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in skilled nursing facilities. This, in APhA's view, will have a substantial positive benefit. APA has also supported revising the conditions to be outcome oriented. This revision will provide objective measures so that pharmacists, surveyors, and nursing home administrators can determine within reasonable limits how pharmaceutical service is being provided in facilities. Where any particular pharmaceutical service program is deficient, the pharmacist and the administrator will have specific information on where emphasis should be placed for improvement.

While not part of the regulations, the Association has supported the development of indicators for use by HHS surveyors in determining whether pharmacists are conducting drug regimen review and providing other aspects of pharmaceutical service. APhA has worked closely with HHS officials in refining these indicators so that they will provide useful information to surveyors and pharmacists about the level of service provided.

The last question was being followed by Congresswoman Oakar when our time expired. Ms. Oakar seemed to share the concerns expressed in the GAO report that pharmacists who provide nondispensing services to nursing homes would be influenced by the fact that they also dispense drug products to patients within the home. APhA has admitted in its comments to the GAO that the potential for a conflict does indeed exist. In fact, APhA stressed that potentials for conflict of interest exist throughout the health care system; a physician may require patients to return for follow-up visits more frequently than necessary, for example. APhA wishes to point out, however, that the GAO study could not uncover any improprieties in pharmacists' actions. The report states that in no instance could it be determined that pharmacists were not objective in their reviews.

In this regard, I should like to submit for your information a statement presented by the American Pharmaceutical Association before the Subcommitte on Oversight and Investigations of the Committee on Interstate and Foreign Commerce of the U.S. House of Representatives on March 15, 1977. That statement addresses the concerns of kickbacks and pharmacists not fulfilling their duties as providers of nondispensing pharmaceutical service (paper consultants). The major cause of the problems discussed in 1977 are still with us in 1980; namely, inadequate compensation for pharmacists who provide nondispensing service. While there have been substantial positive changes in the attitudes of state Medicaid agencies since 1977, APhA still receives complaints from pharmacists practicing in several states that the Medicaid agencies in these states either do not recognize pharmaceutical service as a reimbursable expense or provide rates for reimbursement far below what it costs pharmacists to provide service. The result, Congressman Pepper, is a substantial economic disincentive for providing quality service.

In its comments to the GAO regarding its recommendation that pharmacists who provide nondispensing services not be the same as pharmacists who provide dispensing services, APhA identified two major problems with that recommendation; namely, that it would eliminate unit dose drug distribution systems with their positive contribution to patient care, and secondly, that capitation systems currently under investigation as alternate means of compensating pharmacists for service would be eliminated. There are several additional factors that must be considered in this matter. First, in rural areas often there is only one pharmacy located within a reasonable distance of a nursing home. This pharmacy must provide both dispensing and nondispensing service. A regulation requiring separation of service would pose a substantial inconvenience to the nursing home, adding to the expense of providing service.

A regulation such as that proposed by GAO would prohibit patients, in some cases, from obtaining pharmaceutical service from their own personal pharmacist. As you indicated during the hearings, Congressman Pepper, quite often patients who go into nursing homes want to be served by the same pharmacist who served them prior to their admission. In the face of a regulation requiring separation of service, these patients may be denied the dispensing service of their pharmacist if that pharmacist is the practitioner who provides nondispensary service, or conversely, the patient would be denied the nondispensing service of their pharmacist if he or she were the one providing the dispensing service.

In summary, Congressman Pepper, APA believes that pharmaceutical service has come a long way since the Medicare and Medicaid amendments were first enacted in 1965. The profession has still a long way to go, but positive contributions have been made over these 15 years. APhA looks forward to working with you and your committee in the future. Sincerely,


Director of Professional Affairs.



Mr. Chairman, I am Dr. Richard O. Penna, Assistant Executive Director for Professional Affairs of the American Pharmaceutical Association. I am pleased to represent APhA at the request of the Subcommittee to discuss the professional functions which pharmacists perform in providing pharmaceutical service to longterm care facilities.

The American Pharmaceutical Association (APHA) is the national professional society of pharmacists in the United States. The Association's 55,000 members are comprised of practitioners, students, educators and scientists.

Since the 1965 Social Security Amendments creating Medicare and Medicaid, the Association has planned, implemented and evaluated numerous projects designed to improve the quality of pharmaceutical service provided to patients in the nation's long-term care facilities. Soon after the President signed the Social Security Amendments of 1965, the Association joined with the American Society of Hospital Pharmacists and the American Nursing Home Association (now the American Health Care Association) in publishing a booklet entitled, “Pharmaceutical Services in the Nursing Home.” This publication, designed to serve as an introductory "how to do it” educational tool, has been revised extensively on numerous occasions and today still remains as the fundamental primer for use by pharmacists desiring to learn how best to serve the patients of long-term care facilities.

It was not long after the enactment of the 1965 Amendments that the Association began working with the Department of Health, Education, and Welfare on a number of projects designed to improve the services of pharmacists serving longterm care patients. One of the earliest projects under a contract with HEW was the preparation of a definitive curriculum for use by the agency, schools of pharmacy, state pharmaceutical associations and others in designing long-term care training programs for pharmacists.

As HEW began to draft the Conditions Of Participation regulations to implement the Act, APhA worked closely with HEW officials to develop standards for pharmaceutical service which were not only achievable but designed to ensure quality service.

More recently, in 1973, the Association was awarded a contract by HEW's Division of Long-Term Care, to plan and conduct a number of training conferences emphasizing the role of the pharmacist in monitoring drug therapy of the long-term care facility patient. While the contract required the Association to conduct only 20 such programs, 89 programs were actually presented in every part of the country and APh. estimates approximately 10,000 pharmacists were provided training experience. As part of that same contract, the Association prepared a suggested curriculum for use by schools of pharmacy to sensitize pharmacy students to the need for quality pharmaceutical service in long-term care.

In January 1977, the Association published, “The Right Drug to the Right Patient. a manual to assist pharmacists in conducting inservice education pro grams for long-term care facility staffs-a major responsibility of the pharmacist in long-term care. The Association will soon release an Individual Study Program oriented to the case study method and emphasizing chronic diseases often seen in long-term care patients; the program focuses on the responsibility of pharmacists to monitor drug therapy for these patients.

The Association's most recent project under contract with HEW has been to sponsor three national prototype conferences emphasizing the responsibility of the health care team in assuring rational drug therapy for geriatric patients. These unique conferences were unparalleled successes and the Association—and HEWwill be taking steps to encourage state groups to sponsor similar programs in all parts of the country.

The Association recognized the importance of long-term care in its organizational framework when in 1975 it established the Section on Long-Term Care in its Academy of Pharmacy Practice. The Section makes it possible for pharmacists interested in long-term care to participate in conferences and symposia on this subject and provides the member a direct link to the Association in voicing needs for services and other aids.

From this brief review, Mr. Chairman, I believe you and the Committee will understand that the American Pharmaceutical Association has taken a positive and active role in involving pharmacists and promoting the value of pharmaceutical service in the care of the long-term care patient.

At this point, Mr. Chairman, I should like to elaborate on the term “pharmaceutical service" as I am using it in this statement. There are two basic components of pharmaceutical service: The first is those professional services which are associated directly with dispensing drug products to patients; and the second is those services not directly related to dispensing which are designed to assure rational drug therapy for patients. Both components are critical to the success of patient care regardless of the environment of care.

The “dispensing" component of pharmaceutical service in the long-term care setting includes those professional activities involved in providing patients with properly labeled and packaged medications ordered by patients' physicians. Dispensing pharmaceutical service is usually paid for on a fee-for-service basis to the dispensing pharmacist by the patient, his family, the facility, an insurance company or governmental program such as Medicaid.

The pharmaceutical service not directly related to dispensing drug products includes a broad range of professional functions. Briefly, these functions can be grouped as those which are utilized to design and maintain a safe and efficacious drug distribution system within the facility and those which are aimed at achieving rational drug therapy. Among the functions which are performed by pharmacists in achieving both goals are the following:

Inspecting nursing stations for proper storage of drugs;

Reviewing charts for appropriate prescribing (i.e., to detect possible drug/drug interactions, check dosage);

Maintaining emergency drug supplies;
Implementing the Pharmaceutical Service Committee;
Reviewing patients' charts for appropriate drug administration;
Consulting with physicians;
Providing formal staff education programs (inservice education);
Participating in Drug Utilization Review activities;
Participating in Infection Control Committee;
Participating in Medical Care Evaluation studies.

There have been a number of studies which document the value of nondispensing pharmaceutical service in improving the quality of patient care in long-term care facilities. The overwhelming evidence from these studies establishes that pharmacists can positively influence patient care when measured by the following criteria:

A. Decreasing number of drugs administered per patient-studies indicate that pharmacists have reduced the number of drugs administered per patient between 10 and 20 percent.

B. Lowering drug costs per patient-since patients receive fewer drugs, drug costs decrease by proportionate amounts.

C. Lowering incidence of adverse drug reactions and adverse drug interactions.

D. Better educating long-term care facility staffs regarding drug use and drug handling.

It should go without saying that it takes a significant amount of time to perform the functions I have mentioned. In order to determine just how much time is usually spent in providing nondispensing professional services, APhA conducted a survey in late 1974. The results from 227 pharmacists serving long-term care facilities revealed that they spend approximately 12 hours per week per facility in providing nondispensing service. This value was corroborated in a paper presented at the American Society of Hospital Pharmacists Clinical Meeting in December 1974 by Rawlings and Frisk. These practitioners reported their own experience in serving three facilities indicating they also spend approximately 12 hours per week per facility. Since many functions are performed on a per facility rather than per bed basis, it is not possible at this time to draw any direct correlations between time spent and number of beds per facility.

In calculating the cost for such service, Rawlings and Frisk's data indicated a cost of fifteen cents per patient per day. This compares favorably with a cost of thirteen cents per patient per day reported in February 1977 by Vlasses and co-workers in the Journal of the American Pharmaceutical Association. This latter figure represents only the cost for time spent in monitoring medical records.

While a definitive cost-benefit analysis study has yet to be performed regarding the impact of pharmaceutical service in long-term care, we can conclude, in a preliminary way at least, that pharmacist involvement in improving the overall quality of drug therapy in long-term care facilities can be accomplished with a definitely favorable cost-benefit balance.

Based on this favorable conclusion, one would expect that various state and federal agencies would be encouraging long-term care facility administrators to seek greater involvement of pharmacists in their patient care programs. Unfortunately, that is not the case. In fact, the policies of some federal and state agencies have acted as disincentives for the involvement of pharmacists. These disincentives have taken the form of a refusal of facility administrators or state Medicaid agencies to reimburse for service at adequate levels or even to recognize nondispensing pharmaceutical service as a reimbursable expense.

As one example, the Massachusetts Rate Setting Commission, in the spring of 1976, refused to approve pharmaceutical service as a reimbursable cost to long-term care facilities caring for Medicaid patients. It was only after diligent work on the part of the Massachusetts State Pharmaceutical Association that the Commission reversed its opinion in December 1976. In other states, regulatory agencies have limited the maximum number of hours allowable for reimbursement. Tragically, this maximum is considerably below what is considered necessary to provide quality service. Still, in other states, the reimbursement formula for facilities for pharmaceutical service is on a per patient basis at a rate so low that pharmacists cannot spend adequate time in the facilities.

APA recognizes that pharmacists must spend sufficient time in long-term care facilities in order to fulfill their responsibilities and meet the Conditions of Participation. But, the policies promulgated by state Medicaid agencies—and some policies promulgated by HEW-are forcing pharmacists to spend less and less time in facilities, and consequently, patients are being deprived of even the minimal level of appropriate service. Pharmacists requests that state agencies reconsider their policies have usually been unsuccessful. The agencies have the mistaken impression that compensation for nondispensing pharmaceutical service can be squeezed from the revenues obtained from the dispensing of drug product. This mistaken view was even expressed by Thomas M. Tierney, Director of the Bureau of Health Insurance of the Social Security Administration in October 1975. In a Provider Reimbursement Manual revision he stated, "It is recognized, however, that in many cases it would not be reasonable (for the pharmacist) to charge the provider for the services since the pharmacist already receives compensating value in the volume of prescription business done under the arrangement with the provider.” That view is based on the erroneous assumption that revenues from dispensing pharmaceutical service can compensate pharmacists for providing nondispensing services as well. First, pharmacists who provide nondispensing service may not provide the drug product. Secondly, fees for dispensing drugs to Medicaid patients are barely adequate, and in many cases fall short of the pharmacists' expenses in dispensing drugs to ambulatory Medicaid patients. To expect the pharmacist to support both dispensing and nondispensing related services on the revenues from dispensing service alone, is to expect the impossible.

HEW agencies are working at cross purposes. One agency promulgates Conditions of Participation mandating extensive pharmacist involvement in long-term care facilities. It supports training programs in both schools of pharmacy and postgraduate seminars throughout the country to assist pharmacists in becoming more effective in providing nondispensing service. Another agency promulgates policies which result in confusion among state agencies to the point where, federal regulations notwithstanding, some agencies have yet to be convinced that nondispensing pharmaceutical service provided to long-term care facilities is, in fact, a reimbursable expense under Title XVIII and Title XIX.

Mr. Chairman, we have been discussing some problems of pharmacists who earnestly seek to provide quality service to long-term care facilities. It is no secret, however, that there are instances where pharmacists and nursing home administrators have been guilty of illegal kickback arrangements associated with Medicaid and Medicare programs. These kickbacks apparently take many forms-cash, paid vacations-and sometimes an agreement between the pharmacist and the administrator in which the pharmacist agrees to provide nondispensing service at no cost to the facility. We agree with the opinion expressed by Dr. M. Keith Weikel, Commissioner of the Medical Services Administration, that pharmacists who provide nondispensing service at no cost as an inducement or compensation for prescription business are essentially providing a kickback to the facility. To the extent that the contrary view promulgated by Mr. Tierney encourages such activity, it is a sad commentary on the workings of the Department. APhA deplores any arrangement between a pharmacist and an administrator in which the pharmacist agrees to kickback cash, merchandise or services of monetary value in return for the privilege of “getting all the prescription business.”

Mr. Chairman, there is no such thing as a “free lunch.” If someone or some group is getting something for nothing, someone else or some other group is paying for it. In this case, tragically, that other group is usually the patients themselves, and their "payment” is usually in the form of denial of professional services to which they are entitled or additional costs for dispensing pharmaceutical service.

A term has been coined—the "paper consultant”-which refers to the practitioner who signifies to regulatory agencies that he is providing all required services but in reality is doing little or nothing at all. In some ways, the paper consultant problem is even more costly and tragic than the kickback issue because patients are being cheated out of needed services.

Underlying causes of the paper consultant problem are complex. Federal and state policies that refuse to recognize the professional and economic value of pharmaceutical service; misconceptions regarding the relative values of dispensing and nondispensing services; some unscrupulous facility administrators and pharmacists; and frank ignorance are some of the causes that come immediately to mind.

There are some things that can be done about the problem, however. First, HEW should clarify its position regarding the matter of revenues from dispensing service paying for nondispensing service. Incidentally, HEW Secretary Califano's recently announced reorganization of the Department that will combine the Bureau of Health Insurance and the Social and Rehabilitation Service into a Health Financing Administration may have a beneficial impact on the problem. Second, facility reviewers should view any facility that is receiving pharmaceutical service at no charge as a candidate for in-depth review to determine compliance with regulations. Finally, federal and state agencies should work closely with the professional pharmaceutical organizations to develop guidelines for pharmaceutical services including realistic assessment of the time required to provide service.

In conclusion, Mr. Chairman, pharmaceutical service is comprised of dispensing and nondispensing elements. Nondispensing functions have been demonstrated to improve the quality of care in long-term care facilities. While federal and state regulations mandate significant nondispensing service, policies of many reimbursement agencies serve to prevent pharmacists from rendering the full range of essential service. Illegal activities in the form of kickbacks and paper consultants continue to plague the professions and their patients. Federal and state agencies can substantially reduce kickbacks and paper consultants through policy changes and stronger enforcement of existing regulations.

Mr. Chairman, APhA appreciates the opportunity of presenting its views on this very important matter and trusts that its comments will be of assistance to the Subcommittee in carrying out its functions.


Trenton, N.J., August 5, 1980.
Member of Congress,
Washington, D.C.

DEAR CONGRESSMAN PEPPER: I am writing in support of testimony delivered by GAO, ASCP and APhA to your Committee on Aging on June 25, 1980.

New Jersey instituted a system of capitation payments for pharmaceutical services in long term care facilities in July 1976. The results have been heartening.

The combination of the financial incentive in the capitation system and the Drug Regimen Review process carried on by the Consultant Pharmacist has resulted in substantial savings to the state.

The reduction in the number of medications per patient per month, from an average of 4.5 prescriptions per month to 3.2 prescriptions per month is a direct result of this effort.

This brings me to the issue of who is better able to review a patient's drug regimen-a pharmacist or a nurse. While the nurse has more contact with the patient, the pharmacist is better qualified by education and experience in evaluating drug therapy. Rather than view the two as separate roles, perhaps the cooperative function will serve the patients' needs better than either alone.

The consultant pharmacist should review the nurse's notes regarding the observations of the patient's response to drug therapy and evalute these notes in the same way a physician evaluates the nurse's notes. This then utilizes the expertise of both professionals in an appropriate context to their training and experience.

I do agree with you, however, that the roles of the pharmacy consultant and vendor pharmacist be separate. It is not necessarily relevant that the functions be separated between two distinct organizations not related to one another (i.e., employee and employer), but rather that the functions be performed by two different individuals. That is where the safety factor comes in. It is a system of checks and balances. The concern is for the welfare of the patient as well as for program integrity. I do not believe that conflict of interest is the underlying issue. I believe that one cannot objectively monitor one's own behavior or patterns of practice. Another person can be more objective and also share the burden of responsibility and liability when assessing the role of monitoring someone else's performance. Most people will not intentionally jeopardize their livelihood or integrity to cover someone else's mistakes.

I am a member of the New Jersey State Board of Pharmacy in addition to my Medicaid functions and have consequently seen the "bad actors” in my profession. With the exception of those few wholly unprincipled and amoral persons who inevitably wind up being ostracized from the profession, the majority of pharmacists

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