Posted At StarTribune.com

BY : Warren Wolfe

Canadian pharmacists are likely to lose a big chunk of their $1 billion-a-year mail-order business when Americans on Medicare start getting taxpayer help paying for drugs starting next month.

"Our best guess is that we'll lose 15 to 25 percent of our American customers," said Robert Fraser, a Winnipeg pharmacist and a board member of the Canadian International Pharmacy Association.

That pleases druggists such as Harold Anderson of Hallock, Minn., who has been losing some business to Canada. Medicare won't help pay for the imported prescriptions.

But it also means less business through state-supported website programs such as Minnesota's, which has generated more than $3.7 million in sales since early 2004.

In fact, sales already are falling, probably because a stronger Canadian dollar has pushed up Canadian prices somewhat.

For the past 12 months, sales fell 13 percent from the first quarter to the last quarter for programs operated by Minnesota, Wisconsin and the Minnesota Senior Federation.

Still, government controls in Canada have meant that imported brand-name drugs, on average, cost half as much as they do in the United States. Retired Americans have been the main customers since cross-border sales started booming four years ago.

Older Americans are 12 percent of the population but use about 80 percent of drugs sold. And they are less likely than younger people to have drug insurance.

But all that changes Jan. 1 with the start of a heavily subsidized Medicare drug-insurance program, estimated to cost $720 billion over the next 10 years. About 43 million older and disabled Americans are eligible for the voluntary program.

Among the biggest losers may be the Minnesota Senior Federation, which last year earned about $85,000 on $1.7 million in sales. The federation pioneered Internet links to Canadian pharmacies in 2003 and created the model followed by Minnesota and 10 other states.

Filling the doughnut hole?

The federation and Canadian pharmacists say that some savvy seniors may get the biggest drug savings by combining the Medicare benefit with lower prices from Canada.

For people with high drug costs, Canadian pharmacists might fill a $2,850 gap in most Medicare-approved private insurance plans. Making that work, however, would add another layer of complexity to seniors' drug purchases -- and might hurt a beneficiary financially. Money spent on drugs bought abroad does not count as out-of-pocket costs used to fill the doughnut-hole gap.

Under the Medicare program, beneficiaries may buy a private policy that pays 75 percent of drug costs up to $2,250. But after that, most plans have a gap -- often called the "doughnut hole" -- with no coverage until total costs hit $5,100. After that, the drug plans cover 95 percent of drug costs.

"That's one place where it's worth looking at Canadian drugs -- filling that doughnut hole," said Peter Wyckoff, the federation's executive director.

He said some people may find that paying the full price of imported drugs still is a better deal than buying higher-priced, Medicare-subsidized drugs in the United States. Those people could purchase a low-premium Medicare drug plan in case the situation changes, he said.

"We're probably going to lose some business, but how much?" Wyckoff said. "Canadian prices will remain a good deal for some people."

Navigating complexity

For Minnesotans, how adept beneficiaries become at choosing from among 64 competing Medicare plans may determine how much business is lost to Canada.

"Come the second or third week in January, we're expecting to get a flood of calls from people who say it's just a lot easier buying from us than figuring out which of those [Medicare] plans to choose," said Fraser, the director of pharmacy at CanadaDrugs.com.

That could happen, said Minnesota's Human Services Commissioner Kevin Goodno. He heads the state agency that operates the website linking residents to Canadian pharmacies. A similar program for state employees has generated $1.6 million of the $3.7 million in sales so far.

"The Medicare program is fairly complex, and we're doing everything we can to help people make good choices," he said. "For state employees and younger Minnesotans, they'll probably continue to use the Minnesota program. For older people, we'll just have to see."