Two Controversial Problems in Third-Party Outpatient Prescription Plans

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In 1966 is was predicted that first-dollar prescription drug costs would be the next portion of the uninsured frontier to fall. This prophecy has yet to be fulfilled because of the many troublesome problems inherent in existing outpatient prescription plans. Two which have received extensive publicity are concerned with reimbursement schedules used by third-party carriers. Pharmacists and insurers are not in agreement as to the definition of prescription ingredient and professional service costs. Almost daily there have been developments in these problem areas. Many times, events have occurred simultaneously in various parts of the country and it has been difficult to keep abreast of the situation. For this reason a review of recent occurrences might provide a new perspective on reimbursement problems. This paper arranges chronologically the events which have transpired in attempting to determine prescription ingredient and professional service costs. The purpose of this review is to clarify the facts for all concerned parties. A few solutions which have also been proposed for these problems are also discussed. In 1966 it was predicted that first-dollar prescription drug costs would be the next portion of the uninsured frontier to fall.' This prophecy has yet to be fulfilled. Today only 15 percent of outpatient prescription charges are paid for by private carriers. Yet it is estimated that 70 percent of all outpatient prescription charges will be covered under programs offered by third-party payers in 1975.2 Jean P. Gagnon, Ph.D., is Assistant Professor of Pharmacy Administration, The University of Iowa, Iowa City, Iowa 52240. Christopher A. Rodowskas, Jr., Ph.D., is Project Director, Pharmacy Manpower Pilot Study, American Association of Colleges of Pharmacy, Silver Spring, Maryland 20910. This paper was submitted in November, 1971. 1 Linda Pickthorne Fletcher, Prepaid Plans Sponsored by Pharmacists, The Journal of Risk and Insurance, Vol. 34, No. 1, Mar. 1967, p. 83. 2 T. Donald Rucker, Drug Insurance and Vendor Compensation, unpublished paper presented before annual meeting, California Pharmaceutical Association, Fresno, California, June 5, 1970, p. 1. This is a high prediction considering that prior to 1968 private insurers were still pondering whether first-dollar outpatient prescription drug costs should be insured. They were wary of initiating prepaid prescription plans because of problems for which they foresaw no solutions, e.g. 1) this type of insurance generates many claims which require extensive computer processing to reduce costs and speed payment to vendors, 2) processing expenses per claim are very high, 3) because of widespread utilization, prescription drugs are the highest risk health service, and 4) there is great difficulty in determining actual prescription ingredient and professional service costs. These problems continue to exist today. If solutions are not formulated soon, future predictions for third-party outpatient prescription coverage may not be realized. The problem area of most concern to pharmacists is the determination of prescription ingredient and professional serv-