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| Title: | Initial Economic Impact Analysis of the Proposed Electronic Prescription Rule |
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| Description: | Initial Economic Impact Analysis of the Proposed Electronic Prescription Rule |
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| Body: | INITIAL ECONOMIC IMPACT ANALYSIS
OF THE
PROPOSED ELECTRONIC PRESCRIPTION RULE
Drug Enforcement Administration
U.S. Department of Justice
April 2008
April 2008
April 2008
TABLE OF CONTENTS
EXECUTIVE SUMMARY ....................................................................................................... i
CHAPTER 1: INTRODUCTION ............................................................................................. 1
1.1 BACKGROUND ...................................................................................................... 1
1.2 ELECTRONIC PRESCRIPTIONS .......................................................................... 2
1.3 Options Considered................................................................................................... 4
1.4 ORGANIZATION OF THIS REPORT.................................................................... 7
CHAPTER 2: AFFECTED UNIVERSE .................................................................................. 9
2.1 REGISTRANTS ....................................................................................................... 9
2.2 SYSTEM PROVIDERS.......................................................................................... 11
CHAPTER 3: UNIT COSTS .................................................................................................. 15
3.1 REQUIREMENTS.................................................................................................. 15
3.2 COSTS .................................................................................................................... 16
3.2.1 Identity Proofing ............................................................................................. 16
3.2.2 Two-factor Authentication.............................................................................. 17
3.2.3 Digital Certificates .......................................................................................... 18
3.2.4 Monthly Review Of Controlled Substance Prescription Logs........................ 18
3.2.5 Programming Costs......................................................................................... 18
3.2.6 Auditing Requirements ................................................................................... 21
3.2.8 Option 3 requirements..................................................................................... 22
CHAPTER 4: TOTAL COSTS............................................................................................... 25
4.1 NUMBERS OF PRACTITIONERS, OFFICES, AND SERVICE PROVIDERS 25
4.2 START-UP COSTS AND ON-GOING COSTS.................................................... 30
4.3 TOTAL COSTS ...................................................................................................... 31
CHAPTER 5: SMALL ENTITY ANALYSIS ....................................................................... 37
5.1 CHARACTERISTICS OF SMALL ENTITIES..................................................... 37
5.2 SMALL ENTITY COSTS ...................................................................................... 38
5.3 ALTERNATIVES CONSIDERED ........................................................................ 40
5.4 OTHER ISSUES..................................................................................................... 41
CHAPTER 6: BENEFITS...................................................................................................... 45
6.1 INTRODUCTION .................................................................................................. 45
6.2 QUANTIFIED BENEFITS..................................................................................... 45
6.3 QUALIT ATIVE BENEFITS .................................................................................. 49
6.3.1 Reduction in Controlled Substance Prescription Forgery............................... 49
6.3.2 Cost of Diversion and Abuse of Prescription Drugs............................................. 50
6.4 CONCLUSI ON....................................................................................................... 52
CHAPTER 7: CONCLUSIONS ............................................................................................ 53
7.1 UNCERTAI NTIES ................................................................................................. 53
7.1.1 Rates of Adoption ........................................................................................... 53
7.1.2 Costs to Service Providers .............................................................................. 53
7.2 COSTS AND BENEFITS....................................................................................... 54
7.3 SMALL ENTITY IMPACTS ................................................................................. 55
APPENDIX A: WAGES, FRINGE BENEFITS, AND WEIGHTED AVERAGES ............. 58
APPENDIX B: BIBLIOGRAPHY ........................................................................................ 61
April 2008
April 2008
LIST OF TABLES
Table ES-1: Total Costs ($)
Table 2-1: Practitioner Universe
Table 3-1: Summary of Identity Proofing Cost-Base Case
Table 3-2: Summary of Identity Proofing Cost-Options 1 and 2
Table 3-3: System Requirements
Table 3-4: Summary of Costs, Other Than Identity Proofing-Base Case, Options 1 and 2
Table 3-5: Option-3 Unit Cost
Table 4-1: Implementation Schedule
Table 4-2: Annual Increments in Affected Practitioners
Table 4-3: Practitioners' Offices Implementing Electronic Prescribing of Controlled
Substances
Table 4-4: Initial Visits Only for Proofing (Base Case)
Table 4-5: Projected Reduction in Providers to Practitioners
Table 4-6: Start-up and Ongoing Costs
Table 4-7: Total Costs ($)
Table 4-8: Annualized Costs by Cost Item
Table 4-9: Annualized Costs by Cost Item
Table 4-10: Base Option - Yearly, 15-Year, and Annualized Costs
Table 4-11: Option 1 - Yearly, 15-Year, and Annualized Costs
Table 4-12: Option 2 - Yearly, 15-Year, and Annualized Costs
Table 4-13: Option 3 - Yearly, 15-Year, and Annualized Costs
Table 5-1: SBA Definitions of Small Entities
Table 5-2: Incremental Cost of EMR Systems to Practitioners
Table 6-1: Cost Savings of Callbacks Avoided
Table 6-2: PV and Annualized Cost Savings for Callbacks
Table 6-3: Costs Savings for Public Wait Time
Table 6-4: Annualized Benefits
April 2008
April 2008
EXECUTIVE SUMMARY
Under the Controlled Substances Act (CSA), DEA is required to maintain a closed system of
controls on controlled substances. For Schedule II controlled substances, which have the
highest potential for abuse and dependence of those drugs with an accepted medical use in
treatment in the United States, the CSA mandates that, with very limited exceptions, a
pharmacist may only dispense a Schedule II controlled substance if there is an original
written prescription from a practitioner. For Schedule III through IV controlled substances,
the pharmacist may dispense if there is a written (original or fax) or oral prescription from a
practitioner. DEA is proposing to give practitioners the option of signing and transmitting
controlled substance prescriptions electronically; pharmacies would maintain records of these
prescriptions electronically. The proposed rules for electronic prescriptions for controlled
substances are an addition to, not a replacement of, the existing rules for controlled substance
prescriptions. Practitioners will continue to be able to issue controlled substance
prescriptions on paper or, for Schedule III-V substances, fax or call in prescriptions.
DEA is proposing to allow, but not require, electronic prescriptions for controlled substances
if the systems used to create, transmit, and process controlled substance prescriptions meet
certain requirements that DEA has identified as being necessary to prevent the misuse of the
systems for diversion and to ensure that the records will be usable in legal actions if needed.
DEA examined four options. Under the Base Case, service providers would conduct in-
person identity proofing and verify the DEA registration and State licenses of each
practitioner allowed to sign an electronic controlled substance prescription. Before signing
such a prescription, the practitioner would authenticate to the system using two-factor
authentication that meets the standards of NIST Special Publication 800-63 Level 4. The
systems would also have to meet requirements for the information contained in a controlled
substance prescription. The electronic controlled substance prescription would have to be
digitally signed by the service provider or first intermediary and archived. Practitioners
would have to review a monthly log of controlled substance prescriptions issued under the
practitioner's name. Pharmacies would also have to digitally sign the controlled substance
prescription on receipt and archive that record. Pharmacy systems would have to maintain an
internal audit trail. All service providers would have to obtain a third-party audit annually
that meets the requirements of a SysTrust, WebTrust, or SAS 70 audit for physical security
and processing integrity.
Option 1 differs from the Base Case only in that a DEA-registered hospital, a state licensing
board, or a law enforcement agency would conduct the initial in-person identity proofing.
The service provider would verify the DEA registration and State license and contact the
applicant to verify that the practitioner had submitted the application. Option 2 is a modified
public key infrastructure approach. The practitioner would obtain a digital certificate from a
recognized Certification Authority and use that to digitally sign the controlled substances
prescriptions. The monthly log check would be eliminated, and the audit would address only
processing integrity. Option 3 would impose no requirements on the service providers.
April 2008 i
Pharmacies would be required to phone the practitioner to verify each controlled substance
prescription received.
COSTS
DEA estimates that the costs of the options range from $19 million for Option 2 to $1.3
billion for Option 3, both annualized over 15 years at 7 percent discount rate. The Base Case
is estimated to cost $33 million annualized and Option 1 $38 million. Table ES-1 presents
the estimated annualized costs of all options.
Table ES-1: Total Costs ($)
7.0 percent 3.0 percent
Base Case $32,561,000 $33,392,000
Option 1 $38,256,000 $39,221,000
Option 2 $18,595,000 $18,928,000
Option 3 $1,280,000,000 $1,404,000,000
Most of the direct practitioner cost in the Base Case and Option 1 is driven by the
requirement to check a computer-generated log of controlled substance prescriptions once a
month. The service provider costs over time are primarily the costs of the annual audit,
which accounts for all but about $1.2 million a year of the annualized service provider costs
in the first three options.
BENEFITS
The benefits of the rule that can be quantified - reductions in callbacks ($316 million) and
reduced public wait time (up to $589 million) (at 7 percent) - far exceed the cost of the three
of the four options considered. DEA has not attempted to quantify any reduction in medical
errors. DEA expects that there will be reduced medication errors linked to more readable
prescriptions, but decided that it did not have a reasonable basis for quantifying the benefits.
Another benefit of electronic prescriptions for controlled substances that is ascribable to the
proposed rule, but not easily quantified and monetized, would come from reductions in
controlled substance prescription forgery and alteration.
SMALL ENTITY IMPACTS
The proposed rule will have an impact on a substantial number of small entities. The
economic impact on those directly regulated by this rule would not be significant under the
first three options. DEA estimates that the direct first-year costs to practitioners for in-person
identity proofing, training, and log review will range from about $150 to $350, which
represents less than 0.2 percent of the net income of the lowest paid physician. DEA cannot
accurately estimate the incremental cost to the systems that will be passed on to practitioners
and pharmacies because that cost will depend on how many customers each service provider
has and how they finance their costs, but these costs are unlikely to be higher than the first-
year costs and should decline over time as the industry consolidates and costs can be
April 2008 ii
recovered from a larger practitioner base. For pharmacies, the incremental cost that their
service providers may pass on would be less than $100 in the first year and about $35 a year
in the out years, which represents about 0.003 percent of the average independent
pharmacy's annual sales. DEA, therefore, has determined that the proposed rule would not
impose a significant economic impact on small entities directly regulated by DEA.
Service providers are not directly regulated by DEA. The proposed rule indirectly affects
them because DEA would require that its registrants use only systems and service providers
that meet its requirements. DEA recognizes that the requirements may impose a significant
impact on service providers, many of which are small entities, but the costs are not so great
that a service provider would not be able to recover them from customers or that the
incremental price increase would discourage customers from purchasing a system. DEA
expects that some service providers may drop out of the market if they cannot meet the
security standards that an auditor would demand, but given other government requirements
for security under the Health Insurance Portability and Accountability Act and the public's
expectations for secure medical records, DEA believes that these service providers would not
be able to meet the other standards and public expectations. The market for healthcare
information technology (IT) is evolving rapidly. DEA anticipates that most of the current
service providers will not be in this market by the time most practitioners have adopted
electronic medical record (EMR) systems. As the history of other IT applications has shown,
over time, for reasons unrelated to DEA, a few systems will dominate the market; for the
remaining service providers, DEA's requirements will not be a burden.
April 2008 iii
April 2008 iv
CHAPTER 1: INTRODUCTION
1.1 BACKGROUND
Under the Controlled Substances Act (CSA)
1
, DEA is required to maintain a closed system
of distribution for controlled substances. DEA publishes the implementing regulations in
Title 21 of the Code of Federal Regulations.
2
These regulations are designed to ensure an
adequate supply of controlled substances for legitimate medical and other purposes, and to
deter the diversion of controlled substances to illegal purposes.
Controlled substances include narcotics, stimulants, depressants, hallucinogens, and anabolic
steroids that have a potential for abuse and psychological and physical dependence. DEA
divides controlled substances into Schedules I through V. Schedule I substances have a high
potential for abuse and no accepted medical use in treatment in the United States and,
therefore, may not be dispensed. Schedule II through V substances have accepted medical
uses and also have potential for abuse and dependence. They may be dispensed; except for
Schedule V substances, controlled substances cannot generally be dispensed except in
response to a prescription.
For Schedule II controlled substances, which have the highest potential for abuse and
dependence of the medications with accepted medical uses in treatment in the United States,
the CSA mandates that, except in emergency circumstances, a pharmacist may only dispense
a Schedule II controlled substance if there is a written prescription from a practitioner. For
patients in long term care facilities or hospices, prescriptions for Schedule II substances may
be written and manually signed and faxed with the fax serving as the original prescription.
Most Schedule II prescriptions, however, are written with the original prescription presented
to the pharmacy before dispensing. Schedule II prescriptions may not be refilled; a new
prescription must be issued. For Schedule III and IV controlled substances, the pharmacist
may dispense if there is a written or oral prescription from a practitioner; faxed prescriptions
may serve as the original prescription, but must be written and signed prior to being faxed.
Regulations implementing the prescription requirements are found in 21 CFR part 1306.
Under the regulations, a prescription for a controlled substance may be issued only by an
individual practitioner who is authorized to prescribe by the State in which he or she is
licensed to practice and is registered with DEA, or exempted from registration. To be valid,
the prescription must be written for a legitimate medical purpose by an individual
practitioner acting in the usual course of professional practice. Every controlled substance
prescription must contain the name and address of the patient, the drug name, strength,
dosage form and quantity, directions for use, and the name, address, and DEA registration
number of the practitioner. Every prescription that is written must be dated as of, and signed
on, the day it is issued.
1
21 U.S.C. 801 et seq.
2
21 CFR parts 1300-1399.
April 2008 1
A prescription may be filled only by a pharmacist acting in the usual course of professional
practice who is employed in a registered pharmacy. The prescribing practitioner is
responsible in case the prescription does not conform in all essential respects to the law and
regulations. A corresponding liability rests upon the pharmacist who fills a prescription not
prepared in the form prescribed by DEA regulations.
With respect to records, the pharmacy must maintain a paper file of all prescriptions,
consisting of the original prescriptions, or, where allowed, the facsimiles of the original
written prescriptions, or written documentation of oral prescriptions. The pharmacy must
also maintain records of when the prescription was filled and by whom, for both original
prescriptions and any partial fillings or refillings. Practitioners are not required to maintain
copies of prescriptions written or other records of prescriptions (unless issued for
maintenance or detoxification treatment). Consequently, although practitioners create the
record, pharmacies maintain it. This division between the person who creates the record and
the person who retains it makes the integrity of the record particularly important.
Diversion of controlled substances may occur in a number of ways. With prescriptions,
diversion may take place if a practitioner knowingly or otherwise writes a prescription for a
person who does not have a legitimate need for it. Prescriptions may also be altered (e.g.,
changing a "10" to "40" or "100") or forged. Prescription pads may be stolen to create
forgeries or prescriptions may be used to create fake prescription forms. Pharmacy records
can be altered to hide illegal dispensing or theft by pharmacy employees. Practitioners and
pharmacists may illegally dispense substances.
DEA's recordkeeping requirements and its concern about its ability to determine the integrity
of the prescription record are directed toward preventing diversion and having a legally
defensible record to prove that diversion has occurred. With paper prescriptions, the signed
prescription provides a provable link to the prescribing practitioner. Forgeries can usually be
detected by handwriting experts. As a result, a practitioner whose prescriptions are altered or
forged can prove that he or she did not issue the suspect prescriptions, but a practitioner who
issues invalid prescriptions cannot deny them and can be subject to administrative, civil, and
criminal penalties. Similarly, paper records held at pharmacies can be compared with
pharmacy inventories to determine if all drugs dispensed were dispensed legally.
1.2 ELECTRONIC PRESCRIPTIONS
Industry has asked DEA to develop regulations that will allow the creation and transmission
of electronic prescriptions for controlled substances. Many parties in the healthcare industry
are encouraging the adoption of electronic prescriptions because such prescriptions have the
potential to improve patient safety by reducing medical errors that arise from misread or
misunderstood prescriptions. From DEA's perspective, electronic prescriptions have distinct
advantages, if created in a way that reduces the possibility of forgery or alteration. The
reality of the speed of electronic communications, however, is that electronic prescriptions
could also open a new avenue for rapid diversion, which could leave no trail that DEA could
use to act against those diverting controlled substances. A recent study conducted for the
Department of Health and Human Services (HHS) by the American Health Information
April 2008 2
Management Association, "Report on the Use of Health Information Technology to Enhance
and Expand Health Care Anti-Fraud Activities," noted that "e-prescribing presents a new
vulnerability because of the increased velocity of authenticated automated transactions."
3
Electronic records are easy to create and relatively easy to alter without the alteration being
detectable. Without proper protections, a criminal could open an account, use a practitioner's
DEA number to generate a fake prescription, send it to multiple pharmacies over a wide area,
have confederates pick up the drugs, and close the account within a few hours. Because
DEA registration numbers are publicly available, criminals could do this repeatedly without
using any one DEA registration number more than once, making it unlikely that pharmacists
would notice a pattern. Without proper controls, electronic prescriptions could create the
potential for organized, widespread, and undetected diversion of controlled substances.
To the extent that electronic prescriptions for noncontrolled substances are being issued at
present, they are signed electronically, with personal identification numbers (PINs) or using
some combination of passwords and user IDs and transmitted over closed networks or the
Internet through three to five intermediaries who may open the prescription files to reformat
them and add information, such as routing and payer data. Reformatting is often required if
the pharmacy system is not compatible with the practitioner's prescribing system. The
service providers authorize the practitioners to use the system. Some systems allow
practitioners to enroll online, without any assurance that the person is who he or she claims
to be. Some systems authorize anyone in the practice to use the system so that the system
cannot link a specific practitioner to a prescription. At the pharmacy, the prescription
translates directly into the pharmacy computer system, and the records are maintained
electronically.
This existing electronic prescription system is not sufficient to protect the transactions as the
CSA requires. From DEA's perspective, the existing system has several fundamental flaws.
The system relies on service providers to authenticate practitioners and control the
integrity of the transaction without ensuring that the service providers check the
identity of the practitioner, limit access for prescription signing, or use
authentication protocols that allow only authorized practitioners to sign a
prescription. In addition, the service providers are not subject to security
requirements for their own systems. DEA would have to prove that the third party
was not at fault before it could successfully take action against a registrant who
had been a party to diversion. For example, if a practitioner denied issuing
prescriptions and claimed they had been forged, DEA would have to prove that
the third party had not issued authorization to someone else to use the
practitioner's name and DEA registration number and that none of the third
party's employees or outside hackers had used the system to generate false
prescriptions in the practitioner's name.
3
Foundation of Research and Education, American Health Information Management Association. "Report on
the Use of Health Information Technology to Enhance and Expand Health Care Anti-Fraud Activities,"
prepared for the Office of the National Coordinator, US Department of Health and Human Services, September
30, 2005.
April 2008 3
The system does not provide for record integrity. Even a closed transmission
network does not protect against insider actions. Many computer crimes, such as
identity thefts, are committed by insiders who have the knowledge to overcome
internal protections. Because the third parties routinely open prescriptions, the
opportunity for insider alterations will be substantial. The systems may also not
protect against determined outside hackers.
The system provides limited protection of the record's integrity once it reaches the
pharmacy.
Overall, the existing electronic prescribing systems provide no assurance of security against
identity theft, insider attacks, or outsider attacks. Although some existing systems might
have voluntarily implemented effective security measures, they are not legally obligated to
do so and - in the absence of binding regulatory requirements - there is no way to ensure that
they or others who might enter the market will have effective measures in the future. With
prescriptions moving through multiple parties from creation to dispensing, a security failure
at any link in the chain could undermine the entire system, often leaving no evidence of the
problem.
1.3 OPTIONS CONSIDERED
DEA has analyzed four options to consider the impact of varying requirements to address its
concerns and provide adequate security. Under the Base Case, the following would be
required:
The electronic prescription service provider would conduct in-person identity
proofing. At the service provider's office, a clerk would check the registrant's
State license and DEA registration to ensure that they are active and in good
standing and enter an electronic record of the check, and then file the original
hard copy of the proofing document. The service provider would keep a record of
the identification checked, the person who checked it, and the date on which it
was checked.
Authentication: Access to the electronic prescribing system for the purposes of
signing prescriptions for controlled substances would meet the standards for Level
4 authentication in NIST SP 800-63. That is, the system would require at least
two-factor authentication to access the system; one factor would be on a hard
token that meets the requirements for Level 4 authentication in NIST SP 800-63.
The security of the system would be audited annually using an independent third-
party audit that meets the requirements of a SysTrust or WebTrust audit for
security and processing integrity.
The system would limit signing authority to those practitioners that have a legal
right to sign prescriptions for controlled substances (i.e., the system would set
varying levels of access to the system based on responsibilities).
The system would have an automatic lock out if the system is unused for more
than 2 minutes.
April 2008 4
The prescription would contain all of the required data (date of issuance; patient
name and address; registrant full name, address, DEA registration number; drug
name, dosage form, quantity prescribed, and directions for use; and any other
information specific to certain controlled substances prescriptions mandated by
law or DEA regulations). Prior to signing the controlled substance prescription,
The system would show the prescribing practitioner at least the patient name and
address, drug name, dosage unit and strength, quantity, directions for use, and the
DEA registration number of the prescriber whose identity is being used to sign the
prescription.
Where more than one prescription has been prepared for signing, prior to
authenticating to the system the practitioner would positively indicate which
prescription(s) are to be signed.
The practitioner would authenticate himself to the system immediately before
signing a prescription.
After authenticating to the system but prior to transmitting the prescription, the
system would present the practitioner with a statement indicating that the
practitioner understands that he is signing the prescription being transmitted. If
the practitioner does not so indicate, by performing the signature function, the
prescription could not be transmitted.
The system would transmit the electronic prescription immediately upon
signature. The system would not transmit a controlled substance prescription
unless it is signed by a practitioner authorized to sign such prescriptions.
The electronic data file would include an indication that the prescription was
signed.
The system would not allow printing of prescriptions that have been transmitted;
if a prescription is printed, it would not be transmitted.
The system would generate a monthly log of controlled substance prescriptions
and transmit it to the practitioner for his review. The practitioner would indicate
that the log was reviewed.
The first recipient of the prescription would digitally sign the prescription and
archive the digitally signed prescription as received.
The first pharmacy system that receives the prescription would digitally sign and
archive a copy of the prescription as received. Alternatively, the intermediary that
transmits the prescription to the pharmacy could digitally sign the transmitted
prescription and transmit both the record and the digitally signed copy for the
pharmacy to archive.
The pharmacy system would check to determine whether the DEA registration of
the prescribing practitioner is valid. (Alternatively, any of the intermediary
systems could conduct this check provided that the record indicates that the check
has been conducted. The CSA registration database could be cached for one week
from the date of issuance by DEA of the most current database.)
April 2008 5
The pharmacy system would be able to store the complete DEA number including
extensions.
The pharmacy system would have an audit trail that identifies each person who
annotates or alters the record. The pharmacy system would conduct daily internal
audits to identify any auditable events.
The system would have a backup system of records stored at a separate location.
The pharmacy system would have an independent third-party audit that meets the
requirements of SysTrust or SAS 70 audits for security and processing integrity.
A prescription created electronically for a controlled substance would remain in
its electronic form throughout the transmission process to the pharmacy;
electronic prescriptions may not be converted to other transmission methods, e.g.,
facsimile, at any time during transmission.
Many existing electronic prescription and pharmacy systems already meet some or all of
these requirements.
In Option 1, the mechanism for in-person identity proofing is changed along with some of the
ancillary procedures. The identity proofing would not be conducted by the service provider
but by a DEA-registered hospital, State licensing board, or State or local law enforcement
agency. The analysis assumes that in the great preponderance of cases, the identity proofing
would be conducted by the hospital. Identity proofing of a registrant would be recorded in a
hard document with signatures of the registrant and the agent who conducted the in-person
identity proofing. The original document would be mailed from a practitioner's office to the
service provider. At the service provider's office, a clerk would check the registrant's State
license and DEA registration to ensure that they are active and in good standing, and enter an
electronic record of the check, as in the Base Case, and then file the original hard copy of the
identity proofing document. The service provider would phone the applicant to verify the
submission of the application.
There is no change in the two-factor authentication or other requirements from the Base
Case.
In Option 2, the authentication protocol is changed to require the registrant's digital
signature, which is created by use of a digital certificate issued by a federally recognized
Certification Authority. The original document recording in-person identity proofing would
be stored at the Certification Authority's office rather than at the service provider's office;
checking of the State license and DEA registration would be done at the service provider's
office. The service provider would archive the digitally signed prescription, but would not be
required to digitally sign the prescription on receipt. The digital signature would not be
transmitted to the pharmacy. Because security now depends on the digital signature and
digital certificate, and not on the service provider's system, systems would not have to be
audited for security-only process integrity, a less intensive and less costly audit. The
monthly log check would also be eliminated. The other requirements are the same as the
Base Case.
April 2008 6
Option 3 imposes no requirements for identity proofing, authentication, or system attributes.
Instead, sole reliance for security is placed on a requirement for a callback from the
pharmacy to the practitioner office for every electronic prescription for a controlled
substance.
1.4 ORGANIZATION OF THIS REPORT
The remainder of this report is organized as follows:
Chapter 2 estimates the universe of entities potentially affected by the rule.
Chapter 3 presents the unit costs of each of the options considered.
Chapter 4 presents the total costs of each of the options considered.
Chapter 5 presents the small entity analysis.
Chapter 6 discusses the benefits of the proposed rule.
Chapter 7 presents conclusions and discusses uncertainties associated with the analysis.
April 2008 7
April 2008 8
CHAPTER 2: AFFECTED UNIVERSE
The proposed rule potentially affects any person authorized under State law to prescribe
controlled substances and registered with DEA as an individual practitioner or exempt from
the requirement of registration. It also directly affects registered pharmacies that process
controlled substance prescriptions. This chapter discusses estimates of the number of entities
that would incur costs for compliance if they elect to issue or receive electronic prescriptions
for controlled substances. The rule would not require any registrant to issue or accept
electronic prescriptions for controlled substances; paper and, where permitted, oral
prescriptions are still allowed.
2.1 REGISTRANTS
As of December 2007, DEA had 1.18 million registered individual practitioners. Not all of
these, however, are likely to prescribe controlled substances or do so often enough to justify
any investment in an electronic prescription system. For example, veterinarians,
optometrists, animal shelters, ambulance services, etc. rarely if ever prescribe controlled
substances. Nurse practitioners and physicians assistants who work in hospitals or
institutional settings may not prescribe controlled substances often. Similarly, many
physician specialties either do not prescribe any controlled substances (anesthesiologists,
radiologists, pathologists) or do not often prescribe controlled substances as part of their
usual practices (dermatologists, obstetricians/gynecologists, ophthalmologists). In addition,
many practitioners hold multiple DEA registrations because they practice in more than one
State or dispense or administer controlled substances at multiple locations in a single State.
Finally, some practitioners retain their registrations when they retire.
To estimate the number of practitioners who may use electronic prescribing for controlled
substances, DEA used its registration data plus a Centers for Disease Control and Prevention
(CDC) study of office-based physicians.
4
The CDC study used data from the American
Medical Association (AMA) and the American Osteopathic Association (AOA), which
indicated that there were 489,829 physicians engaged in non-federal office-based care.
5
The
study found that a third of those were out-of-scope because they were hospital-based,
federally employed, anesthesiologists, radiologists, pathologists (11.3 percent), retired or
deceased (9.5 percent), non-office-based (4.7 percent), not practicing (4.4 percent) and
otherwise ineligible (3.9 percent). The study estimated that there were 311,200 office-based
physicians in 2004. DEA used this estimate as its baseline for physicians although the
estimate includes a number of specialties that may rarely prescribe controlled substances.
Adjusting the number for growth to 2007, DEA estimates that 312,135 physicians may now
be writing controlled substances prescriptions.
4
Hing, E., Burt, CW. "Characteristics of Office-Based Physicians and their Practices: United States, 2003-
2004," Series 13, Number 164. Hyattsville, MD: National Center for Health Statistics. January 2007.
5
Practitioners were limited to office-based because hospital-based practitioners do not usually write
prescriptions and neither hospital-based nor federally employed practitioners would be purchasing electronic
prescription systems.
April 2008 9
The other three practitioner groups that are likely to prescribe controlled substances are
dentists, nurse practitioners, and physicians assistants. Because DEA had no basis for
estimating the number of dentists that may hold multiple registrations or have retired, DEA
used the number of currently registered dentists (170,969), recognizing that the estimate is
probably slightly high. For nurse practitioners and physicians assistants, DEA used its
current registrant population (119,659) reduced by 25 percent to 89,744. DEA reduced the
number because many of these mid-level practitioners work in hospitals, where they are
unlikely to write prescriptions. For physicians assistants, only 63 percent work in office-
based practices according to data from the Bureau of Labor Statistics;
6
DEA has no estimates
of where nurse practitioners work because they are aggregated with all nurses in BLS data.
Table 2-1 presents the estimate of total practitioners who could engage in electronic
prescribing for controlled substances and the growth rate applied for estimating the number
in each of the out-years.
Table 2-1: Practitioner Universe
Current number
Future annual
growth rate
Physicians 312,135 0.1 percent
Dentists 170,969 0.9 percent
Mid-level practitioners
89,744 2.2 percent
Total 572,848 0.7 percent
Estimated growth rates are based on recent trends. Regarding physicians, the trend since
2000 indicates a very slight negative growth rate. DEA does not believe this downward trend
will continue; therefore, an annual growth rate for physicians of 0.1 percent has been
estimated. The growth rate for dentists is based on the annual growth rate of DEA
registrations for dentists from 2003 to 2007. The growth rate for mid-level practitioners is
based on CDC data for increases in physicians assistants employment from 1999 to 2004.
Nurse practitioners are a subset of nurses; employment of nurses grew 1.2 percent annually
over that period.
7
Using the 2.2 percent growth rate is, therefore, slightly conservative. The
rate for the total number of practitioners is the weighted average of the separate rates.
Part of the cost of initial in-person identity proofing depends on the number of practitioners'
offices. The 2002 Economic Census reports 321,423 offices of physicians and dentists
(203,118 physicians' offices and 118,302 dentists' offices.)
8
Consonant with DEA's
estimate of the number of physicians likely to write controlled substances prescriptions, the
number of physicians' offices is reduced by 25.0 percent and added to the dentists' offices to
obtain 270,664 offices in 2002 where practitioners were likely to write controlled substances
prescriptions. Using the 1997 and 2002 Economic Census,
9
DEA obtained the weighted
6
http://www.bls.gov/oes/current/oes291071.htm.
7
CDC, Health, United States, 2006, Table 108.
8
http://www.census.gov/prod/ec02/ec0262ssszt.pdf
9
http://www.census.gov/prod/ec97/97s62-sz.pdf
April 2008 10
annual growth rate for these offices from 1997 to 2002-0.77 percent. DEA used that rate to
estimate the number of practitioners' offices for this analysis in 2007-280,929 and to
project the future growth of these offices.
According to the National Association of Chain Drug Stores, there are about 57,000 retail
pharmacies in the United States.
10
Of these, about 40,000 stores are owned by chains. Since
there are about 200 pharmacy chains in the United States, there are about 17,200 retail-
pharmacy firms.
2.2 SYSTEM PROVIDERS
There is more than one kind of system provider, and confusion can arise if clear distinctions
are not made among them. It is necessary to establish a clear terminology before addressing
the universe of system providers.
A system provider is any firm that provides practitioners' offices or pharmacies with the
services and software required for transmitting or processing electronic prescriptions.
System providers can be described in several ways. Providers may install systems on
practice computers and servers, or they may install software needed to link the practice to the
service provider's systems. The latter are called application service providers (ASPs). An
ASP system is usually less expensive initially because the practice does not need to purchase
servers to store records and because trouble-shooting occurs at the ASP level rather than at
the practice. Reprogramming can be done without needing to install patches or new software
at the practice. ASPs also have the advantage that they can be accessed from any location
through the Internet. Installed systems are more costly at least in the early years because
they require more hardware and more on-site support. ASPs, however, may carry higher
annual maintenance fees.
Systems may be further divided into two groups-those that provide only electronic
prescription services (stand-alone systems) and those that provide electronic prescriptions as
part of an electronic medical record system (EMRs). These may be referred to as e-
prescription providers and EMR providers. The latter group is by far the larger; DEA
expects the e-prescription providers to disappear over time because most practices
transitioning to electronic records want a system that can integrate all of its records rather
than just handle one function. Although most stand-alone e-prescription systems are ASPs,
EMRs may be either ASPs or installed systems.
Prescriptions at pharmacies are handled by a pharmacy management system. These systems
may be ASPs or installed systems. The largest chains generally maintain a centralized
system that links all of their stores, functioning in effect as an ASP for the chain.
DEA estimated the number of electronic prescribing providers by combining the list of
providers certified by SureScripts with the list of EMR system providers certified by the
Certification Commission for Healthcare Information Technology (CCHIT) in December
10
www.nacds.org/user-assets/pdfs/facts_resources/2006/Retail_Outlets2006.pdf
April 2008 11
2007.
11, 12
The CCHIT list was used because any system certified under CCHIT must
support electronic prescribing. Overall, 119 firms were listed. The number may be slightly
high because some firms may be listed as both firms and software systems. Of the 119, 103
are EMR systems; the remainder are electronic prescription systems. Of the EMR systems,
86 are certified by CCHIT. SureScripts certifies 66 systems, including all of the stand-alone
systems. The number of pharmacy system providers (20) is based on the number of these
providers certified by SureScripts, which states that 95 percent of United States pharmacies
are able to accept electronic prescriptions. The number may be slightly high because a few
of the certified systems may be transmission networks rather than pharmacy management
systems. Balancing that is the possibility that a few of the larger chain pharmacies may have
their own systems, designed and maintained internally.
Because the pharmacy systems are generally already in operation, DEA assumed that it is a
mature market and the number of providing firms would remain at 20 throughout the
implementation period. A similar assumption cannot be made about the systems serving
practitioners. The market is evolving rapidly. When DEA began considering electronic
prescriptions for controlled substances, the majority of the firms were marketing e-
prescription services. As the numbers above indicate, the great preponderance of firms is
now selling EMR systems. It is reasonable to assume that most, and perhaps all, of the
electronic prescription systems will be sold to an EMR firm, incorporate EMR capability, or
simply fail. Similarly, it is likely that over the longer term, most of the EMR systems will
not succeed in the competitive marketplace. These systems are not only internally
complicated, requiring considerable investment in ongoing technical support from the
provider, but they also must be able to interoperate with systems used by testing laboratories,
hospitals, insurance companies, pharmacies, clinics, and other medical practices. In this
situation, the tendency will be for a few systems to become dominant players and then
replace the smaller systems because the dominant systems interoperate easily with other
systems using the same basic platform. As a recent study of the evolution of word
processing systems found, of more than 400 such systems being sold in the mid-1980s, only
a very few remained 10 years later.
13
Because the ongoing cost of the rule is driven in part by the cost to providers, DEA needed to
estimate the number of firms serving practitioners that would exist over time. As discussed
below under total costs, DEA projected that only 20 systems would remain in the market by
the end of ten years. DEA also estimated that in the first year, only 110 firms would comply
with the rule. This lower initial estimate (from the 119 firms certified) is based on the
assumption that there are almost certainly too many firms competing for what is still a
relatively small market; some will drop out rather than incur the effort and cost of becoming
compliant with the rule.
11
SureScripts is a pharmacy industry organization that certifies electronic prescription and pharmacy systems
that comply with the National Council for Prescription Drug Program SCRIPT standard; SureScripts
certification indicates that the service provider's systems will interoperate with other systems using the SCRIPT
standard. CCHIT establishes standards and certifies electronic medical record (EMR) systems.
12
http://www.cchit.org/choose/ambulatory/2007/index.asp, accessed 12/7/07 and www.surescripts.com/get-
connected.aspx?ptype=physician, accessed 12/5/07.
13
Bergin, T.J, "The Proliferation and Consolidation of Word Processing Software: 1985-1995."
IEEE Annals of the History of Computing. Volume 28, Issue 4, Oct.-Dec. 2006 Page(s):48 - 63
April 2008 12
A 2006 CDC study of EMR use found that only 12 percent of physicians reported having
fully electronic EMR systems, which implies that the 103 EMR providers are vying for a
market that has fewer than 40,000 practitioners.
14
With the cost of building and maintaining
a technically complex system, many existing firms are likely to run out of capital before they
gain enough market share to be profitable, and the number of sellers in this market will
continue to decline over time.
14
Centers for Disease Control and Prevention, "Electronic Medical Record Use by Office-Based Physicians and
Their Practices: United States 2006." Advance Data from Vital and Health Statistics, Number 393, October 26,
2007.
April 2008 13
April 2008 14
CHAPTER 3: UNIT COSTS
In estimating unit costs of the rule, the first step is to establish the baseline with which to
determine the costs that are incremental with respect to the rule. DEA presumes that no
practitioner's office will adopt electronic prescribing simply to write controlled substance
prescriptions; controlled substances now constitute about 11.0 percent of the total number of
prescriptions written annually in the United States.
15
The costs to a practitioner's office of
complying with the rule, therefore, are only the system costs directly required by the
electronic prescriptions for controlled substances rule and do not include any of the costs that
the office would incur for setting up electronic prescription capability without controlled
substances.
3.1 REQUIREMENTS
DEA is considering four variants on a rule to allow electronic prescription of controlled
substances-the Base Case, and Options 1, 2, and 3. The Base Case would impose the
following requirements on an electronic prescription system:
In-person identity proofing imposes costs on practitioners and providers.
Two-factor authentication requires that each practitioner with authority to sign
controlled substance prescriptions have a unique hard token to gain access to the
system. This imposes costs on some practitioners.
Monthly review of controlled substance prescription logs by practitioners imposes
a cost on practitioners.
System requirements impose reprogramming costs on service providers.
Requirements for annual independent third-party audits impose costs on service
providers.
Effects of options:
. Under Options 1 and 2 in-person identity proofing also imposes costs on DEA-
registered hospitals, State licensing boards, or law enforcement agencies; costs to
practitioners rise because of the greater time required.
. Option 2 does not require log reviews.
. Option 2 requires that each registrant have a digital signature, generated by a digital
certificate issued by a federally approved Certification Authority. This imposes costs
on practitioners' offices.
. Option 2 imposes lower costs for independent third-party audits.
15
The 11 percent is based on the percent of the top 200 brand name prescriptions filled (number of
prescriptions, not value) and top 200 generic prescriptions that DEA identified as controlled substances. The
analysis assumes that the remaining prescriptions (about one sixth of total prescriptions) will have the same
proportion of controlled substance prescriptions as the top 400 do.
April 2008 15
. Option 3 has none of the above requirements. Instead, sole reliance for security is
placed on a requirement for a callback from the pharmacy to the practitioner office
for every electronic prescription for a controlled substance received. This imposes
costs on pharmacies and practitioners' offices.
3.2 COSTS
3.2.1 IDENTITY PROOFING
Base Case:
Identity proofing under the Base Case requires a face-to-face meeting between each
practitioner who will use the system and a representative from the service provider. The
meeting would take two minutes of the practitioner's time (to show the provider a
government-issued photographic identification) and the service provider's time to look at the
identification and make a record of the type of identification seen. For each practitioner, an
information clerk would spend another eight minutes at the service provider's office
verifying that the practitioner's State license and DEA registration are active and in good
standing, and entering the practitioner's data into the service provider's record of identity
proofing. In many cases, the service provider would meet practitioners while on a visit to the
practitioner's office that would have been made for other purposes (e.g., installation, training,
trouble-shooting). In some cases, however, the visit would be made for no other purpose
than the identity proofing itself, particularly for some current electronic prescribing ASPs; in
such a case, the service provider staff person's travel time to and from the practitioner's
office would be a cost. DEA assumes an average round trip of two hours. Using a weighted
average for practitioners' wages (fully loaded) of $222.51, $83.80 for the service provider
representative, and $33.89 for the service provider clerk, the cost of identity proofing is $7.42
for practitioners, $2.79 for the service provider representative, and $4.52 for the service
provider clerk. Thus, the cost of identity proofing without travel is $14.73. Two hours of
travel adds $167.71, so the cost of identity proofing with travel is $182.34.
Options 1 and 2:
Identity proofing is conducted by a DEA-registered hospital, State licensing board, or State
or local law enforcement agency-not by the service provider. DEA assumes that the great
preponderance of the identity proofing would be done at hospitals. Since physicians
routinely visit local hospitals, travel time to the hospital for a medical doctor is not included
as a cost, but travel time for dentists and mid-level practitioners is regarded as incremental
cost. Average round trip to a hospital is assumed as one hour. The identity proofing session
at the hospital would require ten minutes of a practitioner's time and ten minutes for an agent
of the hospital. A hard document is generated and signed by both practitioner and hospital
agent. The document is mailed from the practitioner's office to the service provider's office.
For Option 2, the document would be mailed to the Certification Authority. Mailing requires
two minutes of a secretary's time plus postage. As in the Base Case, a clerk at the service
provider's office takes eight minutes to ensure that the practitioner's State license and DEA
registration are active and in good standing, and enter the data into the record. But, under
April 2008 16
Options 1 and 2, the service provider's clerk also calls the practitioner's office to verify the
application. This requires three minutes for the service provider clerk and one minute for the
practitioner. Finally, the service provider clerk takes another two minutes to file the
document.
For each identity proofing, then, 11 minutes are needed for the practitioner, ten minutes for
the hospital agent, 13 minutes for the service provider clerk, and two minutes for the
practitioner secretary. Full hourly cost for the hospital agent is $35.55, for the medical
secretary, $30.33. Additional costs are $0.41 for postage and annual storage cost (in a
standard filing cabinet) at the service provider's office of $0.01
16
.
Table 3-1: Summary of Identity Proofing Cost-Base Case
Cost item Time Full hourly cost Unit cost
Practitioner 2 minutes
$222.51 $7.42
Service provider representative 2 minutes
$83.80 $2.79
Service provider clerk 8 minutes
$33.89 $4.52
Travel for service provider representative
2 hours $83.80 $167.61
Total without travel $14.73
Total with travel $182.34
Table 3-2: Summary of Identity Proofing Cost-Options 1 and 2
Cost item Time Full hourly cost
Unit cost
MD 11 minutes
$269.00 $49.32
Dentist 11 minutes
$214.07 $39.25
Mid-level practitioner 11 minutes
$76.94 $14.11
Hospital staff 10 minutes
$35.55 $5.93
Service provider clerk 13 minutes
$33.89 $5.65
Practitioner secretary 2 minutes $30.33 $1.01
Dentist travel 1 hour $214.07 $214.07
Mid-level travel 1 hour $76.94 $76.94
Postage $0.41
Storage $0.01
Totals
MD (no travel) $63.84
Dentist $267.83
Mid-level practitioner $105.56
In Option 2, the hard copy of the identity proofing document is stored at the office of the
Certification Authority rather than the service provider's office, but that does not change the
cost.
3.2.2 TWO-FACTOR AUTHENTICATION
This requirement is the same for the Base Case and for Options 1 and 2. Two-factor
authentication requires that access to the system can be gained only using a combination of a
16
The annualized cost of a standard file cabinet is $10.98 a year (at 7%); a file cabinet holds about 1,100 files.
April 2008 17
hard token, which holds the practitioner's private cryptographic key or one-time-password
and a password. A number of devices may serve this purpose: e.g., PDAs, Blackberries,
thumb drives, smart cards, multi-factor one-time-password devices. It is assumed that
physicians and dentists will already have a PDA and be familiar with its use. The same
cannot be assumed for mid-level practitioners. DEA assumes that tokens would have to be
purchased for 75.0 percent of mid-level practitioners and those mid-level practitioners would
require training in the use of the tokens. For mid-level practitioners, the tokens would be
thumb drives. Time required for training is estimated to be ten minutes per mid-level
practitioner. Using the hourly wages (including fringes and overhead) for physician's
assistants of $76.94, the training cost is estimated to be $12.82. A thumb drive costs $12.00;
total unit cost for mid-level practitioners only: $24.82.
DEA has not considered the cost of using two-factor authentication prior to signing because
the actual authentication is no different, from the practitioner's point of view, from entering a
password as persons that use electronic prescription systems already do. The protection in
two-factor authentication is the storage of part of the authentication protocol on the hard
token; the actual authentication does not add steps for the practitioner signing a prescription
electronically although it may alter when the practitioner authenticates to the system.
3.2.3 DIGITAL CERTIFICATES
An approved Certification Authority would charge each practitioner an annual fee of $30.00
for issuing a digital certificate for a digital signature. The costs for digital certificates vary
from less than $20 a year to $80 or more depending on the security features.
3.2.4 MONTHLY REVIEW OF CONTROLLED SUBSTANCE PRESCRIPTION LOGS
This is the same for the Base Case and Option 1. There is no log review in Option 2. Once a
month, each practitioner would review the log of his controlled substance prescriptions for
that month. DEA is not proposing to require a comprehensive review or a cross-check with
medical records. Rather DEA is proposing that the practitioner check the log for obvious
anomalies - prescriptions for patients he did not see, prescriptions for substances he
generally does not prescribe, prescriptions for quantities that seem abnormal. DEA estimates
that a practitioner can review the log for obvious anomalies in an average of two minutes.
Although some practitioners will need more time than that, there will be a significant number
of practitioners who write few, or no, controlled substance prescriptions in any given month.
The average cost is estimated to be $7.42 per month or $89.01 per year, using a weighted
hourly wage for all practitioners.
3.2.5 PROGRAMMING COSTS
As shown in Table 3-1, a number of the proposed requirements would necessitate
reprogramming by some or all of the existing service providers. Any system currently able
to transmit prescriptions electronically should be complying with the NCPDP SCRIPT
standard, which includes fields for all of the basic prescription data elements that DEA
requires. If any existing program is not transmitting those elements (e.g., practitioner or
April 2008 18
patient address), their programs should nonetheless already be capable of doing so with little
effort because the fields already exist in the program. Some of the additional requirements,
such as the pop-up screen prior to signing, should require relatively minor programming.
Similarly, any ASP that does not have an automatic time-out function can add it relatively
easily. Any system provider that conducts secure transactions over the Internet will already
have a digital certificate and have done the programming needed to implement digital
signing; they will need to program to sign these prescriptions, but the more complex
programming for adding the digital signing functionality should already exist. The more
complicated programming may be adding access limitations where they do not currently exist
and adding two-factor authentication with a cryptographic key. Systems that do not support
these functions may need more substantial reprogramming.
Table 3-3 presents detail on the individual requirements that affect programming costs. The
items in italics are those that will require few, if any, entities to incur such costs.
Table 3-3: System Requirements
Requirement Current practice
Two-factor Level 4
authentication
EMRs certified by CCHIT must support 2-factor authentication.
17
Most
EMRs have this capability. E-prescribing systems may need to
reprogram to require cryptographic keys.
Limit access to
signing function
EMRs certified by CCHIT must do this. Many stand-alone systems also
already do this. Some systems may need to add this functionality.
Automatic lockout
after a period of
inactivity
EMRs certified by CCHIT must do this. Most systems may have this
function. For ASPs, the programming is relatively simple.
Prescription must
contain all DEA data
elements
All systems should already have this capability. All of the required
elements are included in SCRIPT. If any system does not include all of
these elements, it would have to reprogram.
Present the required
data elements to the
practitioner
Most systems present the full prescription information on a single
screen.
Indicate that each
prescription is ready
to be signed
Some existing systems already do this, requiring practitioners to check
off each prescription they want to sign. Others may need to reprogram
to include this function.
Authenticate to the
system just before
signing
Unclear when current systems require authentication. At least one
requires entry of separate password to sign. Most may need to
reprogram to apply this function at signing.
Transmit immediately
upon signature
May be common practice in existing systems because signing is the
equivalent of transmitting. Some systems may need to reprogram to add
this function.
Do not transmit if
printed; do not print if
transmitted
May be a new function for most systems. (This requirement does not
prevent printing a copy of a medical record.) Systems may need to
reprogram.
17
CCHIT Security Criteria 2007 Final 16Mar07.
April 2008 19
Requirement Current practice
Indicate that the
prescription was
signed
A new field for e-prescriptions; industry has indicated that this is not a
problem. SCRIPT will need to be revised to indicate which field will be
used. SCRIPT has available fields that can be used.
Generate monthly
logs for practitioner
review
All systems should be able to generate records.
First recipient digitally
signs the prescription
as transmitted
At least one service provider is already doing so. Service providers all
have digital certificates and the capability to sign records digitally. They
will need to reprogram to include the function.
Do not convert to fax if
cannot be delivered
May alter existing practice for some intermediaries. HHS has proposed
removing an exemption from the SCRIPT standard for faxes.
No alteration of the
content during
transmission except
for formatting
Industry says this does not happen so requirement should not impose a
burden.
First pharmacy (or last
transmitter) digitally
signs the prescription
as received
Intermediaries and at least some pharmacy system providers have digital
certificates and the capability to sign records. Any system that conducts
secure transactions on the Internet will have digital signature capability.
They may all have to reprogram to add the signing function.
Check the validity of
the prescriber's DEA
registration
(Pharmacy)
Many pharmacies already check the DEA registration database for
registration information. This will probably require some
reprogramming to automate the check for each prescription.
Store all of the DEA
data in the pharmacy
system
Pharmacy systems already do this. Some may have problems with
extensions to DEA registration numbers.
Have an internal audit
trail and analyze for
auditable events
(Pharmacy)
Most systems have this capability.
To estimate the cost of reprogramming, DEA divided the universe into systems that already
implement many of the functions required and those that may not. EMRs are assumed to
support most of the functions that may require more extensive programming. Stand-alone
electronic prescription systems are assumed to need more programming to support two-factor
Level 4 authentication and access limitations. For pharmacies, those systems that operate as
ASPs are assumed to require lower levels of programming because they will already have
digital signature functionality; the rest of the systems are assumed to need to add digital
signature functionality.
Based on industry information presented to DEA when the Agency developed the Controlled
Substances Ordering System, DEA estimated that adding digital signature functionality or the
authentication/access limits would require about 2,000 hours of programming time to install
and test.
18
For systems that only need to add new screens or less complex instructions, DEA
18
70 FR 16911, April 1, 2005. Economic analysis is available at
http://www.deadiversion.usdoj.gov/ecomm/csos/csos_eia_03112005.pdf.
April 2008 20
estimated that they would need 500 hours of programming and testing. DEA recognizes that
these estimates are averages and that there will be considerable variability based on the
functions that each system already has. Some systems may already meet almost all or all of
the requirements. Others may require more extensive revision. DEA notes that given the
complexity of even electronic prescribing systems, which are usually designed to link to drug
and formulary databases as well as in-house record systems (schedules/calendars, patient
databases, billing, etc.), the elements DEA is requiring are relatively simple and do not alter
any basic functions of the system. For cost estimates, DEA assumes that systems with EMR
capability and systems for providers to pharmacies will require 500 hours of reprogramming;
systems for practitioners with capability only for electronic prescriptions will require 2,000
hours.
Given the hourly cost of a programmer of $73.24, 500 hours of reprogramming costs
$36,619, and 2,000 hours costs $146,477. Both levels of reprogramming would be needed
under the Base Case and Option 1, according to capabilities of providers' existing systems.
Under Option 2, however, only 500-hour reprogramming would be required. Because
security would depend on the digital signature of a practitioner, complex authentication
procedures would not be required for service providers' systems.
DEA also recognizes that the NCPDP SCRIPT standard itself will need revision to add an
indication that the prescription has been signed. The standard is being revised on a
continuing basis; HHS testing of elements of the standard indicated that three of the six
elements tested were not ready for implementation. DEA, therefore, does not consider that
the cost of what is a minor revision - designating one of the open fields to indicate that the
prescription was signed - to impose any significant burden on the standard or on systems
using the standard. SureScripts and other intermediaries may also have to reprogram their
systems to ensure that no controlled substance prescription file is converted into a fax if the
electronic transmission fails. These systems, however, are constantly adjusting to new
service providers and existing service provider upgrades. This change should not impose a
burden on them. DEA notes that transforming an electronic data file into a fax would create
an illegal prescription because faxed prescriptions must be manually signed by the
practitioner prior to transmission.
3.2.6 AUDITING REQUIREMENTS
For the Base Case and Option 1, all system providers that serve practitioners would be
required to undergo an annual third-party security audit for system security, processing
integrity, and compliance with the rule. The audits would have to meet the standards of a
SysTrust, WebTrust, or SAS 70 audit; these audit protocols are established and maintained
by the American Institute of Certified Public Accountants and are widely recognized and
used in the commercial sector for IT systems.
19
The same level of audit would be required
for providers that serve pharmacies under the Base Case and both Options 1 and 2. The level
of audit for service providers to practitioners would drop under Option 2; reliance on the
19
For a description of these audits, see
http://www.ffiec.gov/ffiecinfobase/booklets/audit/audit_06_3_party.html.
April 2008 21
digital signature for security would lessen the need to audit for system security. Only audits
for processing integrity would be required for practitioner service providers under Option 2.
The first audit for a service provider is generally more costly than subsequent audits because
the auditors need to familiarize themselves with the system and document its elements.
Subsequent audits, if conducted by the same audit firm, do not involve the same learning
curve. DEA estimates the following per-vendor costs for audits: First-year audits: $125,000;
subsequent audits: $100,000. DEA notes that the costs of a SysTrust or SAS 70 audit range
from $15,000 to $250,000 depending on the size of the company. DEA used a conservative
estimate of $125,000 for the initial audit although in many cases the cost for the DEA
required audit elements would be less. A full SysTrust or SAS 70 audit covers five areas;
DEA is requiring that the audit address only two of those, physical security and processing
integrity. For Option 2 audits, addressing only processing integrity, DEA estimates annual
audit cost of $25,000, including first-year audits.
Table 3-4: Summary of Costs, Other Than Identity Proofing-Base Case, Options 1
and 2
Cost item Time Full hourly
cost
Unit cost
Two-factor token (mid-level practitioners only)
Learning 2 minutes $76.94 $12.82
Token $12.00
Total $24.82
Digital certificate (annual cost) (Option 2) $30.00
Monthly log review
(Base Case, Option 1)
2 minutes
per month
$222.51 $89.01
Reprogramming
Pharmacy systems 500 hours $73.24 $36,619
Practitioner systems
(EMR capability)
(all systems in Option 2)
500 hours $73.24 $36,619
Practitioner systems
(E-prescription only)
(Base Case and Option1)
2,000 hours $73.24 $146,477
Audits-annual cost
Pharmacy systems (first year) $125,000
Pharmacy systems (2
nd
and subsequent years) $100,000
Practitioner systems (first year) (Base Case, Option 1) $125,000
Practitioner systems (2
nd
and subsequent years)
(Base Case, Option 1)
$100,000
Practitioner systems (all years) (Option 2) $25,000
3.2.8 OPTION 3 REQUIREMENTS
Option 3 requires that a technician at the pharmacy call a practitioner's office and speak to
the prescribing practitioner for every electronic prescription of a controlled substance
April 2008 22
received by the pharmacy. DEA estimates that this will take three minutes for the pharmacy
technician, three minutes for a medical secretary who receives the call and retrieves the file,
and one minute for the practitioner to look at the file and speak to the pharmacy technician.
Table 3-5: Option-3 Unit Cost
Cost item Time Full hourly cost
Unit cost
Pharmacy technician 3 minutes
$26.63 $3.71
Practitioner secretary
3 minutes
$30.60 $1.53
Practitioner 1 minute $222.51 $3.71
Total $6.55
April 2008 23
April 2008 24
CHAPTER 4: TOTAL COSTS
To proceed from unit costs to total costs, it is necessary to establish the frequency of
occurrence of cost items and the distribution of those occurrences, and thus of costs, over
time.
4.1 NUMBERS OF PRACTITIONERS, OFFICES, AND SERVICE PROVIDERS
The first step is selection of the time horizon for the analysis. DEA has chosen 15 years for
the period of the analysis. DEA expects that full implementation of electronic prescriptions
for controlled substances will require 15 years, i.e., at the end of the 15th year of the analysis,
all practitioners' offices will have controlled substance electronic prescribing capability in
their IT systems.
Fifteen years is essentially an estimate of the time required for implementation of electronic
prescription and EMR systems. As practitioners adopt EMR and electronic prescription
systems, they will include electronic prescribing of controlled substances in the package, as
the incremental cost of doing so for an office is very slight. (Going forward, DEA expects
few practices to buy electronic prescription systems without getting the entire package with
EMR.) Although the selection of the implementation period is somewhat arbitrary, DEA
believes that 15 years is a reasonable estimate to reflect the balance between pressure from
insurers, who want practitioners to implement EMR systems, and the reluctance of
practitioners to invest in expensive systems that are time-consuming to implement and
perhaps not yet fully tested. The larger practices may well acquire EMR systems early on,
but the practices with five or fewer physicians-which employ 74.5 percent of all
practitioners-will take much longer to do so.
20
It is reasonable to assume that for the 35.8
percent of practitioners in solo practice, it could take at least 15 years before they adopt
EMRs.
To distribute costs over time, year by year, it is necessary to project the rate at which
electronic prescribing systems will be implemented in practitioners' offices. Table 4-1
shows the schedule at which DEA projects implementation over time.
Table 4-1: Implementation Schedule
Percentage of offices
implementing in a year
Cumulative implementation
percentage
Year 1 6.0 6.0
Year 2 4.0 10.0
Year 3 4.0 14.0
20
Hing, E., Burt, CW. "Characteristics of Office-Based Physicians and their Practices: United States, 2003-
2004," Series 13, Number 164. Hyattsville, MD: National Center for Health Statistics. January 2007.
April 2008 25
Percentage of offices
implementing in a year
Cumulative implementation
percentage
Year 4 5.0 19.0
Year 5 5.0 24.0
Year 6 5.0 29.0
Year 7 6.0 35.0
Year 8 6.0 41.0
Year 9 7.0 48.0
Year 10
9.0 57.0
Year 11
10.0 67.0
Year 12
11.0 78.0
Year 13
11.0 89.0
Year 14
6.0 95.0
Year 15
5.0 100.0
The rate in Year 1 is somewhat higher than the rate in the next several years, because some
percentage of offices has already adopted electronic prescription systems. After dropping in
Year 2, the rate rises gradually to a peak in Years 12 and 13 and then drops as full
implementation approaches.
Total costs for practitioners and some costs for providers will also be affected by the annual
growth rates of the different classes of practitioners-0.1 percent for physicians, 0.9 percent
for dentists, 2.2 percent for mid-level practitioners, and 0.7 percent for the weighted growth
rate for all practitioners. Table 4-2 shows the effect of the overall growth rate on number of
practitioners and the combined effects of the implementation rate and the growth rate on the
annual increment in the number of practitioners in offices with implemented e-prescription
systems.
Table 4-2: Annual Increments in Affected Practitioners
Total
practitioners
Practitioners adding EPCS systems
Cumulative practitioners in
offices with EPCS
Year 1 572,848 34,371 34,371
Year 2 576,673 23,296 57,667
Year 3 580,524 23,606 81,273
Year 4 584,400 29,763 111,036
Year 5 588,303 30,157 141,193
Year 6 592,231 30,554 171,747
Year 7 596,186 36,918 208,665
April 2008 26
Total
practitioners
Practitioners adding EPCS systems
Cumulative practitioners in
offices with EPCS
Year 8 600,167 37,403 246,068
Year 9 604,174 43,935 290,004
Year 10 608,209 56,675 346,679
Year 11 612,270 63,542 410,221
Year 12 616,359 70,539 480,760
Year 13 620,474 71,462 552,222
Year 14 624,618 41,165 593,387
Year 15 628,789 35,402 628,789
As noted in the chapter on unit costs, there are both start-up costs and ongoing costs driven
by the number of practitioners. Start-up costs incurred in each year will be based on the
number of practitioners in offices implementing electronic prescriptions for controlled
substances in that year plus new hires in offices that have already adopted controlled
substances prescribing. The combination of implementation and growth rates captures both
the newly implementing offices and the new hires.
Ongoing costs for practitioners will be based on the total number of practitioners in offices
where electronic prescriptions for controlled substances has been implemented in a given
year, i.e., the cumulative number of practitioners in offices that have adopted electronic
prescribing of controlled substances.
While most costs depend on number of practitioners, there are two exceptions for ASPs. One
has to do with office visits for in-person identity proofing (Base Case), the other with annual
audits. In some cases, as noted in Chapter 3, under the Base Case, ASP staff would have to
visit practitioners' offices for no purpose other than to conduct initial identity proofing. In
that case, an ASP staff person's travel time to and from such offices is an incremental cost
with respect to the rule, and the travel costs depend, in part, on the number of practitioners'
offices in which electronic prescriptions for controlled substances has been adopted. Table
4-3 shows DEA's projection of the total number of practitioners' offices and the year-by-year
number of offices implementing electronic prescriptions for controlled substances.
21
The
EPCS implementation rate for offices is the same as the implementation rate for practitioners
as shown in Table 4-1.
21
Growth rate is the weighted average of the growth rates of physicians' and dentists' offices based on the
number of such offices in 1997 and 2002 as found in the 2002 Economic Census-0.77 percent for physicians'
offices, 0.71 percent for dentists' offices, weighted average growth rate of 0.75 percent.
April 2008 27
Table 4-3: Practitioners' Offices Implementing Electronic Prescribing of Controlled
Substances
Offices adopting
EPCS in a year
Total offices
Year 1 16,856 280,929
Year 2 11,448 283,032
Year 3 11,618 285,152
Year 4 14,663 287,287
Year 5 14,881 289,438
Year 6 15,100 291,605
Year 7 18,261 293,788
Year 8 18,529 295,988
Year 9 21,783 298,204
Year 10 28,111 300,437
Year 11 31,551 302,687
Year 12 35,063 304,953
Year 13 35,577 307,237
Year 14 20,620 309,537
Year 15 17,795 311,855
DEA believes that visits only for initial identity proofing would be made almost entirely by
ASPs offering only electronic prescription systems, not EMRs. A significant amount of
work is required to set up and maintain an EMR system. It is highly unlikely that, during the
initial set-up of the system, EMR provider staff would be in a practitioner's office with no
task to perform other than identity proofing. DEA expects that the electronic prescription
system providers will disappear fairly quickly, either going out of business or expanding their
services to include EMR. As this happens, the percentage of initial visits made only for
identity proofing will decline to zero by the end of Year 5. This is shown in Table 4-4.
Table 4-4: Initial Visits Only for Proofing (Base Case)
Percentage of initial visits only for
identity proofing
Year 1 15.0
Year 2 12.0
Year 3 9.0
Year 4 6.0
Year 5 3.0
April 2008 28
Percentage of initial visits only for
identity proofing
Year 6 0.0
Year 7 0.0
Year 8 0.0
Year 9 0.0
Year 10 0.0
Year 11 0.0
Year 12 0.0
Year 13 0.0
Year 14 0.0
Year 15 0.0
Regarding audit costs for system providers, total cost is a function of the number of
providers. DEA expects that there will be 110 firms offering services to practitioners' offices
in Year 1, and that this number will drop to 20 in Year 11 and stabilize at that level. The
number of providers serving pharmacies remains stable at 20 throughout the analysis period.
Table 4-5 shows the projected number of providers to practitioners over the analysis period.
Table 4-5: Projected Reduction in Providers to Practitioners
Number of providers serving
practitioners
Year 1 110
Year 2 95
Year 3 80
Year 4 70
Year 5 60
Year 6 50
Year 7 40
Year 8 30
Year 9 25
Year 10 25
Year 11 20
Year 12 20
Year 13 20
Year 14 20
Year 15 20
April 2008 29
4.2 START-UP COSTS AND ON-GOING COSTS
Start-up costs are those incurred by an entity when it first implements electronic prescriptions
for controlled substances and takes the steps needed to comply with the rule. Under the
assumptions of this analysis, all start-up costs will be incurred during the 15-year analysis
period. Ongoing costs are those incurred after initial implementation and which will
continue indefinitely thereafter.
Start-up costs for practitioners are the initial identity proofing and the purchase of hard
tokens, and training in their use, for some of the mid-level practitioners. The major ongoing
cost is the monthly log review (absent in Option 2). Under Option 2, the digital certificate is
an ongoing cost for practitioners. There is also some ongoing cost associated with turnover
of personnel in practitioners' offices. When a practitioner moves to a new office, there is a
high likelihood that the transfer will also be a move between providers; when that is the case,
there must be a new identity proofing for that individual. Transfers of mid-level practitioners
are assumed to require new purchases of hard tokens.
For providers, the start-up cost is the required reprogramming. The major ongoing cost is the
annual audit. But providers also incur ongoing cost for identity proofing, both when a
practitioner's office adopts electronic prescriptions for controlled substances and in the case
of identity proofing required when practitioners transfer between offices with different
providers. Most identity proofing costs are shifted from providers to hospitals in Options 1
and 2. Table 4-6 presents a summary of start-up and ongoing costs and the timing of each
group of costs.
Table 4-6: Start-up and Ongoing Costs
Base Case, Options 1 and 2
Practitioners Providers
Start-up
costs
Initial identity proofing
Buying tokens for mid-levels
Training for mid-levels in use of tokens
Reprogramming for providers
Timing of
start-up
costs
These costs will accrue throughout the analysis
period as practitioners adopt EPCS.
All these costs will accrue in
Year 1 of the analysis.
Ongoing
costs
Monthly log reviews (not in Option 2)
Digital certificates (only in Option 2)
Proofing of transfers
Buying tokens for transferring mid-levels
Annual audits for providers
Identity proofing for start-up
practitioners
Identity proofing of transfers
(Identity proofing costs borne by
hospitals in Options 1 and 2)
Timing of
ongoing
costs
All of these costs will accrue in the time after
initial implementation in a practitioner office.
These costs will accrue throughout
the analysis period.
All callbacks in Option 3 are ongoing costs.
April 2008 30
Some further assumptions regarding these costs must be made to estimate total costs. These
are as follows:
For ongoing identity proofing visits due to personnel turnover, there is no
incremental travel cost in the Base Case.
Percentage of personnel transfers between offices that are also transfers between
service providers: 90.0 percent.
Annual turnover rate for physicians and dentists: 2.5 percent.
Annual turnover rate for mid-level practitioners: 5.0 percent.
DEA assumes that ongoing identity proofing will not involve travel costs in the Base Case
because provider staff may have to visit practices for other reasons, such as system upgrades,
maintenance, and staff training. Identity proofing can occur during those visits. Identity
proofing for transfers in Options 1 and 2 will still require travel to hospital for dentists and
mid-level practitioners.
4.3 TOTAL COSTS
Table 4-7 shows the annualized costs over the analysis period for each of the four variants.
The discounted present values over the analysis period are summed to yield present value of
total cost for the period. The present-value total is then annualized with a capital recovery
factor to yield annualized total costs.
Table 4-7: Total Costs ($)
7.0 percent 3.0 percent
Base Case $32,561,452 $33,392,270
Option 1 $38,256,015 $39,220,948
Option 2 $18,594,831 $18,928,003
Option 3 $1,280,040,536 $1,404,204,487
Tables 4-8 and 4-9 show annualized costs of individual cost items for the Base Case and the
three options with 7.0 and 3.0 percent interest rates. For simplicity, start-up and ongoing
costs have been combined for the same item, e.g., identity proofing includes both start-up and
ongoing identity proofing. Monthly log reviews are the largest single component of costs for
the Base Case and Option 1. It is the absence of log reviews in Option 2 that makes it the
low-cost variant. Annual audits for providers are large cost items. All the other costs are
relatively trivial compared to these items, except for the enormous cost of the call-backs in
Option 3.
April 2008 31
Table 4-8: Annualized Costs by Cost Item
7.0 percent
Practitioners Providers Total
Base Case
Identity
proofing
$352,367 $459,425 $811,792
Tokens $90,757 $90,757
Training $75,147 $75,147
Log reviews $22,495,039 $22,495,039
Reprogramming $824,224 $824,224
Audits $8,264,492 $8,264,492
Total $32,561,452
Option 1
Identity
proofing
$6,151,445 $354,910 $6,506,355
Tokens $90,757 $90,757
Training $75,147 $75,147
Log reviews $22,495,039 $22,495,039
Reprogramming $824,224 $824,224
Audits $8,264,492 $8,264,492
Total $38,256,015
Option 2
Identity
proofing
$6,151,445 $354,910 $6,506,355
Tokens $90,757 $90,757
Training $75,147 $75,147
Digital
Certificates
$7,582,154 $7,582,154
Reprogramming $703,606 $703,606
Audits $3,636,812 $3,636,812
Total $18,594,831
Option 3
Practitioners Pharmacies Total
Callbacks $1,023,778,891 $256,261,645 $1,280,040,536
April 2008 32
Table 4-9: Annualized Costs by Cost Item
3.0 percent
Practitioners Providers Total
Base Case
Identity
proofing $357,789 $443,823 $801,612
Tokens $94,227 $94,227
Training $76,832 $76,832
Log reviews $24,389,580 $24,389,580
Reprogramming $628,833 $628,833
Audits $7,401,186 $7,401,186
Total $33,392,270
Option 1
Identity
proofing $6,269,439 $360,851 $6,630,290
Tokens $94,227 $94,227
Training $76,832 $76,832
Log reviews $24,389,580 $24,389,580
Reprogramming $628,833 $628,833
Audits $7,401,186 $7,401,186
Total $39,220,948
Option 2
Identity
proofing $6,269,439 $360,851 $6,630,290
Tokens $94,227 $94,227
Training $76,832 $76,832
Digital
Certificates $8,220,726 $8,220,726
Reprogramming $536,808 $536,808
Audits $3,369,812 $3,369,812
Total $18,928,003
Option 3
Practitioners Pharmacies Total
Callbacks $1,123,085,458 $281,119,029 $1,404,204,487
Tables 4-10 through 4-13 present the cost for each year, the total cost over 15 years, and the
annualized costs for each option at both discount rates.
April 2008 33
Table 4-10: Base Option - Yearly, 15-Year, and Annualized Costs
Total Costs
Present value
7% 3%
YEAR 1 $27,861,426 $27,861,426
YEAR 2 $16,169,934 $16,797,893
YEAR 3 $15,604,822 $16,840,382
YEAR 4 $16,009,317 $17,947,852
YEAR 5 $16,209,149 $18,877,585
YEAR 6 $16,338,328 $19,766,983
YEAR 7 $16,881,782 $21,217,666
YEAR 8 $17,246,153 $22,517,392
YEAR 9 $18,185,251 $24,665,602
YEAR 10 $19,881,208 $28,013,138
YEAR 11 $21,282,559 $31,152,247
YEAR 12 $22,952,181 $34,900,853
YEAR 13 $24,300,482 $38,386,059
YEAR 14 $24,012,809 $39,404,711
YEAR 15 $23,631,498 $40,284,965
Total $296,566,901 $398,634,754
Annual $32,561,452 $33,392,270
Table 4-11: Option 1 - Yearly, 15-Year, and Annualized Costs
Total Costs
Present value
7% 3%
YEAR 1 $31,550,781 $31,550,781
YEAR 2 $18,673,871 $19,399,070
YEAR 3 $18,100,551 $19,533,717
YEAR 4 $19,042,767 $21,348,615
YEAR 5 $19,220,924 $22,385,174
YEAR 6 $19,322,054 $23,376,854
YEAR 7 $20,264,251 $25,468,882
YEAR 8 $20,532,343 $26,807,997
YEAR 9 $21,806,335 $29,577,067
YEAR 10 $24,209,769 $34,112,192
YEAR 11 $25,870,551 $37,867,899
YEAR 12 $27,769,551 $42,226,097
YEAR 13 $28,977,479 $45,774,038
YEAR 14 $26,938,424 $44,205,609
YEAR 15 $26,152,841 $44,583,136
Total $348,432,492 $468,217,128
Annual $38,256,015 $39,220,948
April 2008 34
Table 4-12: Option 2 - Yearly, 15-Year, and Annualized Costs
Total Costs
Present value
7% 3%
YEAR 1 $17,424,141 $17,424,141
YEAR 2 $8,834,926 $9,178,030
YEAR 3 $8,671,300 $9,357,877
YEAR 4 $9,409,060 $10,548,383
YEAR 5 $9,432,139 $10,984,907
YEAR 6 $9,422,978 $11,400,422
YEAR 7 $10,061,005 $12,645,054
YEAR 8 $10,089,256 $13,173,009
YEAR 9 $10,755,886 $14,588,767
YEAR 10 $12,063,256 $16,997,440
YEAR 11 $12,803,342 $18,740,833
YEAR 12 $13,579,798 $20,649,303
YEAR 13 $13,843,780 $21,868,214
YEAR 14 $11,786,863 $19,342,092
YEAR 15 $11,182,396 $19,062,796
Total $169,360,125 $225,961,268
Annual $18,594,831 $18,928,003
Table 4-13: Option 3 - Yearly, 15-Year, and Annualized Costs
Total Costs
Present value
7% 3%
YEAR 1 $112,983,045 $112,983,045
YEAR 2 $181,265,632 $188,305,074
YEAR 3 $244,285,086 $263,627,104
YEAR 4 $319,136,124 $357,779,641
YEAR 5 $388,049,433 $451,932,179
YEAR 6 $451,364,352 $546,084,716
YEAR 7 $524,385,591 $659,067,761
YEAR 8 $591,316,516 $772,050,805
YEAR 9 $666,393,630 $903,864,357
YEAR 10 $761,759,541 $1,073,338,924
YEAR 11 $861,928,610 $1,261,643,999
YEAR 12 $965,927,528 $1,468,779,581
YEAR 13 $1,060,946,280
$1,675,915,162
YEAR 14 $1,090,135,393
$1,788,898,207
YEAR 15 $1,104,613,335
$1,883,050,744
Total $9,324,490,097
$13,407,321,299
Annual $1,023,778,891
$1,123,085,458
April 2008 35
April 2008 36
CHAPTER 5: SMALL ENTITY ANALYSIS
Under the Regulatory Flexibility Act of 1980 (5 U.S.C. 601-612) (RFA), Federal agencies
must evaluate the impact of rules on small entities and determine whether the rule will have a
significant economic impact on a substantial number of small entities. This section discusses
DEA's analysis of the impact on small entities. DEA emphasizes that the rule is voluntary.
No businesses are required to comply with this rule unless they elect to issue or process
controlled substance prescriptions as electronic data files; practitioners and pharmacies have
the option to continue to use paper and, for Schedule III-V substances, oral prescriptions.
5.1 CHARACTERISTICS OF SMALL ENTITIES
As discussed in previous sections, the small entities directly affected by the proposed rule are
practitioners and, to a limited extent, pharmacies. The firms marketing services and software
are not directly affected by the rule because they will recover their costs from practitioners.
Nonetheless, DEA will discuss the impact on these firms. Table 5-1 shows Small Business
Administration's standards for these firms.
Table 5-1: SBA Definitions of Small Entities
Affected
Entity
Industry Description
NAICS
Code
Small Business Definition
(sales in $)
Offices of Physicians 62111 $9,000,000
Practitioner
and Mid-
Level
Practitioner
Offices of Dentists 621210 $6,500,000
Service
Provider
Software Publishing 511210 $23,000,000
Pharmacies and Drug Stores 44611 $6,500,000
Supermarkets and Other
Grocery Stores
44511 $25,000,000 Pharmacy
General Merchandise Stores
Mail Order Houses
45291
454113
$25,000,000
$23,000,000
Although some practitioners are part of large practices that may qualify as large businesses,
so few practitioners fall into the large category that it is simpler to assume that they are all
small entities. It is also the case that the service providers generally charge on a per
practitioner basis rather than a per practice basis so that the costs may be considered as
applying to individual practitioners. Mid-level practitioners are generally employed by a
practice so their costs would be incurred by the practice, not the individual. They are not,
therefore, small businesses.
April 2008 37
The lowest average net income for a physician in private practice listed in the Allied-
Physician Survey is $135,000.
22
The American Dental Association states that the average
net income of a dentist in private practice is $185,940 for a general practitioner. The average
gross billings for a dentist in general practice per dentist are $595,340.
23
For pharmacies, the
17,500 independent pharmacies are small entities; the other pharmacies belong to about 200
chains that are mostly large firms. There may be a few chains with fewer than 3 pharmacies,
which could be small. In 2006, National Association of Chain Drug Stores data indicate that
the average independent pharmacy had prescription sales of $2.48 million a year; average
total sales are about $2.675 million.
24
As discussed in Chapter 2, DEA estimates that there are about 130 service providers (110 for
electronic prescriptions, 20 for pharmacies) that will be indirectly affected by this rule. A
few of these are large entities or part of large companies (e.g., General Electric and
McKesson). DEA has no information on the revenues of most of these firms. DEA notes
that fully electronic EMRs cost between $20,000 and $50,000 per practitioner, with a usual
monthly maintenance fee of $500 per practitioner. A provider, therefore, would need fewer
than 4,000 practitioners to qualify as a large business. The providers of stand-alone
electronic prescribing systems charge a tenth as much and are assumed to be small entities.
5.2 SMALL ENTITY COSTS
The costs to DEA registrants are relatively small. As discussed in Chapter 4, the initial costs
to the practitioner would range from about $62 to $266 for identity proofing, mostly for the
time to have the identification checked. The main ongoing costs for the proposed rule would
be the monthly log review by practitioners (about $89 a year) plus any incremental cost of
the software or service. The initial and ongoing costs for the basic rule elements represent
less than 0.2 percent of the annual income of the lowest paid practitioner.
22
www.allied-physicians.com/salary-surveys, accessed 1/16/2008.
23
www.ada.org/ada/prod/survey/faq.asp, accessed 1/16/2008.
24
http://www.nacds.org/wmspage.cfm?parm1=507, accessed 1/18/2008.
April 2008 38
Determining the incremental cost of the system requirements per practitioner is difficult
because it depends on the number of providers, the number of customers, the number of
system requirements that a provider does not already meet, and how costs are recovered (in
the year in which the money is spent or over time). For example, an EMR system that had to
reprogram to the full extent would have incremental system costs of $161,000 ($125,000 for
the third-party audit and $37,000 for reprogramming). If the service provider had 1,000
practitioners enrolled in the first year, it would also incur about $5,660 for identity proofing.
If the provider recovered the costs ($167,000) from its 1,000 customers, the incremental cost
to those customers would be $167 or about $14 a month. The costs in the out years would be
lower because no further programming is needed and the audit cost is lower ($100,000). If
the provider added 1,000 practitioners a year over 15 years, the incremental cost per
practitioner would fall as shown in Table 5-2. The costs shown are conservative because the
audits may cost considerably less depending on the complexity of the system; many EMRs
may need little reprogramming. Either or both of these factors in combination could reduce
their costs considerably and, therefore, reduce the incremental costs to practitioners.
Table 5-2: Incremental Cost of EMR Systems to Practitioners
Year
#
Practitioners
Total Provider
Costs
Annual
Cost/Practitioner
Monthly Cost/
Practitioner
1 1000 $167,270 $167.27 $13.94
2 2000 $105,648 $52.82 $4.40
3 3000 $105,648 $35.22 $2.93
4 4000 $105,648 $26.41 $2.20
5 5000 $105,648 $21.13 $1.76
6 6000 $105,648 $17.61 $1.47
7 7000 $105,648 $15.09 $1.26
8 8000 $105,648 $13.21 $1.10
9 9000 $105,648 $11.74 $0.98
10 10000 $105,648 $10.56 $0.88
11 11000 $105,648 $9.60 $0.80
12 12000 $105,648 $8.80 $0.73
13 13000 $105,648 $8.13 $0.68
14 14000 $105,648 $7.55 $0.63
15 15000 $105,648 $7.04 $0.59
In the first year, the total cost to a physician for DEA's requirements would be less than
$300; dentists would have higher initial costs because of travel time. After that, the cost will
decline over time to about $100 to $150 a year including the incremental costs charged for
the systems. The lowest paid physician earns about $135,000 a year. For none of the
registrants will the cost represent a significant economic impact.
For pharmacies, the only costs will be the incremental cost that their service provider charges
to cover the costs of reprogramming and audits. In the first year, if the providers recover the
programming costs in a single year, the average incremental cost to a pharmacy would be
$85. After that, the incremental charge to recover the cost of the third-party audit would be
$35 per pharmacy, assuming the cost is evenly distributed across all pharmacies. The first
year charge represents 0.003 percent of an independent pharmacy's annual sales. It also
April 2008 39
represents a far lower cost than the pharmacy will pay SureScripts or another intermediary
for processing the prescriptions. Currently, SureScripts charges the pharmacy $0.215 per
electronic prescription to process and reformat prescriptions to ensure that the pharmacy
system will be able to capture the data electronically. Based on National Association of
Chain Drug Stores data on the average price of prescriptions ($68.26) and the average value
of prescription sales, an independent pharmacy processes about 36,400 prescriptions a year
and would have to pay SureScripts about $7,800.
25
5.3 ALTERNATIVES CONSIDERED
Although these costs do not represent a significant economic impact, as discussed above,
DEA considered options. The Base Case option would be less expensive initially,
particularly for dentists and mid-level practitioners, because much less time would be needed
for identity proofing. Once the identity proofing has occurred, however, the costs would be
the same for the Base Case and Option 1. Option 2 would be less expensive for practitioners
because the monthly log check would not be needed and the service provider costs would be
lower because less stringent auditing requirements would be imposed, which would reduce
the incremental costs recovered from the practitioner.
DEA has not proposed the Base Case because of two concerns about identity proofing. First,
DEA is concerned that having a service provider employee conduct the in-person identity
proofing would make it easier for insider collusion to occur. Putting the in-person identity
proofing in the hands of a DEA registrant or a public employee lessens that threat. Second,
others expressed a concern that service providers would not visit practitioners' offices often,
which could delay implementation and adoption, particularly for rural practices. DEA is not
proposing Option 2, the digital signature option, except for Federal healthcare systems
because of the concerns expressed by industry with regard to the use of digital signatures and
the problems they would create for intermediaries. The third option, which would impose no
costs on service providers, would be very expensive for pharmacies and practitioners. If the
average independent pharmacy processes 36,400 prescriptions, about 11 percent of those are
likely to be for controlled substances. Their annual cost for conducting callbacks on each of
those would be about $5,200 in 2008; eliminating callbacks that already occur, the costs
would be about $3,800 in 2008. If the number of controlled substance prescriptions (359
million original and newly authorized refills in 2008) were equally distributed among
practitioners (about 573,000 in 2008), the average practitioner would incur costs of about
$3,300 for callbacks under Option 3. Eliminating the callbacks that already occur, the
average practitioner would incur new costs of about $2,200 under Option 3.
DEA has, therefore, determined that the proposed rule would not impose a significant
economic impact on a substantial number of small entities directly subject to the rule. Less
expensive options are considered too burdensome by the service providers and
intermediaries. The option that would impose no burden on service providers would impose
substantially higher costs on practitioners and pharmacies.
25
http://www.nacds.org/wmspage.cfm?parm1=507, accessed 1/18/2008.
April 2008 40
5.4 OTHER ISSUES
Another issue that DEA considered is whether the incremental costs might affect
practitioners' decisions about purchasing a system that provides electronic prescribing. As
discussed previously in this analysis, the market for these systems has shifted away from
stand-alone systems to EMRs. The cost of an EMR system for the functionalities that
CCHIT requires ranges from $20,000 and $50,000 per practitioner with a usual annual
maintenance charge of $6,000 per practitioner. (There are some less expensive systems
marketed as EMRs that have only some of the functions; some appear to provide billing,
scheduling, and simple records, but none of the more complex functions such as electronic
prescribing, database links, etc.) Even in the first year, where the incremental cost of adding
DEA's requirements would be between $150 and $200, this additional charge is unlikely to
affect the decision to invest in an EMR, where the first year cost would be, at the low end
$26,000 ($20,000 plus the $6,000 maintenance fee). The incremental costs would add less
than 1 percent of the cost of the system; in the out-years, the incremental costs would
similarly be a small fraction of the annual system maintenance cost. For stand-alone
electronic prescription systems, the initial incremental costs will be higher because they are
expected to need more programming. After the initial year, however, their incremental costs
should be similar. These costs will represent a greater percentage increase in their monthly
charges, which average $50 per month, but this is unlikely to affect the initial decision
because most of these systems are being provided free to practitioners by insurers that want
to encourage electronic prescribing.
DEA considers it unlikely that any provider would attempt to market a product or service that
could not be used for controlled substance records and, therefore, no provider will be
disadvantaged by complying because all providers will incur costs and recover them from
customers. The situation may be similar to certification of EMRs by CCHIT. Some were
concerned that the standards would create barriers, but most of the companies certified have
been small. The chairman of CCHIT, Mark Leavitt stated that the data on the revenues of
firms that gained certification "laid to rest this concern that it was going to squeeze out small
vendors. It actually seems to have done the opposite. It's created a level playing field."
26
DEA notes that the barriers to adoption of electronic prescribing cited in various government
studies relate to the high cost of the systems, the disruption caused by implementing these
systems, and the relatively early stage of system development and interoperability provided
by the existing systems. Despite the benefits of legible prescriptions, both in terms of patient
safety and fewer callbacks from pharmacies, practitioners have resisted adoption of
electronic prescriptions. Insurance companies that have offered the systems for free have had
difficulty finding practitioners willing to accept them because, while the service is free, the
cost of additional hardware, training, and staff disruption is a barrier to adoption. In 2005,
Wellpoint offered physicians $42 million in hardware, software, and support. "Of the 25,000
physicians contacted, only 19,000 accepted these free gifts," Wellpoint then-CEO Leonard
Schaeffer said. "And of those 19,000, only 2,700 physicians chose e-prescribing PDAs. The
rest selected a paperwork reduction package. ... Free is not cheap enough," Schaeffer
26
California HealthCare Foundation, "Gauging the Progress of the National Health Information Technology
Initiative: Perspectives from the Field." January 2008.
April 2008 41
concluded.
27
The likelihood that the electronic prescribing systems will be part of EMR
systems probably is also slowing adoption because practices do not want to invest in a stand-
alone system that will be redundant later.
A study of physicians' experiences with commercial electronic prescription systems that was
funded by HHS and published in Health Affairs on April 3, 2007, examined the
implementation of electronic prescribing.
28
The study focused on larger medical practices
(12 of the 21 practices had more than 50 doctors; none had fewer than 5), which meant that
many of the practices had IT staff and support. Many of the problems encountered involved
not the basic function of writing a prescription, but other functions that are designed to
improve patient safety (e.g., medication histories, clinical decision support) and formulary
compliance. Connectivity with pharmacies was also a problem. Practice estimates of the
number of prescriptions printed out for the patient ranged from 10 percent to close to 100
percent. Despite the theoretical level of pharmacy readiness for electronic prescriptions,
"most practices using electronic fax or EDI [electronic data interchange] reported spending
substantial time educating pharmacies about e-prescribing." Many practices noted that "at
least some of the mail-order PBMs [pharmacy benefit managers] routinely rejected
prescriptions sent via electronic fax or EDI..."
Implementing a system was reported to be very complicated. One physician reported
working with the IT department 4 hours a week for 6 months to iron out the "kinks" in the
electronic prescribing module before the system could be tested. Maintenance of the system
continued to demand staff resources. The study concluded:
Much of the literature assessing barriers to electronic prescribing adoption and use
has focused on cost, physician resistance, and changing practice workflow. Our
findings highlight the role of product limitations, external implementation challenges,
and physicians' preferences for how to use system features and are consistent with
several other assessments of e-prescribing system functionality and provider
pharmacy connectivity.
Respondents' implementation hurdles belie the view that electronic prescribing
products are relatively simple "plug-and-play" applications. It is hard to imagine that
e-prescribing as it exists today can be the "killer app" that will drive further IT
adoption. All of the practices we examined, regardless of size, IT expertise,
geographic location, or vendor, had invested many financial and human resources in
implementing and maintaining e-prescribing.
These findings are consistent with the CDC study cited above, which found that electronic
prescribing was one of the less used functions in a fully or partially electronic EMR system.
27
Schaeffer, L. WellPoint Health Networks, Thousand Oaks, CA. Transforming an IT-Enabled Health Care
System: The Health Plan Role. Presentation at the Second Annual National Health Information Summit.
Washington DC, October 20, 2004. http://www.managedcaremag.com/archives/0504/0504.pharmacy.html
28
Grossman, Joy M. et al., "Physicians' Experiences Using Commercial E-Prescribing Systems," Health
Affairs, 26, no. 3 (2007), w393-w404.
April 2008 42
Creating an electronic prescription takes more time than writing a paper prescription and
handing it to a patient. The electronic prescription system shifts some responsibility from the
pharmacy to the practitioners. At present, it is the pharmacy that checks to see if a particular
drug is covered by the patient's insurance and that checks for drug interactions by examining
other medications the patient is taking. With electronic prescriptions, all of these checks may
occur before the practitioner signs the prescription. While this process may significantly
reduce processing time at the pharmacy and ensure that more prescribed drugs are on the
insurance companies' formularies, it may substantially increase the time a practitioner must
spend to create a prescription. Rather than spending a few seconds writing a prescription
while talking to the patient, the practitioner has to move through a series of drop-down
menus to select the patient, drug, dosage unit, and directions, then determine whether the
insurance company will cover it and at what level of co-pay. Finally the practitioner will
have to find the pharmacy from a drop-down menu. Electronic prescriptions are likely to
save practices staff time in reduced callbacks, but the practitioners may initially see mainly
the additional time that needs to be spent creating the prescription and the office disruption
that occurs when staff need to be trained on new systems. (An earlier Rand study noted that
although electronic prescriptions will eliminate errors caused by misread or misunderstood
prescriptions, practitioners may not review the prescription to check that the right items from
successive menus have been selected. Electronic prescriptions may introduce new errors
through system design flaws. They may also reduce the likelihood that the pharmacy will
check the prescription for errors.)
29
Although the rule could impose a burden on the smallest service providers, the costs are not
so great that a service provider would not be able to recover them from customers or that the
incremental price increase would discourage customers from purchasing a system. The
programming that may be needed to implement a conforming system is not so onerous that a
service provider would find it a significant burden; these firms are in the business of
designing, programming, implementing, and upgrading software systems. The cost of the
annual third-party audit may be burdensome, but without the audit there is no assurance that
the system is protected against identity theft and insider attacks, two of the most likely
sources of diversion. Some providers may drop out of the market if they cannot meet the
security standards that an auditor would demand, but given other government requirements
for security under HIPAA and the public's expectations for secure medical records, these
providers would not be able to meet other standards and public expectations. The market for
healthcare IT is evolving rapidly. As discussed above, DEA anticipates that most of the
current providers will not be in this market by the time most practitioners have adopted EMR
systems. Eventually, for reasons unrelated to DEA, a few systems will dominate the market;
for these providers, DEA's requirements will not be a burden.
29
Bell, D.S. et al., "Recommendations for Comparing Electronic Prescribing Systems: Results of An Expert
Consensus Process," Health Affairs, May 25, 2004, W4-305-317.
April 2008 43
April 2008 44
CHAPTER 6: BENEFITS
6.1 INTRODUCTION
Electronic prescriptions are widely expected to reduce errors in medication dispensing
because they will eliminate illegible written prescriptions and misunderstood oral
prescriptions. They are also expected to reduce the number of callbacks from pharmacy to
practitioner to address legibility, formulary, and contraindication issues. Electronic
prescriptions may also reduce processing time at the pharmacy and wait time for patients.
These benefits are likely to be mitigated to some extent. As the Rand study suggested,
practitioners may fail to review the prescription and notice errors that occur when the wrong
item is selected from one or more drop-down menus; pharmacists may be less likely to
question a legible electronic prescription.
30
In addition, the formulary and contraindication
checks are functions that practitioners sometimes disable because they do not work as they
should or take too much time.
31
Nonetheless, electronic prescriptions may provide benefits
in avoided medication errors, reduced processing time, and reduced callbacks. These
benefits of electronic prescriptions are not directly attributable to this proposed rule except to
the extent the rule facilitates implementation of electronic prescribing of controlled
substances.
6.2 QUANTIFIED BENEFITS
DEA has quantified two types of benefits: reduced number of callbacks to clarify
prescriptions and the reduction in wait time for patients picking up prescriptions. One of the
greatest burdens in the paper system is the need for callbacks to clarify prescriptions.
Clarifications and changes may be required for several reasons: the prescription is not
legible; required information is not included on the prescription; the prescribed dosage unit
does not exist; the particular medication is not approved by the patient's health insurance;
and the drug prescribed is contraindicated because it reacts with other medications the patient
is taking or because it negatively affects other conditions from which the patient suffers.
Each callback involves the pharmacist and one or more staff at the practitioner's office, often
including the practitioner. Electronic prescriptions will eliminate illegible prescriptions and
should eliminate those with missing information or unavailable dosage units or forms.
Whether the last two types of errors are eliminated will depend on the requirements of the
software systems and the accuracy of the drug databases that they use.
The public is also affected by the current system. For the majority of controlled substance
prescriptions, the patient (or someone acting for the patient) presents a paper prescription to
the pharmacy and then waits for the pharmacy to fill it. The time between the point when the
30
Bell, D.S. et al., "Recommendations for Comparing Electronic Prescribing Systems: Results of An Expert
Consensus Process," Health Affairs, May 25, 2004, W4-305-317.
31
Grossman, Joy M. et al., "Physicians' Experiences Using Commercial E-Prescribing Systems," Health
Affairs, 26, no. 3 (2007), w393-w404.
April 2008 45
prescription is handed to the pharmacist and the point when it is ready for pick-up is a cost to
the public.
To estimate the part of these benefits that may accrue to the proposed rule, DEA estimated
the number of controlled substance prescriptions that may require callbacks. Although there
are widely varying estimates for callbacks, the best available data, based on the operation of
the two largest mail order prescription pharmacies, support an estimate of 30 percent of
original prescriptions.
32
DrugTopics.com surveys of pharmacists in 1996
33
and 1999
34
indicated that 80 percent or 95 percent of the prescription problems were of the type that
electronic prescriptions could eliminate (illegible, missing information, or formulary).
35
The
analysis estimates that 90 percent of the callbacks could be eliminated with electronic
prescriptions because data from current operations indicate that formulary issues have
become a more prevalent cause of callbacks than was the case in the earlier surveys.
36
Overall, the analysis estimates that 27 percent of original prescriptions require callbacks.
DEA assumes that electronic prescriptions would phase in at the same rate as practitioners
(i.e., if 6 percent of practitioners had adopted electronic prescribing for controlled substances,
then 6 percent of the controlled substance prescriptions would be electronic.) Applying the
cost of a callback as estimated for Option 3 ($6.58), Table 6-1 presents the annual data for
the cost-savings from callbacks avoided over the 15 year implementation period. Table 6-2
presents the PV of the costs at 7 and 3 percent discount rates.
Table 6-1: Cost Savings of Callbacks Avoided
Year # Original
Prescriptions
# Callbacks Implementation
Rate
# Callbacks
Avoided
Cost Savings
2008 326,767,500 88,227,225 0.06 5,293,634 $34,832,108
2009 336,570,525 90,874,042 0.1 9,087,404 $59,795,119
2010 346,667,641 93,600,263 0.14 13,104,037 $86,224,562
2011 357,067,670 96,408,271 0.19 18,317,571 $120,529,620
2012 367,779,700 99,300,519 0.24 23,832,125 $156,815,380
2013 378,813,091 102,279,535 0.29 29,661,065 $195,169,808
2014 390,177,484 105,347,921 0.35 36,871,772 $242,616,261
2015 401,882,808 108,508,358 0.41 44,488,427 $292,733,849
2016 413,939,293 111,763,609 0.48 53,646,532 $352,994,183
2017 426,357,471 115,116,517 0.57 65,616,415 $431,756,010
2018 439,148,195 118,570,013 0.67 79,441,909 $522,727,758
2019 452,322,641 122,127,113 0.78 95,259,148 $626,805,196
32
"Company Pushes the Envelope to Get Prescriptions in the Mailbox," St. Petersburg Times, September 15,
2002. Story reports on Medco's mail order pharmacy operation. Barrett Toan, CEO of Express Scripts, also
reported a 30 percent callback rate. Express Scripts and Medco process about 600 million prescriptions.
33
"Where Does the Time Go?" Drugtopic.com, June 10, 1996.
34
"No Rest for the Weary," Drugtopic.com, June 21, 1999.
35
The analysis assumes that electronic prescriptions will be produced using prescription software that has fields
that must be completed and a database of formularies that will prompt the practitioner to select both the drug
name and an available dosage unit. Existing prescription software systems include formularies.
36
Medco reports 43 percent of its callbacks are for formulary issues; the Drugtopic surveys put the formulary
callbacks at less than 25 percent.
April 2008 46
Year # Original
Prescriptions
# Callbacks Implementation
Rate
# Callbacks
Avoided
Cost Savings
2020 465,892,321 125,790,927 0.89 111,953,925 $736,656,824
2021 479,869,090 129,564,654 0.95 123,086,422 $809,908,654
2022 494,265,163 133,451,594 1 133,451,594 $878,111,488
Table 6-2: PV and Annualized Cost Savings for Callbacks
Year PV at 7% PV at 3%
2008 $34,832,108 $34,832,108
2009 $55,883,289 $58,053,514
2010 $75,311,872 $81,274,920
2011 $98,388,073 $110,301,677
2012 $119,633,702 $139,328,434
2013 $139,153,376 $168,355,191
2014 $161,665,459 $203,187,299
2015 $182,299,929 $238,019,408
2016 $205,445,828 $278,656,867
2017 $234,846,662 $330,905,030
2018 $265,728,286 $388,958,544
2019 $297,790,633 $452,817,410
2020 $327,084,440 $516,676,275
2021 $336,083,298 $551,508,383
2022 $340,546,775 $580,535,141
Total $2,874,693,730 $4,133,410,200
Annualized $315,625,919 $346,241,638
Assuming that electronic controlled substance prescriptions phased in over 15 years, as
described above, the annualized time-saving for eliminating these callbacks would be $316
million (at 7% discount) or $346 million (at 3% discount).
Electronic prescriptions could also reduce the patient's wait time at the pharmacy. The
number of original controlled substance prescriptions that could require public wait time is
based on the estimated number of original prescriptions (approximately 328 million in 2008),
reduced by 19 percent, to account for those prescriptions phoned to the pharmacy
37
plus
another 15 percent to remove those that are currently filled by mail order pharmacies or long-
term care facilities.
38
Assuming the average wait time is 15 minutes for the 81 percent of
original prescriptions that are presented on paper to retail pharmacies (not mail order or long-
37
A 1999 Drugtopics.com survey indicated that 36% of all prescriptions were phoned in; because refills are
usually authorized on the original prescription and do not require second calls, and slightly less than half of
prescriptions are refills, the analysis uses 19% for phoned in prescriptions.
38
Based on IMS Health 2007 channel distribution by U.S. dispensed prescriptions. http://imshealth.com,
accessed April 16, 2008.
April 2008 47
term care prescriptions), at the current United States average hourly wage ($19.62)
39
, Table
6-3 presents the annual estimates.
Table 6-3: Costs Savings for Public Wait Time
Year
Original Paper
Prescriptions
Paper Prescriptions
Avoided Hours Saved Cost-Savings
2008 220,767,123 13,246,027 3,311,507 $64,971,764
2009 227,390,137 22,739,014 5,684,753 $111,534,862
2010 234,211,841 32,789,658 8,197,414 $160,833,271
2011 241,238,197 45,835,257 11,458,814 $224,821,937
2012 248,475,342 59,634,082 14,908,521 $292,505,173
2013 255,929,603 74,219,585 18,554,896 $364,047,063
2014 263,607,491 92,262,622 23,065,655 $452,548,160
2015 271,515,716 111,321,443 27,830,361 $546,031,680
2016 279,661,187 134,237,370 33,559,342 $658,434,299
2017 288,051,023 164,189,083 41,047,271 $805,347,452
2018 296,692,553 198,784,011 49,696,003 $975,035,572
2019 305,593,330 238,362,797 59,590,699 $1,169,169,521
2020 314,761,130 280,137,405 70,034,351 $1,374,073,974
2021 324,203,964 307,993,765 6,998,441 $1,510,709,420
2022 333,930,083 333,930,083 83,482,521 $1,637,927,055
Total $10,347,991,204
The annualized savings over 15 years would be $589 million (at 7% discount) or $646
million (at 3% discount).
The estimates for public wait time are upper bounds. They assume that the practitioner will
transmit the prescription and that the pharmacists will open the record and fill it before the
patient arrives at the pharmacy. It is probably more realistic to assume that only a fraction of
these benefits will be gained particularly in the early years when pharmacies are still getting
used to electronic prescriptions. There may also be some offsetting costs to the pharmacy.
The industry estimates that about 20 percent of prescriptions written are never presented to
pharmacies. If these are sent to pharmacies electronically and prepared before the patient
arrives, the pharmacy will have spent time for which it will not be reimbursed if the patient
does not pick up the prescription. (It may be reasonable to expect the 20 percent to decline
with electronic prescriptions, although probably not to zero.)
Table 6-4 presents the annualized benefits at a 7 percent and 3 percent discount rate.
39
BLS, "Employer Costs for Employee Compensation," December 2007, March 12, 2008. Table 2. All
civilian workers.
April 2008 48
Table 6-4: Annualized Benefits
7% 3%
Callbacks Avoided $315,626,000 $346,242,000
Public Wait Time Avoided $588,732,000 $645,839,000
The benefits, both of which represent time savings, clearly exceed by a wide margin the costs
of the Base Case and Options 1 and 2. The costs of Option 3 at $1.3 to $1.4 billion a year
exceed the benefits, which would not, of course, include callbacks eliminated.
6.3 QUALITATIVE BENEFITS
DEA is proposing additional security requirements for electronic controlled substance
prescriptions to ensure that electronic prescriptions for controlled substances do not become
an easy route for widespread and undetectable diversion of controlled substances. Properly
secure electronic prescribing systems have the potential to reduce prescription forgeries,
which will protect practitioners from identity theft and misuse of their DEA registration
numbers by practice staff and others. Secure pharmacy systems may help identify diversion
that occurs at pharmacies.
DEA has not attempted to quantify or monetize the benefits of the proposed rule that relate to
diversion because of a lack of data on the extent of diversion of controlled substances
through forged or altered prescriptions and alteration of pharmacy records. These benefits
are, however, discussed qualitatively in this section. The immediate cost of misuse of
prescription controlled substances is also reviewed in terms of data on deaths and emergency
room (ER) visits that result from nonmedical use of these drugs.
6.3.1 REDUCTION IN CONTROLLED SUBSTANCE PRESCRIPTION FORGERY
Diversion of controlled substances through forgery, doctor shopping (where a patient visits
more than one practitioner to receive prescriptions for the same controlled substance), and
alteration of pharmacy records is a growing problem. Controlled substances are diverted in a
number of ways, some of which will not be affected by electronic prescriptions. For
example, diversion occurs when:
Controlled substances are stolen from practitioners and pharmacies.
Practitioners knowingly write non-legitimate prescriptions.
Practitioners write prescriptions for people who have lied about symptoms to
obtain the drugs. A commonly used term for these patients is "doctor shoppers,"
people who routinely visit different doctors with the same ailment to obtain
multiple prescriptions for controlled substances, usually pain relievers. These
prescriptions are then filled at various pharmacies and the drugs are abused or
sold on the illicit market.
Although DEA does not expect the proposed rule to eliminate these problems, it may act as a
deterrent to practitioners who write non-legitimate prescriptions and to doctor shoppers
April 2008 49
because it will be easier for States to monitor prescriptions when they are electronic through
the use of State prescription monitoring programs. Digitally signed prescription records will
make it very difficult for a practitioner to claim that a prescription has been forged or altered.
Some States are already using prescription monitoring programs to identify practitioners who
prescribe unusual quantities of controlled substances and patients filling multiple
prescriptions at different pharmacies.
Electronic prescriptions for controlled substances will directly affect the following types of
diversion:
Stealing prescription pads or printing them, and writing non-legitimate
prescriptions.
Altering a legitimate prescription to obtain a higher dose or more dosage units
(e.g., changing a "10" to a "40").
Phoning in non-legitimate prescriptions late in the day when it is difficult for a
pharmacy to complete a confirmation call to the practitioner's office.
These are examples of prescription forgery that contribute significantly to the overall
problem of drug diversion. DEA expects this rule to reduce significantly these types of
forgeries because only practitioners with secure prescription-writing systems will be able to
issue electronic prescriptions for controlled substances and because any alteration of the
prescription at the pharmacy will be discernible from the audit log and a comparison of the
digitally signed records. DEA expects that over time, as electronic prescribing becomes the
norm, practitioners issuing paper prescriptions for controlled substances may find that their
prescriptions are examined more closely.
6.3.2 COST OF DIVERSION AND ABUSE OF PRESCRIPTION DRUGS
A reduction in forged controlled substance prescriptions could result in a reduction in drug-
related deaths and medical care. The 2006 National Survey on Drug Use and Health
(NSDUH) found that 6.7 million people in the United States currently use prescription-type
therapeutic drugs for nonmedical reasons.
40
This nonmedical use of prescription drugs can
lead to death and emergency room visits. The Substance Abuse and Mental Health Services
Administration (SAMHSA) runs the Drug Abuse Warning Network (DAWN), a public
health surveillance system that monitors drug-related visits to hospital emergency
departments and drug-related deaths investigated by medical examiners and coroners.
SAMHSA reported that in 2003, in six States (Maine, Maryland, New Hampshire, New
Mexico, Utah, and Vermont) there were 352 deaths from misuse of oxycodone and
hydrocodone, both prescription controlled substances.
41
The 32 metropolitan areas that are
part of DAWN reported 3,530 deaths from misuse of oxycodone and hydrocodone and 1,381
deaths that involved the misuse of benzodiazepines (Schedule IV controlled substances) in
40
Substance Abuse and Mental Health Services Administration. (2007). Results from the 2006 National Survey
on Drug Use and Health: National Findings (Office of Applied Studies, NSDUH Series H-32, DHHS
Publication No. SMA 07-4293). Rockville, MD.
41
The DAWN Report - Opiate-related Drug Misuse Deaths in Six States, 2003. Issue 19, 2006.
April 2008 50
2003.
42
These numbers do not include the 624 suicides that involved benzodiazepines or
opiates other than heroin and methadone.) The 32 metropolitan areas represent about 24
percent of the United States population.
In another report, SAMHSA stated that in 2004 there were 42,491 emergency room visits
involving nonmedical use of hydrocodone, 36,559 visits for nonmedical use of oxycodone,
and 144,000 visits for nonmedical use of benzodiazepines.
43
By 2005, the number of
emergency visits for nonmedical use of these drugs rose to 51,225 for hydrocodone, 42,810
for oxycodone, and 172,388 for the benzodiazepines. For all nonmedical use of prescription
opiates except methadone, the number of visits was about 155,000.
44
ER visits for all
controlled substances except methadone represented 60 percent of the 598,542 ER visits
involving nonmedical use of drugs.
45
(With methadone, they represent 67 percent of these
ER visits.) About 33 percent of all ER visits for nonmedical use of drugs resulted in the
person being admitted to the hospital; about 12 percent of ER visits resulted in the person
being admitted to an intensive care unit.
Using a value per life of $3 million, the costs of the 2003 deaths from misuse of prescription
controlled substances in the six States is more than $1 billion. The cost of the 2003 deaths
from misuse of prescription controlled substances in the 32 metropolitan areas is more than
$10 billion. The cost of the 2005 emergency room visits is above $350 million (at $1,000 per
visit), not including the cost of further in-patient care for those admitted. These costs are
some fraction of the total cost to the nation. Nonetheless, they add to more than $11.35
billion in one year. DEA has no basis for estimating what percentage of these costs could be
addressed by the proposed rule. If, however, the proposed rule prevents even a small fraction
of the deaths and emergency care the benefits will far exceed the costs. DEA notes that, at
7.0 percent, the total annualized cost of the rule is $38 million, 0.3 percent of $11.35 billion.
These costs also do not represent all of the costs of drug abuse to society. Drug abuse is
associated with crime and lost productivity. Crime imposes costs on the victims as well as
on government. DEA does not track information on controlled substance prescription drug
diversion because enforcement is generally handled by State and local authorities. The cost
of enforcement is, however, considerable. In 2007, DEA spent between $2,700 for a small
case and $147,000 for a large diversion case just for the primary investigators; adjudication
costs and support staff are additional. It is reasonable to assume that State and local law
enforcement agencies are spending similar sums per case. Some cases involve multiple
jurisdictions, all of which bear costs for collecting data and deposing witnesses. The rule as
proposed could reduce the number of cases and, therefore, reduce the costs to governments at
all levels. A reduction in forgeries would also benefit practitioners who would be less likely
to be at risk of being accused of diverting controlled substances and of then having to prove
that they were not responsible.
42
Drug Abuse Warning Network, 2003: Area Profiles of Drug-Related Mortality, SAMHSA March 2005.
43
The DAWN Report - Emergency Department Visits Involving Non-medical Use of Selected
Pharmaceuticals. Issue 23, 2006.
44
Drug Abuse Warning Network, 2005: National Estimates of Drug-Related Emergency Department Visits
DAWN Series D-29, DHHS Publication No. (SMA) 07-4256, Rockville, MD, March 2007.
45
Methadone is excluded because it may be obtained either by prescription or from narcotic treatment
programs.
April 2008 51
6.4 CONCLUSION
Electronic prescriptions for controlled substances would produce cost savings that may be
well in excess of the costs of the rule for three of the four options considered. If the rule
reduces diversion, it may also produce benefits in terms of reduced numbers of deaths and
medical costs that far exceed the cost of the rule. The rule would also protect practitioners
from misuse of their DEA registrations and reduce the costs to law enforcement. In contrast,
a less secure electronic prescription system could greatly increase diversion, the deaths and
medical costs associated with drug misuse, and the number of diversion cases. A less secure
system would dramatically increase investigation costs because every provider and
intermediary involved in a transaction would have to provide testimony to attempt to
demonstrate that a prescription was not altered during transmission. The costs of such
testimony would fall on law enforcement, service providers, and intermediaries. Finally, a
less secure system would expose practitioners to the risk of identity theft, with the
considerable costs associated with resolving those problems.
April 2008 52
CHAPTER 7: CONCLUSIONS
This chapter discusses the limitations of the analysis and presents the overall conclusions.
7.1 UNCERTAINTIES
Any economic analysis involves some level of uncertainty about elements of the analysis.
This is particularly true for this analysis, which must estimate costs for implementation of a
new technology and project voluntary adoption rates. This section discusses the elements
that have the greatest level of uncertainty associated with them.
7.1.1 RATES OF ADOPTION
In 2004, the President called for a majority of Americans to have interoperable electronic
health records within 10 years.
46
This analysis does not project adoption of electronic
prescribing to be that rapid in part because recent studies indicate that little progress has been
made in health IT adoption outside of very large medical practices and systems. A recent
report from the California HealthCare Foundation stated that "while larger physician groups
are increasingly using health IT, those who practice alone or in small groups are no closer to
using health IT now than they were three years ago." The report noted that even when
practices install EMR systems, they do not necessarily use them.
47
The barriers to adoption are the high cost of the systems, the disruption that implementation
creates in a practice, and uncertainty about the systems themselves.
48
As discussed in
Chapter 2, the pattern with software systems is that a large number of firms enter a market,
but the vast majority of them fail, leaving a very few dominant providers.
49
The health IT
market is still in the early phases of this process. DEA has no basis for estimating when
dominant players will emerge. The 15-year implementation period projected may be too
conservative or too optimistic.
7.1.2 COSTS TO SERVICE PROVIDERS
The time for reprogramming existing systems is estimated to be between 500 hours and
2,000 hours. DEA based the upper estimate on information provided by the industry for
DEA's rulemaking regarding electronic orders for controlled substances. The actual cost to
existing service providers is likely to vary widely. Some providers may meet all or virtually
all of the requirements and need little reprogramming. Many of the requirements are
46
California HealthCare Foundation, "Gauging the Progress of the National Health Information Technology
Initiative: Perspectives from the Field." January 2008.
47
Ibid.
48
California HealthCare Foundation, Snapshot: The State of Health Information Technology in California,
2008.
49
Bergin, T.J, "The Proliferation and Consolidation of Word Processing Software: 1985-1995." IEEE Annals
of the History of Computing. Volume 28, Issue 4, Oct.-Dec. 2006 Page(s):48 - 63.
April 2008 53
standard practice for software (e.g., access controls, automatic time outs) and should need
minimal adjustments. Most electronic prescribing systems appear to present the data DEA
would require on prescriptions. Any software firm that uses the Internet for any transaction
will have digital signature capability. EMR systems must support two-factor authentication
and control access to gain CCHIT certification. Nonetheless, DEA expects that for some
existing providers, the requirements may take more than the estimated time.
Another uncertainty on provider costs relates to the third-party audit and security provisions
that are needed to be judged acceptable under the SysTrust, WebTrust, or SAS 70 audit
protocols. DEA did not assign a cost to actions that might be needed to meet the security
standards because it has no basis for determining what may be needed by what fraction of the
providers. To compensate for this, DEA used a high estimate for the cost of the audit itself.
These audits range in cost from $15,000 to $250,000 depending on the complexity of the
firm and the IT systems. DEA is requiring that the audit focus on only 2 of the 5 elements
usually covered by the audit, hence the upper bound might be estimated to be $100,000 for
the initial audit and less than that for subsequent years even for a large firm. Most of the
firms marketing these systems are not large, so even lower costs might be appropriate. To
deal with the uncertainty of the potential costs of additional security steps, DEA used an
estimate of $125,000 for the first year and $100,000 for later years. DEA notes that many
firms may decide to obtain a full audit, covering all elements, but the added costs would not
accrue to this rule.
A final uncertainty of system provider costs relates to the proposed requirement for a back-up
system for pharmacy records that would have to be at a separate location. Some pharmacy
service providers already provide this, but it is possible that not all do. Nonetheless, DEA
considers that the requirement may be standard business practice simply because the loss of
the business records could have serious consequences unrelated to any DEA concerns.
7.2 COSTS AND BENEFITS
The costs of three of the four options considered ($19 million to $38 million annualized over
15 years at 7 percent) are far lower than the potential cost savings even if all of those savings
are not realized. For the Base Case, about two thirds of the costs are attributed to a single
requirement - that the practitioner review a log of controlled substance prescriptions once a
month. The cost of this proposed requirement is so great because, although the time required
is low, the cost of a practitioner's time and the number of practitioners are high. The cost of
identity proofing in Options 1 and 2 is higher, because the cost of practitioner travel time. In
Option 2, the cost of digital certificates is high because it is an annual cost. The costs to the
service provider are mainly the costs of the annual third-party audit. DEA assumes that the
service providers will recover their costs from the practitioners or pharmacies.
The cost savings that may occur could total $900 million a year although this is an upper
bound estimate. It is unlikely, especially in the early years, that all of public wait time
savings will be gained. Until pharmacies receive a substantial percentage of prescriptions
electronically and learn to check the incoming prescription records, there may be a
substantial lag between system receipt and pharmacist action. There may also still be
April 2008 54
callbacks although some of these could be sent electronically. One uncertainty associated
with callbacks is the frequency with which pharmacists will identify problems with electronic
prescriptions. Although the prescriptions will be legible, pharmacists may find keying errors
(e.g., wrong drug, wrong dosage unit, wrong form, etc.) and need to contact the practitioner
to clarify the prescriptions. If practitioners have not checked formularies, either because they
have turned off the function or because the particular formulary is not available to them,
pharmacies will still need to do callbacks for formulary issues. In addition, the ability of e-
prescribing systems to identify contraindication problems depends on the system having a
complete record of a patient's medications and medical problems. Until EMR systems can
interoperate with EMR systems at other practitioner offices to develop a complete medical
history, the pharmacy will continue to be a principal means of identifying these issues.
Needed contacts between a pharmacy and practitioner, whether electronic or telephone, will
lower the cost savings for callbacks and for public wait time.
The benefits of the security requirements would be a reduction in diversion of controlled
substances that are obtained from forged, altered, or invalid prescriptions. DEA has no basis
for estimating the current level of diversion from these activities and, therefore, no basis for
an estimate of a potential reduction. The cost of misuse of prescription controlled
substances, however, is extremely high. Misuse of prescription controlled substances in
2003 was involved in almost 5,000 deaths in metropolitan areas that cover 25 percent of the
United States population. The value of those deaths alone is above $10 billion. These drugs
were also involved in more than 350,000 emergency room visits in 2005, a number that was
more than 20 percent higher than the 2004 number. If the requirements of this rule reduce
even 0.5 percent of these costs, the benefits will far outweigh the costs. DEA notes that a
system that did not have the security controls DEA is proposing could lead to an upsurge of
deaths and illness because it would facilitate diversion rather than limit it and make it far
more difficult for law enforcement agencies to bring cases against the criminals involved.
7.3 SMALL ENTITY IMPACTS
DEA determined that this rule would affect a substantial number of small entities because
almost all practitioners and all independent pharmacies are small businesses. The costs to
these entities, however, are very low and would not impose a significant economic impact on
them, being far below one percent of their annual revenues. DEA also notes that the
proposed rule is voluntary; no practitioner or pharmacy would be required to handle
electronic prescriptions for controlled substances.
The service providers are not directly regulated by DEA and would be expected to recover
their costs from DEA registrants. DEA nonetheless considered their costs. Many of these
firms are small entities and may find complying with the security requirements, particularly
the audit, a burden. The cost, however, is not so great that they will not be able to pass it on
to customers. DEA considers it unlikely that any provider would attempt to market a product
or service that could not be used for controlled substance records and, therefore, no provider
will be disadvantaged by complying because all providers will incur costs and recover them
from customers. The situation may be similar to certification of EMRs by CCHIT. Some
were concerned that the standards would create barriers, but most of the companies certified
April 2008 55
have been small. The chairman of CCHIT, Mark Leavitt stated that the data on the revenues
of firms that gained certification "laid to rest this concern that it was going to squeeze out
small vendors. It actually seems to have done the opposite. It's created a level playing
field."
50
50
California HealthCare Foundation, "Gauging the Progress of the National Health Information Technology
Initiative: Perspectives from the Field." January 2008.
April 2008 56
April 2008 57
APPENDIX A: WAGES, FRINGE BENEFITS, AND WEIGHTED
AVERAGES
Average hourly wages for following occupations:
Physicians: $111.90 (June 2003)
Adjusted to December 2007 (based on BLS Employment Cost Index): $130.41
Source: Allied Physicians Survey
http://www.allied-physicians.com/salary_surveys/physician-salaries.htm
Hourly wage is based on weighted average annual salary of $223,808 divided by 2,000 to
obtain hourly wage. Average was weighted based on total number of physicians in
specialties likely to prescribe controlled substances, earnings of each specialty, and each
specialty's percentage share of total physicians in this universe.
Dentists: $93.00 (reported for 2004, treated as June 2004 for indexing)
Adjusted to December 2007 (based on BLS Employment Cost Index): $103.78
Source: "What Can a Career in Dentistry Offer You?"
http://www.ada.org/public/careers/team/dentistry_fact.pdf
The online fact sheet is, in turn, based on ADA 2004 Survey of Dental Practice,
Characteristics of Dentists in Private Practice and their Patients, American Dental
Association.
Hourly wage is based on reported average earnings of $185,940 of a dentist with his own
practice, divided by 2,000.
Mid-level practitioners: $35.64 (May 2006, treated as June 2006 for indexing)
Adjusted to December 2007 (based on BLS Employment Cost Index): $37.30
Source: Office of Employment Statistics, May 2006 National Industry-Specific Occupational
Employment and Wage Estimates.
http://www.bls.gov/oes/current/naics4_621100.htm#b29-0000
Hourly wage for physicians' assistants (Standard Occupational Classification (SOC) Code
29-1071), taken as wage for all mid-level practitioners.
Medical secretaries: $14.05 (May 2006, treated as June 2006 for indexing)
Adjusted to December 2007 (based on BLS Employment Cost Index): $14.70
Source: Office of Employment Statistics, May 2006 National Industry-Specific Occupational
Employment and Wage Estimates.
http://www.bls.gov/oes/current/oes436013.htm
Hourly wage for medical secretaries in physicians' offices (SOC Code 43-6013).
Hospital human-resource assistants: $15.73 (May 2006, treated as June 2006 for indexing)
Adjusted to December 2007 (based on BLS Employment Cost Index): $16.56
Source: Office of Employment Statistics, May 2006 National Industry-Specific Occupational
Employment and Wage Estimates.
http://www.bls.gov/oes/current/naics4_622100.htm#b43-0000
Hourly wage for hospital human-resource assistants (SOC Code 43-4161).
April 2008 58
Pharmacy technicians: $12.04 (May 2006, treated as June 2006 for indexing)
Adjusted to December 2007 (based on BLS Employment Cost Index): $12.60
Source: Office of Employment Statistics, May 2006 National Industry-Specific Occupational
Employment and Wage Estimates.
http://www.bls.gov/oes/current/naics5_446110.htm#b29-0000
Hourly wage for pharmacy technicians (SOC Code 29-2052).
Service provider support/sales staff: $39.21 (May 2006, treated as June 2006 for indexing)
Adjusted to December 2007 (based on BLS Employment Cost Index): $40.70
Source: Office of Employment Statistics, May 2006 National Industry-Specific Occupational
Employment and Wage Estimates.
http://www.bls.gov/oes/current/oes414011.htm#nat
Hourly wage for sales representatives for computer-system design and related services (SOC
Code 41-4011).
Service provider information clerks: $15.70 (May 2006, treated as June 2006 for indexing)
Adjusted to December 2007 (based on BLS Employment Cost Index): $16.46
Source: Office of Employment Statistics, May 2006 National Industry-Specific Occupational
Employment and Wage Estimates.
http://www.bls.gov/oes/current/oes434199.htm
Hourly wage for information and record clerks for computer-system design and related
services (SOC Code 43-4199)
Computer programmers: $33.42 (May 2006, treated as June 2006 for indexing)
Adjusted to December 2007 (based on BLS Employment Cost Index): $35.19
Source: Office of Employment Statistics, May 2006 National Industry-Specific Occupational
Employment and Wage Estimates.
http://www.bls.gov/oes/current/naics4_621100.htm#b15-0000
Hourly wage for computer programmers (SOC Code 15-1021).
Fringe Benefits and Overhead
Fringe benefits for health workers (except hospitals): 38.0 percent of wages
Fringe benefits for hospital staff: 44.0 percent of wages
Fringe benefits for service provider staff: 38.0 percent of wages
Fringe benefits for computer programmers and pharmacy staff: 40.0 percent of wages
Source: BLS Employer Cost of Employee Compensation, Table 14 for health workers, Table
9 for others.
http://www.bls.gov/news.release/pdf/ecec.pdf
Overhead for all offices in study: 49.0 percent
Source: Grant Thornton, LLP, 12
th
Annual Government Contractor Industry Survey, 2006, p.
8.
April 2008 59
The overhead is applied as a multiplier to wages plus fringes. Therefore, the multiplier to
convert hourly wages to fully loaded hourly cost is:
Health workers (except hospitals) and provider staff-1.38 x 1.49 = 2.06
Hospital staff-1.44 x 1.49 = 2.15
Computer programmers and pharmacy staff-1.40 x 1.49 = 2.09.
Thus, fully loaded hourly costs are:
Physicians 2.06 x 130.41 = $269.00
Dentists 2.06 x 103.78 = $214.07
Mid-level practitioners 2.06 x 37.30 = $76.94
Medical secretaries 2.06 x 14.70 = $30.33
Hospital HR staff 2.15 x 16.56 = $35.55
Pharmacy technicians 2.09 x 12.60 = $26.23
Service provider representatives 2.06 x 40.70 = $83.80
Service provider clerks 2.06 x 16.46 = $33.89
Computer programmers 2.09 x 35.19 = $73.24
To obtain hourly cost for all practitioners and for all dentists and physicians together, average
costs were weighted by each group's percentage share of the total. A separate wage rate was
calculated for physicians and dentists because turnover rates for these practitioners are
assumed to be different from turnover rates for mid-level practitioners and are, therefore,
costed separately.
% all practitioners % all MDs and dentists
Physicians 54.0 65.0
Dentists 30.0 35.0
Mid-levels 16.0
Weighted growth rate for practitioners' offices was based on the relative population shares of
physicians and dentists in the affected universe as shown above.
April 2008 60
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