Nearly a third of independent pharmacy owners may close their stores in 2024, according to an NCPA survey.1,2 Just take my home state of Oregon as an example: A recent report by the Associated Press found that 36 stores in Oregon closed last year, with the state second only to Alaska in terms of limited pharmacy access.3
In a geospatial survey conducted by Wittenauer et al, investigators found that nearly 16 million people live in “pharmacy deserts” in rural and urban settings all over the country, and the recent spate of closings in both community and chain pharmacies will surely impact these numbers further.4 The most urgent issue to improve this pharmacy ecosystem now is working to make sure pharmacies are reimbursed correctly and transparently.
Pharmacy Reimbursement
The FTC’s interim report on pharmacy benefit managers (PBMs), helped shine a light on the business practices of these middlemen that are impacting everyone, including patients, employers, payers, and pharmacies.5 Included in the report were early findings on how PBMs “may be steering patients to their affiliated pharmacies and away from smaller, independent pharmacies.”
Furthermore, large PBMs are vertically integrated with health care entities, sometimes with their own mail order or pharmacy businesses.6 By steering patients to their own pharmacies, PBMs can “retain high levels of dispensing revenue,” with one anecdote in the FTC report pointing out “nearly $1.6 billion in excess revenue on just 2 cancer drugs in under 3 years.” Steering isn’t the only issue—there’s also the PBM practice of adding margin to the price they pay the pharmacy vs what they charge the health plans and patients, a practice known as spread pricing.7 The PBM keeps the spread while raising drug prices, and any savings comes out of the pockets of pharmacy owners and patients. And we haven’t even addressed DIR clawbacks in this mix.8
Pair with this the negative reimbursement—sometimes below the purchase cost of the actual medication—of pharmacies who are not affiliated with the large PBMs, and you can start to see why pharmacies are suffering, without the necessary reimbursement to keep their doors open.9 Seeing the bigger picture helps us understand how community pharmacies have been eviscerated by legacy PBM practices, with pharmacy deserts being a serious outcome.
It’s Time to Embrace Innovation to Change the Pharmacy Ecosystem
About the Author
Paige Clark, RPh, is the VP of pharmacy programs and policy at Prescryptive, overseeing the company’s policy work to drive awareness, utilization, and scope of trusted independent pharmacists nationally. Prior to Prescryptive, Clark spent 11 years at Oregon State University's College of Pharmacy, driving policy initiatives for the state’s licensed pharmacists, including the prescribing of birth control and tobacco cessation services. Clark also worked as the staff pharmacist consultant for the Oregon Board of Pharmacy, managing rule writing, legislative endeavors, and regional and national policy work. She is a frequent speaker and presenter at national industry conferences and a multi-award winner, including several Pharmacist of the Year recognitions.
I have hope that this intense scrutiny means innovation will be embraced. The way reimbursement operates now is not working for pharmacies, but new models are under development that could change the game.
There is immense value in developing a pharmacy ecosystem where PBMs are no longer in complete control. When resources are redistributed in a more democratized manner that adequately reimburses pharmacies, we can impact the escalating closure rates while serving the communities who need it.
What We Lose When Pharmacies Close Their Doors
When a community loses a pharmacy, they lose a pharmacist who can help impact their health care experience. We are likely to see public health outcomes (eg, immunizations, etc) impacted as stores continue to close.
Let’s bring it back to Oregon, where I know a pharmacy that serves a population who speaks multiple languages. At last count, the pharmacy staff collectively spoke 5 different languages to support this community, offering essential services in a language that the customers feel comfortable with. If that store is closed, that community will lose that opportunity for personalized care in their own language.
But even in times of great change, there are opportunities. By embracing new payment models and technologies, pharmacies can help keep their doors open and focus on what they do best: patient care.
REFERENCES
- Local pharmacies on the brink, new survey reveals. National Community Pharmacists Association. February 27, 2024. Accessed August 15, 2024. https://ncpa.org/newsroom/news-releases/2024/02/27/local-pharmacies-brink-new-survey-reveals
- Murphy T, Pananjady K. As pharmacies shutter, some Western states, Black and Latino communities are left behind. Associated Press. June 3, 2024. Accessed August 15, 2024. https://apnews.com/article/pharmacy-closure-drugstore-cvs-walgreens-rite-aid-91967f18c0c059415b98fcf67ad0f84e
- Sierra A, Templeton A. Oregon 2nd worse in the nation for retail pharmacy access, new analysis finds. Oregon Public Broadcasting. June 5, 2024. Accessed August 15, 2024. https://www.opb.org/article/2024/06/05/oregon-pharmacy-closures-limited-access/
- Wittenauer R, Shah PD, Bacci JL, Stergachis A. Locations and characteristics of pharmacy deserts in the United States: a geospatial study. Health Affairs Scholar. 2024;2(4):qxae035. doi:10.1093/haschl/qxae035
- FTC releases interim staff report on prescription drug middlemen. FTC. July 9, 2024. Accessed August 15, 2024. https://www.ftc.gov/news-events/news/press-releases/2024/07/ftc-releases-interim-staff-report-prescription-drug-middlemen
- Blackley C. PBMs are in regulators’ crosshairs but are regulators missing the point? MedCity News. November 23, 2023. Accessed August 15, 2024. https://medcitynews.com/2023/11/pbms-are-in-regulators-crosshairs-but-are-regulators-missing-the-point/
- Blackley C. Pharmacy benefit managers inflate drug prices and decrease competition while consumers pay the price. Does the FTC have the medicine to fix it? MedCity News. October 18, 2022. Accessed August 15, 2024. https://medcitynews.com/2022/10/pharmacy-benefit-managers-inflate-drug-prices-and-decrease-competition-while-consumers-pay-the-price-does-the-ftc-have-the-medicine-to-fix-it/
- Prepare for 2024 and the coming DIR cliff with predictable profitability from AI. Prescryptive. December 7, 2023. Accessed August 15, 2024. https://prescryptive.com/insights/webinar-prepare-for-2024-and-the-coming-dir-cliff-with-predictable-profitability-from-ai/
- Luhby T. Pharmacy benefit managers profit at expense of patients and small pharmacies, FTC says. CNN. July 9, 2024. Accessed August 15, 2024. https://www.cnn.com/2024/07/09/health/ftc-report-pbm-pharmacy-healthcare/index.html
