WINNIPEG — With just one month left for American patients to enrol in a new federal drug plan, Canada's online pharmacy industry is trying to assess just how big a hit they've taken - and how soon they might recover.

While there have been some layoffs and losses since the U.S. program, called Medicare Part D, was rolled out in January, industry insiders say they hope to weather the storm because of the many gaps in the U.S. plan.

"There's no question Medicare Part D has dampened sales," said David MacKay, former executive director of the Canadian International Pharmacy Association who is now a consultant for about 20 online druggists.

"Overall, it's not something that will kill the industry by any means, but it is something that has educated us and caused us to have to adapt and work smarter."

For the first time in the United States, everyone with Medicare coverage can have access to prescription drug coverage, regardless of their income or health status, by enrolling in Part D.

It operates like an insurance plan, with patients paying deductibles and premiums in exchange for more affordable medications.

Enrolment is voluntary, but the U.S. government hoped to have as many as 30 million people on board by the May 15 deadline.

The U.S. plan is effectively competing with Canadian online pharmacies since their customer base has primarily been uninsured and underinsured Americans.

MacKay estimated monthly sales have fallen as much as 30 per cent since December. About 1,000 jobs have been lost from a peak of about 4,000 in late 2004.

In Manitoba, the birthplace of the industry, the number of cross-border pharmacy licences issued by the province's regulator fell to 36 in January from 45 in March 2005 and 64 in January 2004.

But the decline can't be attributed to Part D alone.

The strong Canadian dollar has tightened profit margins. Other pharmacists just grew weary of the constant struggle to find a reliable drug supply and worry that the previous federal Liberal government would regulate the industry out of business.

All of that is little comfort, however, to opponents of the industry in Canada, who have long called on the federal government to adopt stricter measures to protect the drug supply.

The enduring potential of legislation in the U.S. Congress that would legalize imports from Canada, including bulk shipments, should be a greater concern for Canadians than the impact Part D may be having on the industry, said Jeff Poston, executive director of the Canadian Pharmacists Association.

Poston said his group and other opponents have always maintained that Americans shouldn't look to Canada to solve their problems with high drug prices.

"This is primarily a U.S. problem," said Poston.

"So the question is going to be: To what extent will the U.S. Medicare Part D benefit actually create a half-decent drug plan for American seniors and American poor so they don't have to come to Canada for their drugs?"

Pharmacist Jeff Uhl said he didn't panic when enrolments in Part D started.

While he has had to lay off about 20 of the 70 employees at his Universal Drugstore in Winnipeg since August, his confidence is slowly paying off. Customers who left to give the American plan a try have started to come back because of inefficiencies with their coverage.

"We've done a lot of studies on Medicare and we think if an American patient joined the cheapest plan in their state just to get the insurance part of it and then kept getting their drugs from Canada, they'd actually be cheaper in the long run," said Uhl.

Part of the problem lies with a gap in Part D coverage dubbed "the doughnut hole."

Canadian online pharmacies are not cheaper than Medicare when a patient's drug bill is less than $2,500 a year or more than $7,800, but cost savings under Medicare dwindle substantially for amounts in between, said MacKay.

The Minnesota Senior Federation, one of the largest U.S. programs that refers American bargain-hunters to Internet pharmacies, says the challenges of navigating Part D only reinforce their motto of buyer beware.

For example, generic drugs are often cheaper in the United States, while brand-name drugs can be found at bargain prices in Canada.

Executive director Lee Graczyk has noticed a drop in interest in Canadian drugs since January, but a rebound has already begun.

"The biggest problem is that the benefits of Part D, the costs and the availability are not universal," said Graczyk.

Graczyk said the government has also already served notice that costs of the program will go up next year for everything from the deductible, to the initial coverage limit, to how much patients must pay.

MacKay said online pharmacists have learned to adapt quickly to the new post-Part D business reality.

Many have put calculators on their websites to show patients which drugs are still cheaper in Canada. They have also set up hotlines or personally contacted thousands of their customers to suggest they opt for a combination of Part D and Canadian drugs.