The Vanishing Of The Drug Stores: Rural Pharmacies On The Decline

Once a fixture in almost every town in America, non-chain drug stores and pharmacies are rapidly becoming a thing of the past.

Washington Post:

Corner pharmacies, once widespread in large cities and rural hamlets alike, are disappearing from many areas of the country, leaving an estimated 41 million Americans in what are known as drugstore deserts, without easy access to pharmacies. An analysis by GoodRx, an online drug price comparison tool, found that 12 percent of Americans have to drive more than 15 minutes to reach the closest pharmacy or don’t have enough pharmacies nearby to meet demand. That includes majorities of people in more than 40 percent of counties.

From 2003 to 2018, 1,231 of the nation’s 7,624 independent rural pharmacies closed, according to the University of Iowa’s Rural Policy Research Institute, leaving 630 communities with no independent or chain retail drugstore.

Independent pharmacies are struggling due to the vertical integration among drugstore chains, insurance companies and pharmaceutical benefit managers, which gives those companies market power that community drugstores can’t match.

Insurers also have ratcheted down what they will pay for prescription drugs, squeezing margins to levels that pharmacists call unsustainable. As the insurers’ drug plans steered patients to their affiliated drugstores, independent shops watched their customers drift away. They find themselves at the mercy of pharmaceutical middlemen, who claw back pharmacy revenue through retroactive fees and aggressive audits, leaving local pharmacists unsure if they’ll end the year in the black.

That has a direct impact on customers, particularly older ones, who face higher co-pays for prescription medications if they have a drug plan, and higher list prices if they don’t. If their local pharmacy can’t survive, they may be forced to travel long distances to the nearest drugstore or endure waits to get their prescriptions from understaffed pharmacies serving more and more patients.

“Living in an area with low pharmacy density could increase wait times, decrease supply, and make it harder to shop around for prescription medications,” said Tori Marsh, GoodRx’s lead researcher on the drugstore desert study.

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The financial pressures on independent drugstores began mounting two decades ago when Medicare instituted its Part D program using private insurance plans: Pharmacies’ most frequent customers went from paying cash for list prices to using insurance coverage that paid lower negotiated rates.

Independent pharmacies saw their margins shrink. On average, a pharmacy’s cost of dispensing a single prescription, factoring in labor, rent, utilities and other overhead, ranges from $9 to $15. But the reimbursement is often far less.

Multiple pharmacists said that about half of drug plan reimbursements fail to cover the costs of drugs and their overhead.

“What you’re left with is that 50% of claims that you can make some money on, and really, the tiny percentage of claims where you make an extremely high amount of money,” said Nate Hux, who owns an independent pharmacy in Pickerington, Ohio.

It’s that tiny sliver of wildly overpaid drugs, especially generics, that determines whether a pharmacy can survive. A generic drug that costs $4 might get reimbursed by a drug plan at $4,000.

“Filling a generic prescription, from a financial standpoint, is like pulling the slots at a casino,” said Ben Jolley, an independent pharmacist in Salt Lake City. “Sometimes you lose a quarter, sometimes you lose a buck, and sometimes you make $500. But you have to have those prescriptions that you make $500 on to make up for the losses on the rest of your meds.”