, Improving Drug Compliance by Knowing and Communicating with Patients, 88 APOTHECARY 17 (1976); Becker & Green, A Family Approach to Compliance with Medical Treatment: A Selective Review of the Literature, 18 INT. J. HEALTH EDUC. 173 (1975); Stewart & ClufF, A Review of Medication Errors and Compliance in Ambulant Patients, 13 CLINICAL PHARMOCOL. THERAPY 463 (1972); Davis, Physiologic, Psychological and Demographic Factors in Patient Compliance with Doctor's Orders, 6 MED. CARE 115 (1968).

201 SCHERING LABORATORIES, supra note 14.

202 See Schulz & Ganon, Patient Behavior Patterns Regarding Prescription Refills, 5 CONTEMP. PHARM. PRAC. 150 (1982). The study did not attempt to determine which refills did not have to be refilled by the patient because the patient's disease state terminated, or the physician switched medication.

203 Woroniecki, McKercher, Flagler, Berchou & Cook, Effect of Pharmacist Counseling on Drug Information Recall, 39 AM. J. HOSP. PHARM. 1907 (1982); Clinite & Rabat, Improving Patient Compliance, 16 J. AM. PHARM. ASS'N 74 (1976).

204 Satisfied patients have been found to be more compliant. Reasons for patient dissatisfaction include: (1) unmet expectations of the patient; (2) lack of warmth by the provider; (3) failure to receive an adequate explanation of what was being done; (4) perceived cost; (5) patient's knowledge of the disease being treated; (6) convenience — the more waiting and disruption of family or work, the less compliance; (7) continuity in the physician patient relationship — the more regularly the patient sees the physician the more compliant; (8) nature of condition — more compliance in acute conditions than chronic; and, (9) degree of patient's understanding of side effects. Smith & Daniel, Compliance and the Economic Health of the Pharmacy, 190 AM. DRUGGIST 57 (1984). This list of factors indicates that a teamwork approach by the pharmacist and physician would be far more effective at increasing compliance than if one or the other were eliminated from the picture.

205 Patient profiles can improve quality of care and reduce costs. Harsfield & Pelis, Pharmacies with Automated Drug Profiles Can Enhance the Quality and Reduce the Cost of Drug Therapy, 23 AM. COLLEGE HEALTH ASS'NJ. 277 (1975); Solomon, Baumgartner & Glascock, Use of the Medication Profiles to Detect Potential Therapeutics Problems in Ambulatory Patients, 31 AM. J. HOSP. PHARM. 348 (1974).

206 See Knapp, Wolf, Knapp & Rudy, The Pharmacist as a Drug Advisor, 9 J . AM. PHARM. ASS'N 502 (1969)(study indicated that only 0% to 20% of the patients receiving prescription medications receive meaningful information about their prescriptions). Another study revealed that even where counseling is required by law only half of the pharmacists studied provided information regarding the use of the drug, and only 8% provided information about precautions to take when using the drug. Campbell & Grisafe, Compliance with Washington State Patient Information Regulation, 15 J. AM. PHARM. ASS'N 494 (1975). In a 1976 investigation by the Massachusetts Consumer's Council, prescription drugs were purchased at 69 randomly selected pharmacies throughout Boston, Cambridge and Brookline. The study revealed that every pharmacist failed to give the patient complete enough advice, instructions or warnings to insure that the patient would receive the full benefit of the drug and suffer no adverse reactions. MASSACHUSETTS CONSUMERS’ COUNCIL, CUTTING CORNERS AT THE CORNER DRUG STORE: AN INVESTIGATION OF PHARMACY PRACTICES IN GREATER BOSTON (1976).

207 A nationwide telephone survey examined the nature and source of information provided patients who received prescription drugs and found that about one half received information from their doctor about the purpose and directions for use. Only 11 % were informed of the drug's side effects and 19% said they had been told nothing by their doctor. Seventytwo percent said that nothing had been said to them at the pharmacy. Overall, the subjects stated that they were told a great deal more about the drug by their physician than by the pharmacist. Morris, A Survey of Patient's Receipt of Prescription Drug Information, 20 MED. CARE 596, 596 (1982). Another study revealed that 25.4% of “the patients indicated that their physicians did not explain what the drug was supposed to do.” German & Klein,Johns Hopkins University Study, cited in Cost-Effective Prescribing Must Be Focus of Research, DMA Meeting Told, 26 AM. PHARM. 327, 329 (1986). Ninety-one point six percent said that their physicians did not ask how the drug affected them once drug therapy had started, and eighty-seven point seven percent indicated that the drug was not changed after discussing the drug with the physician. Id.

208 Consumers Overwhelmingly Affirm That Pharmacists, Not Doctors, Are Their Preferred Source of Prescription Drugs, supra note 5, at 27.

209 See ELI LILLY & Co., infra note 216, at 3.

210 For example, the Washington Pharmacists Association is waging a several hundred thousand dollar publicity campaign to convince consumers why they should patronize community pharmacies.

211 Schulz & Gagnon, supra note 202, at 151.

212 The importance of pharmacy convenience to consumers is demonstrated in a study where consumers rated convenience of location first, promptness of filling prescriptions fourth and convenient store hours fifth. SCHERING LABORATORIES, supra note 14, at 5.

213 See supra note 121. The FTC concluded that evidence existed that consumers were not being allowed to select the dispenser of their choice because of the consumers’ inability to obtain prescriptions.

214 A report from the Pennsylvania Department of Aging on the costs of its Pharmaceutical Asssistance Contract for the Elderly (PACE) includes data showing that the average prescription cost paid by PACE to physician dispensers is more than one dollar higher than that paid to independents or chains. Drug Repackagers on the Make, supra note 7, at 20. A medical director of a health insurer in Oregon recommended reducing reimbursement for some drug claims after finding some instances where physicians marked up the drugs by 200 percent or more. See Wyden, , supra note 7, at 6, col. 2;Google Scholar see also NACDS Analysis Shows MD-Dispensed Drug Prices are Higher, 36 WEEKLY PHARM. REP., June 15, 1987, at 3-4 (reporting on a study conducted by the National Association of Chain Drug Stores which compared the prices of 50 prescription drugs between chain drug stores and dispensing physicians and showed that the physician's prices were an average of 13.2% higher than the prices at the chain drug stores).

A few studies have shown that physician prices are lower. See Schwartz & Hager, supra note 16, at 32 (comparison of prices between a physician group practice and three Los Angeles pharmacies on four prescriptions. A study by the National Association for Ambulatory Care, Washington, D.C., found that ambulatory care centers charge an average of $4.00 per prescription versus an average charge of $13.00 per prescription per pharmacy. The comparison, however, does not appear to be valid since ambulatory care centers primarily dispense low cost generic antibiotics while pharmacies dispense several drugs which have very high acquisition costs. See Braden, Cutting Out the Middle Man, 46 LA. PHARM. 5 (1987).

215 See Robinson, Pharmacy Moves to Step Spread of Physician Dispensing, 128 DRUG TOPICS, Nov. 19, 1984, at 10; see also VIRGINIA PHARMACEUTICAL BD., A STATEMENT TO THE VIRGINIA BOARD OF MEDICINE FROM THE PHARMACISTS OF VIRGINIA CONCERNING THE DISPENSING OF MEDICATION BY PHYSICIANS (1987); GLASSMAN-OLIVER, ECON. CONSULTANTS, supra note 27, at 18, 20.

216 ELI LILLY & Co., 3 THE LILLY DIGEST 3 (1986). The net profit of 2.8% represents the percentage of all pharmacy sales, not just prescription drugs.

217 Drug Repackagers on the Make, supra note 7, at 21.

218 H. BALDWIN, II STOCK MANAGEMENT JOURNAL 16-17 (1973).

219 One study showed that 44% of consumers ask their pharmacist for advice on minor health problems at least once during the year. Schering Laboratories, The Pharmacist as an OTC Consultant, SCHERING REP. (1980). Legally, pharmacists cannot diagnose because it is considered to be part of the practice of medicine. Patients, however, frequently ask pharmacists their advice on an array of ailments to which pharmacists must make a cursory physical assessment of the patient's condition. The pharmacist then either will recommend an appropriate OTC medication, will recommend that no medication be used, or will recommend that the patient consult a physician.

220 Annual Rx Study, 197 Am. Druggist 88 (1988).

221 R. ABOOD, REPORT ON THIRD PARTY PRESCRIPTION PROGRAMS 31-35 (1984).

222 See J. Stone, Third Party-Induced Cost Shifting in Community Pharmacy Practice (1985)(Ph.D. thesis on file at Purdue Univ.).

223 Brownman, Stephens & Bangert, supra note 119.

224 Pharmacists complete five to six years of college to receive a pharmacy degree. Professional coursework includes several hours of credit in pharmaceutics, organic medicinal chemistry, pharmacology, toxicology, dispensing, therapeutics, administration and law. Medical school requires its graduates to have very little knowledge of these areas.

225 A study measuring the knowledge of hazards of medications at a major tertiary care teaching hospital showed that based on a perfect score of 100, nurses scored 72.3%, physicians 81.3% and pharmacists 85.1%. All scores showed significant differences. Markowitz, , Nurses, Physicians and Pharmacists: Their Knowledge of Hazards of Medications, 30 NURSING RES. 366, 366 (1981).Google Scholar

226 Dickinson, Is Pharmacy Heading For a Fall?, 12 U.S. PHARM. 37 (1987); PHARMACIST PERCEPTIONS, supra note 195.

227 See 36 WEEKLY PHARM. REP., Apr. 27, 1987, at 3.

228 Dialog Defuses MD Dispensing, 196 AM. DRUGGIST 46 (1987