Q. I opened a pharmacy last year to service my respiratory medication patients. With the cuts in the new Medicare bill, I have already stopped marketing and wonder if I should close the pharmacy?

A. Even after the 2004 cuts, respiratory medications are still profitable (Medicare and private insurance). What appears to be significant cuts are scheduled for 2005 based on “manufacturers average selling price” plus 6%. However, there is still quite a bit of debate as to what final reimbursement rates will actually be determined and implemented by CMS. Until the final details are sorted out, I would continue to market medications and then determine a strategy for 2005 based on the implementation details once they are released by CMS.

As you plan for 2005, remember that reimbursements and gross profits are coming down and pharmacies will require greater scale to reach profitability. You may want to consider adding new product lines to your pharmacy to gain enough volume to cover your fixed costs. And, even if profitability is reduced to break even, it still may make sense to stay in the business. Many respiratory medication patients will require oxygen in the future, thus a break even pharmacy is like a sales rep that costs nothing but provides a steady stream of oxygen patients.

Richard Glass is the president of SRA, specializing in the growth and sale of HME/ Respiratory companies. 800- 813-4984.

Reprinted with permission of HME News from the April 2004 issue. ©2004 United Publications, Inc., Yarmouth, ME.

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