e-Texas e-Texassmaller smarter faster governmentDecember, 2000
Carole Keeton Rylander
Texas Comptroller of Public Accounts

Recommendations of the Texas Comptroller

Chapter 8: Health and Human Services

Authorize the Use of Automated Drug Dispensing Systems


In fiscal 1999, Texas spent $178 million on prescription drugs for its Medicaid-funded nursing home population, and these drug expenditures are expected to continue rising more rapidly than the general inflation rate. From 4 percent to 10 percent of all medications are needlessly wasted in long-term care facilities. To reduce drug waste in the Medicaid Vendor Drug Program, Texas should authorize long-term care facilities to use automated drug dispensing systems that package and label single doses as needed.


Automated drug dispensing systems use sophisticated computer technology to package and label single doses of drugs so that they can be administered precisely to patients in health care facilities. Such devices help eliminate waste due to changes in doctor’s orders, patient deaths, transfers, etc., and they can reduce human error in the administration of medications, since they label, deliver, and record medication administered to patients with multiple, built-in checks and verifications.

Automated drug dispensing systems are particularly useful in long-term care facilities, such as nursing homes, which provide pharmaceutical services. Various studies over the last 10 years have reported that the percentage of drug waste in long-term care facilities ranges from 4 percent to 10 percent.[1] Automated drug dispensing systems help long-term care facilities reduce such waste and administer medications more accurately, thereby improving their quality of care. A pharmacy manager at a Florida nursing home that leases an automated drug-dispensing machine told e-Texas staff the system has cut his facility’s drug waste by 90 percent.[2]

In addition, such systems facilitate inventory control and, as a North Carolina nursing home administrator has noted, free nurses to spend more time with patients.[3] Drug dispensing systems benefit pharmacists as well, since they eliminate the need to process and credit returns, allow for less-frequent refills, expedite after-hours orders, and reduce the number of trips pharmacists must make to nursing homes each month.

Medicaid Drug Waste

Automated drug dispensing systems could help Texas save on Medicaid drug costs at a time when such expenditures are rising rapidly. Drug expenditures in the Texas Medicaid Vendor Drug Program rose by between 11 percent and 16 percent annually between 1995 and 1999. In 1999, Texas spent $178 million on prescription drugs for nursing home residents, and that amount is projected to reach $208 million in fiscal 2000.[4]

At present, medications at long-term care facilities that are discontinued or left over after the death of a patient are destroyed. Several studies have been conducted to determine the rate or percentage of drug waste in long-term care facilities. A 1992 study of selected Central Texas long-term care facilities found that 7.7 percent of 999 prescriptions dispensed involved some quantity of waste, and that overall medication waste amounted to 3.7 percent of the cost of the prescriptions dispensed.[5] A more recent Massachusetts study found that drug waste totaled 6.7 percent of the cost of all medications dispensed. Patient deaths and medication discontinuation accounted for almost 70 percent of the medications destroyed, with the remainder due to changes in medication or dosage, medication expiration, or patient hospitalization.[6]

In Texas facilities, a licensed pharmacist must be on site to oversee the dispensing of medications and cannot operate an automatic drug dispensing machine from a remote location. Other states, including Florida, New York, and North Carolina, offer special licenses allowing long-term care facilities with automated drug-dispensing machines to work with offsite pharmacists. Still other states, including Kansas, Louisiana, Mississippi, South Carolina, Ohio and West Virginia, have broader rules and laws that do not preclude the use of the devices.[7]


State law should be amended to authorize long-term care facilities to use automated drug dispensing systems that store, package, dispense, distribute, and label prescription drugs.

Fiscal Impact

Automated drug dispensing systems would eliminate drug waste in nursing homes by updating patient medication routines on a daily basis. Based on previous studies, the Medicaid Vendor Drug Program could expect to prevent drug waste equal to at least 3.7 percent of the program’s drug expenditures in nursing homes that choose to invest in a system.

If all Texas nursing homes with more than 100 beds purchased or leased an automated drug dispensing machine, total state and federal savings to the Medicaid program would be about $5 million annually. Actual savings would depend upon the actions of individual care facilities and cannot be estimated.

[1] Robert P. Paone et al, “Medication Destruction and Waste Measurement and Management in Long-term Care Facilities,” The Consultant Pharmacist (January 1996), p. 32.

[2] Telephone interview with Oscar Perry, pharmacy manager of Okeechobee Healthcare Facility, Okeechobee, Florida, August 4, 2000.

[3] Telephone interview with Kevin Parries, administrator, Fleshers Fairview Healthcare Center. Fairview, North Carolina, August 4, 2000.

[4] E-mail communication from Ben Sherman, Texas Department of Health, August 4, 2000.

[5] Brian D. Shinavier and Kenneth W. Kirk, “Medication Waste in Selected Central Texas Long-term Care Facilities Under the Same Corporate Ownership,” The Consultant Pharmacist (April 1992), p. 422.

[6] Robert P. Paone et al, “Medication Destruction and Waste Measurement and Management in Long-term Care Facilities,” p. 32.

[7] Telephone interview with Tom Kraft, KVM Technologies, Inc., Houston, Texas, June 1, 2000.

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Austin, Texas

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