homepage_link about_medpin_link
publications_link free_drugs_link low_cost_drugs_link

» 340B Discounts

» Generics

» Purchasing Options

» Dispensing Options

Contract Pharmacy
Model Contract (pdf)
» California's Discount Programs

» Glossary

Guidelines for Considering Pharmacy Options to Dispense
340B Drugs

There are no definitive formulas for calculating what is the best approach for providing pharmacy services. However, there are a number of factors to consider as a clinic decides what model is the best fit. The first consideration is access to discounted pharmaceutical prices. The clinic must be a covered entity to take advantage of 340 B prices. If the clinic is not currently a covered entity, the clinic may want to explore becoming a federally qualified health center look-alike.

Should the clinic operate an in-house pharmacy?

Clinic size is a factor, particularly the number of patient encounters, the number of full time primary care providers and the number of prescriptions dispensed per day, in assessing the feasibility of an in-house pharmacy. A minimum of 10,000 – 12,000 patients encounters and three FTE providers is needed. The clinic must dispense at least 100 prescriptions per day.

Similarly, the payor mix is a significant determinant. A clinic probably needs a minimum of 15% - 20% managed Medi-Cal patients or patients with private insurance to insure an adequate revenue base for in-house pharmacy services.

Demographic factors such as age and ethnicity are likely to influence the number of prescriptions generated, the probability of health coverage and the prevalence of chronic disease. Women of reproductive age and children 0 – 14 years are most likely to have both health coverage and to create a reliable demand for drugs including contraceptive, prenatal and antibiotics. Elderly patients, over 60 years, have an increased incidence of chronic disease and if they are documented citizens or residents of the United States they are likely to be eligible for Medicare, which does not include drug coverage. The prevalence of chronic disease is higher among low income and minority populations in both inner city and rural areas. Many of these patients may not have health insurance or sufficient drug coverage.

Lastly, the clinic will need to consider the space and resources it can allocate to pharmacy services. An initial outlay ranging between $30,000 - $75,000 is realistic to accommodate inventory, construction costs, computer systems and equipment for an onsite pharmacy. Staffing the pharmacy is also a consideration. However, the revenue generated from the difference between the actual acquisition costs through PHS and the amount that is reimbursed by the managed care plans should cover pharmacy personnel costs.

A clinic cannot dispense drug samples except by an individual physician.

Should the clinic contract with a retail pharmacy?

There are a number of advantages for the clinic in contracting with a retail pharmacy rather than undertaking the risk of operating its own in-house pharmacy. First, the clinic does not have to invest in costly remodeling, computers or equipment. Similarly, the clinic does not have the fixed overhead or staffing expenses of an in-house pharmacy.

Second, if the clinic does not have the payor mix to justify an in-house pharmacy, contracting with a retail pharmacy can be meet the needs of the clinics indigent patients and satisfy CMSP and other local or county funding requirements. To achieve the greatest savings the clinic must have good credit with its wholesalers.

The clinic will incur the following costs: initial drug inventory costs and payment of an administrative or dispensing fee to the retail pharmacy. In calculating the costs to the clinic, the clinic must consider that dispensing medications in the clinic setting has a cost as well. A rough estimate of the costs of clinic dispensing, including clerical and non-pharmacist (but legally qualified personnel) dispensing costs is about $3.00 per prescription.

The clinic may not be able to take advantage of special pricing (best buys). While the contract pharmacy orders on a replenishment basis, it is up to the clinic to alert the contract pharmacy about special pricing. Space constraints may prevent the retail pharmacy from ordering in larger quantities.

Should the clinic operate a dispensary?

For a clinic that has a large percentage of uninsured patients and receives minimal or no reimbursement for pharmacy expenditures for this population, operating a dispensary may significantly reduce pharmacy costs.

The clinic will incur the following costs: initial inventory outlay, staffing costs (administrative and dispensing, potential remodeling costs for a secure, well ventilated drug storage space and minimal computer and equipment costs. In addition, the initial clinic permit costs (including fingerprinting) is about $500. The annual clinic permit renewal fee is $175. In addition, the clinic will need to secure the services of a consultant pharmacist for approximately $600 annually.

Should the clinic operate a dispensary and also contract with a retail pharmacy?

For some clinics this model may prove to yield the greatest cost-savings. The clinic may be able to take advantage of special pricing (best buys) for select dispensing to indigent patients thereby saving on dispensing fees to the contract pharmacy. Depending on the calculated costs of clinic dispensing and the negotiated dispensing fee, this savings may range from $1.00 to $2.00 per prescription.

The clinic can dispense drug samples and PAP drugs. Contracting with a retail pharmacy provides expanded pharmacy services including pharmacy consultation for clinic patients.

Home | About Medpin | Education and Training Events | Links | Sitemap
Publications | Free Drugs | Low Cost Drugs | Medicare | Public Policy

Copyright ©2006 Medpin         A Program of
The Public Health Institute