Who else might deliver neb-meds?

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Saturday, July 31, 2004

YARMOUTH, Maine - As the uncertainty over respiratory medication reimbursement persists and more companies threaten to quit the product line, some industry watchers suggest that retail pharmacies could step up as the new distribution channel.

“[The ASP] could leave a huge gap,” said Bill Bonello, a Wachovia Securities analyst. “It certainly leaves a gap in terms of patients being able to get their medication in a way they are accustomed to getting them, which is delivered to the home.”

The MMA’s proposed switch in reimbursement strategies to average sales price plus 6% is scheduled to take effect at the start of 2005 despite sharp criticism from the industry, which says the method will effectively eliminate all provider profits and cause many businesses to close.

Bonello has been looking at the industry to determine what distribution alternatives exist if the big providers, like Lincare or Apria, do exit the respiratory business.

“It’s possible that some other specialty drug distributors would step up,” he said.

Bonello said there was a “mixed response” from the distributors questioned on the likelihood of adding respiratory medications, like albuterol and ipratropium, to their mix.

A similar uncertainty lingers around the retail pharmacies. Bonello said adding the drugs will have little impact on the incremental cost structure of pharmacy giants, like Walgreens and Rite Aid, which already distribute thousands of different medications.

“The difference with the DME and respiratory companies is that they are used to higher reimbursement than pharmacies are,” said Sheldon Rubin, president of Medical Center Pharmacy in North Billerica, Mass. “[Pharmacies] are not making great reimbursements on their drugs as a general rule, so I think we might be more inclined to add respiratory medications if we are making a comparable profit to our other drugs.”

Others say pharmacies are more likely to shy from the medications because of the low drug margins and a myriad of other logistical problems associated with billing and caring for Medicare patients, said Mickey Letson, president of the Letco Companies. Pharmacies also are unfamiliar with CMNs and completing patient check-ups required by Medicare.

“I just don’t see every single retail pharmacy hiring two or three extra employees just to handle a few nebulizer medication patients,” he said.

Letson also said he thinks a CVS-or-Rite Aid-run mail order operation is unlikely.

“In retail pharmacy they are interested in foot traffic into the store,” he said. “Their money is made on the front end items; the money is not made on the drugs. Therefore, you are not going to see them set up big mail order facilities because that doesn’t benefit their business model.”

Bonello and Wachovia are weighing these arguments to determine what risk there is for respiratory patients come the dawning on the ASP.

“The industry says if it exits the business patients will be left unmedicated and end up hospitalized,” he said. “We think this is somewhat accurate. There are alternatives, but those alternatives are not necessarily immediately palatable.”

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