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
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
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.