The Journal Gazette, 600 W. Main St., Fort Wayne IN

Traffic really picked up last year at two small drugstores in Kosciusko County. Then, this summer, the pharmacies went out of business.

“My Mentone and Milford stores were never busier than when I closed them,” said pharmacist Bill Winn, co-owner of Pill Box Pharmacy Inc., which has one location left in Warsaw.

It’s a paradox similar to what’s happened nationwide.

Since Medicare Part D was implemented in 2006, pharmacies have filled more prescriptions but also endured lower reimbursement and lagging payments. Some major chains like Walgreen Co. have managed a net gain, but other drugstores – especially smaller independents – have lost money. Some even called it quits.

Winn said the decision to close the Mentone and Milford pharmacies came only after options such as cutting hours and staff didn’t suffice. He’d hoped that the higher volume of prescriptions would offset reduced margins, but it never worked out.

There were other factors that reduced the three pharmacies to one, including competition from mail-order drug sales. But losses related to the Medicare prescription drug program were the primary contributor, Winn said.

Nationwide, the number of independent pharmacies fell from 24,500 in 2005 to 23,348 in 2006, according to the National Community Pharmacists Association. The steep drop-off accounts for about 5 percent of the non-publicly traded stores considered community pharmacies, association spokesman John Norton said.

Medicare Part D “is the only new factor that was introduced to the marketplace,” he said, speculating about the decline, which he expects to continue. Although the ranks of smaller pharmacies have historically dwindled because of competition from larger chains and other factors, the numbers were fairly stable in the years preceding the prescription drug program’s implementation.

The biggest issue for community pharmacies has been lagging payments, Norton said. On average, pharmacies surveyed by the association are taking out about $70,000 in loans to deal with related cash-flow problems, he said.

A study from the University of Texas at Austin showed that 44.1 percent of pharmacies’ prescription drug claims submitted in 2006 didn’t get reimbursed within 30 days; and 9.6 percent weren’t recouped within 60 days, according to research released last month.

The study examined about 3 million prescription drug claims submitted by independent and regional-chain pharmacy companies.

Researcher Dr. Marv Shepherd, director of the Center for Pharmacoeconomic Studies in the College of Pharmacy, called quick payment to community pharmacies crucial because most must pay drug wholesalers every two weeks. Some drugstores pay more often than that or prepay for medications, he said.

Despite that, some pharmacies say they are better off under the new prescription drug program, which covers millions of beneficiaries. About half the nation’s 65-and-older population used the program last year, according to the Centers for Medicare and Medicaid Services.

“It’s definitely brought more patients with prescriptions into our pharmacies,” said Michael Polzin, spokesman for Walgreen Co. Expanded coverage will always lead to increased use, he said.

Overall, Walgreens filled 583 million prescriptions in fiscal 2007, which ended Aug. 31, a 10 percent increase from the previous fiscal year. Walgreens now fills nearly 17 percent of all retail prescriptions in the country, the company said in its annual earnings report.

The company’s size and deep pockets allow it to more easily absorb lower reimbursement rates and endure delays in payments than a small, independent pharmacy, Polzin said.

“For us, it is a net gain,” he said.

For fiscal 2007, the company reported $2 billion in net earnings and $53.8 billion in net sales. It added 536 new stores – now operating about 6,000 in 48 states and Puerto Rico – and expects to add 550 in fiscal 2008. Over the two years, the company expects to add almost as many stores as total community pharmacies lost in 2006.

But that doesn’t necessarily mean Doris Cooper will ever have a pharmacy in her hometown again. The 77-year-old resident, who lives just outside of Mentone, now uses the Pill Box Pharmacy & Home Medical Equipment Store in Warsaw, about 15 miles away.

Winn hopes that store – the busiest of the three – will remain open for the long haul. As its name implies, the Warsaw drugstore relies on more than drugs to keep it afloat. It’s diversified like some other pharmacies, selling home medical equipment and offering an immunization program.

Still, Cooper was sad to see the Mentone Pill Box store close, one more business that didn’t make it in the town of about 900. But it doesn’t color her opinion of Medicare Part D, which she says has saved her thousands on drugs since she signed up last year.

Winn, too, thinks Medicare Part D is good for seniors, even if he doesn’t think it’s good for small towns like Mentone and Milford, which lost their only pharmacies. Winn concedes that some community drugstores, like his in Warsaw, are making due. But challenges persist for many small pharmacies still getting used to the prescription drug program.

“It’s pretty tough to survive,” he said.

mschroeder@jg.net