Neb-med market continues to shrink
YARMOUTH, Maine - Neb-med providers left the market in droves in 2008, pushed out by declining Medicare reimbursement, and industry sources expect more of the same in 2009.
"Unless there is a change (in policy), we are going to see continuous consolidation in the market," said Mickey Letson, president of Decatur, Ala.-based Letco Companies. "You have to have a tremendous amount of patients to survive and even bigger companies are struggling financially."
Several large providers threw in the towel in 2008. In August, Independence Home Pharmacy, which had about 20,000 patients, filed for Chapter 7 bankruptcy. In November, Praxair, which had about 5,000 patients, closed its neb-med pharmacy. In a statement to HME News, the company blamed "dramatic reimbursement cuts made by Medicare."
And in December, frustrated by lackluster reimbursement, Cincinnati-based HME Services pulled the plug on its neb-med business.
"There are costs associated with the detailed service we provide," said Michael Boyce, director of sales and marketing. "The writing is on the wall."
It was also a rough year for small providers. Hi-Tech Homecare, for one, suspended its neb-med business in October.
"At the first of the year, we had about $750,000 in revenues," said Todd Tyson, president of Norcross, Ga.-based Hi-Tech Healthcare. "Now, for the same number of patients, it's dropped to between $300,000 and $400,000."
With little to no margin to be made on neb-meds, providers must make their profits on the $33 dispensing fee. But that alone is not enough to cover the costs associated with supplying the drugs, said provider Sam Jarczynski.
"You have to have proof of delivery and there are shipping costs and increased fuel costs," said Jarczynski, president of St. Petersburg, Fla.-based Rx Stat. "You also have to pay a pharmacist."
Provider David McDonald, whose company recently acquired the patients of several companies, including Praxair, said he's begun the "courting process" with a few other large companies looking to exit the market.
"I think there will be a few bigger players to make some waves," said McDonald, president of Senior Respiratory Solutions in Texarkana, Texas. "If it's not what you do best, don't do it."