Joint venture mines Part D benefit

Wednesday, May 31, 2006

HAYLEYVILLE, Ala. - After the dust from the new Medicare Part D program settled, Brent McNutt saw an opportunity to get into the retail pharmacy business--and bring fellow HME providers along for the ride.
In March, McNutt rolled out Global Pharmacy and Medical Equipment, adding retail pharmacy to his traditional DME/oxygen and respiratory meds business. He also unveiled a joint venture program in which Global partners with other providers seeking to expand into retail pharmacy.
"What we're offering is a 40% ownership of the pharmacy, so the paid-in capital can range from $10,000 to $20,000," said McNutt. "Some look at is as more of an investment and some like the idea of having a joint pharmacy in their area."
Providers refer interested customers to Global who then delivers or ships medications via mail or UPS. When the HME reaches a critical mass of 600 to 800 customers, a pharmacist is hired and a location--preferably in the provider's local area--is established.
Despite near-constant industry upheavals, McNutt is confident his program has legs.
"The government has a lot at stake here because so many people are affected by prescription drugs," said McNutt, president of the five-year-old company. "They're taking a huge voter base and bringing them into this. I feel the government is going to protect that as a service because it's such a big political issue."
McNutt's research bore out the money-making potential.
"We discovered that our average customer has five to six prescriptions per month and the average gross profit is $9 to $10 a month per prescription," said McNutt.
With those numbers, McNutt felt confident offering providers a joint venture arrangement.
There are a few key points to follow when entering into such a venture, said Jeff Baird, an attorney with Brown and Fortunato in Amarillo, Texas. Both partners need to invest risk capital and the pharmacy operation must be set up as a corporation or limited liability company.
"The pharmacy needs to be independent from Global and XYZ DME," said Baird. "It needs to have its own employees, space and inventory."
Either of the partners can offer services to the pharmacy as long as they are paid fair market value.
Following these rules lets providers pass what Baird calls the "smell test," complying with OIG guidelines on fraud and contractual joint ventures. The new program differs from the mail order respiratory pharmacy--DME partnerships of the past, he said.
"That type of business arrangement is going out the window," said Baird. "This pharmacy is going to be dealing in your standard retail drugs."
McNutt has already signed on three providers and hopes to have 50 on board in the next year.