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Special coverage: Medicare

Filling in gaps left by Part D

A wholesale pharmacy almost wiped out by the new Medicare program finds new business with those who exhaust coverage.

By KRIS HUNDLEY
Published June 29, 2006

[Times photo: James Borchuck]

Gaston Bedard of Neighborly Pharmacy in St. Petersburg talks with a customer on Wednesday. "All small people like me are getting hurt," Bedard said of the new Medicare Part D rules that forced him to close his Palm Harbor store.

ST. PETERSBURG - About 2½ years ago, Neighborly Care Network in Pinellas County started a nonprofit pharmacy to sell drugs to seniors at wholesale cost.

Then Medicare's Part D prescription program got rolling in January and nearly put Neighborly Pharmacy out of business.

But with some cutbacks and consolidation - and steady business from plenty of uninsured under-65-year-olds - the nonprofit drugstore survived. And that's a good thing because soon, plenty of seniors who exhaust their Medicare drug benefits may need Neighborly Pharmacy's low prices again.

Neighborly Pharmacy's tale is one of the unintended consequences of a government program and a nonprofit's constant need to adapt to people's needs.

Debra Shade, Neighborly Care Network's president and chief executive and the impetus behind the agency's pharmacy effort, said her pharmacy initially thought it would be able to participate as easily in Medicare's drug program as it had, for years, in Medicaid's.

"We signed up with every Part D entity that was available in Pinellas County," Shade said. "We were in every network so current customers could continue to get their drugs from us."

But unlike Medicaid, which is a state-run program, Medicare's Part D plans are run by private insurers. These insurers receive a flat per-member payment from Medicare for providing drug coverage. The plans then tell drugstores how much they'll be reimbursed for drugs.

Neighborly Pharmacy quickly learned that reimbursement rates set by insurers were often lower than the small pharmacy's wholesale prices.

"Our buying power is not nearly like Walgreens or Wal-Mart," Shade said. "If we had their buying power, we might have been able to participate."

Gaston Bedard, pharmacist at Neighborly Pharmacy, said he figures he needs about a $9 margin on each prescription to cover costs of the operation. "The Medicare plans were giving us about $1.50," he said. "No privately owned drugstore is going to be able to survive Part D."

By February, Neighborly Pharmacy was gushing red ink, running $40,000 in the hole. In March, Shade and Bedard took dramatic measures. They closed the pharmacy's Palm Harbor location, consolidating operations at the Sunshine Center in downtown St. Petersburg. They fired a pharmacist, technician and driver and began charging $5 for home deliveries, which had previously been free. And they encouraged their Medicare customers to use their Part D plans at nearby chain stores.

Thanks to the cost-cutting, Neighborly Pharmacy is well on its way toward its goal of being self-sustaining by the end of the year. With the loss of many of its Medicare-eligible customers, prescriptions are down 40 percent, but Bedard still processes about 160 orders each day.

Many are from the patients of St. Petersburg's Free Clinic and uninsured working people, but the pharmacy is open to everyone, regardless of age, income or place of residence.

In recent weeks, however, Bedard said he is starting to see some seniors who have reached the coverage gap - the so-called doughnut hole - on their Medicare Part D plans. After a total of $2,250 in drug expenses is spent on a member's account, the individual has to spend up to an additional $2,850 out of pocket before the plan's catastrophic coverage kicks in.

Since drug costs have continued to rise under Part D plans, seniors are often getting an unpleasant shock when they have to pay full price for their prescriptions. In some cases, Shade said, Neighborly Pharmacy's prices may be less than the plans. And in those cases, the nonprofit will be more than happy to have customers return.

"I think the second wave is coming," she said of seniors who will find themselves once again on the hunt for low-cost drugs.

Shade said she wasn't unhappy about Medicare's attempt to offer drug coverage, just disappointed the effort didn't go far enough.

"If there was a prescription program that was good for everybody and we went out of business because of it, that would be a great day," she said. "But that's not the case."

Kris Hundley can be reached at hundley@sptimes.com or (727) 892-2996.

NEIGHBORLY PHARMACY

What it is: nonprofit pharmacy operated by Neighborly Care Network

What it does: sells prescriptions at wholesale price to anyone, regardless of age, income, place of residence; $8 dispensing fee is added for customers younger than 60

Fees: $5 home-delivery fee per delivery only in Pinellas County

Pharmacist: Gaston Bedard

Address: Sunshine Center, 330 Fifth St. N., St. Petersburg

Phone: (727) 892-5781

[Last modified June 29, 2006, 06:12:45]