Drugstore closures escalate last decade, researchers find
Editor’s Note: I recently sat down with my friend Stewart Gandolf, CEO of Healthcare Success, on his eponymous podcast. We cover a lot of ground, but most of it —you guessed it — involve my thoughts on IDN trends and value-based care. You can listen here, as well as find links to watch it on YouTube or your favorite podcast app.
Nearly 30% of US drugstores open for business during 2010-20 were closed by 2021, researchers find
Of the nearly 89,000 retail pharmacies operating during the period spanning 2010 through 2020, 29.4% had closed by 2021, according to research published Dec, 3 in Health Affairs.
From 2010 to 2017, the number of U.S. pharmacies increased because of store openings, but starting in 2018, the pace of store closings gained speed. From 2018 to 2021, there was a net loss in pharmacies of 2.1%, in large part because of a decrease in the number of chain pharmacies, which dropped 5%, the research team found.
The states affected most by the closings during that later period were Illinois, Maine, Mississippi, New York, Pennsylvania, Rhode Island, and Vermont. More than half of the counties in these states experienced a net decline in pharmacies.
Industry consolidation ramped up around that time, the researchers noted. Mergers occurred not only among pharmacy chains but also between pharmacy chains and pharmacy benefit managers. Drugstores that were not sufficiently profitable were closed.
The consolidation affected independent pharmacies as well — overall, the risk of closing for independent pharmacies was more than double that of chain pharmacies.
The risk of store closure was highest in predominantly Black and Latino neighborhoods and those with higher proportions of residents who are uninsured or covered by Medicaid and Medicare. Independent pharmacies, which are more likely than chain stores to be located in Black, Latino, and low-income neighborhoods — and are more than twice as likely to be the sole pharmacy in the neighborhood — were at greater risk of closing as compared with chain pharmacies.
In addition to getting their prescriptions filled, consumers frequently rely on retail drugstores for essential health care services such as vaccinations, contraception, overdose prevention, and treatments for opioid use disorder, Dima Qato, senior author of the study and a pharmacy professor at the University of Southern California, told The Associated Press. Because Black and Latino communities often have fewer pharmacies to start with, store closings can have a greater affect on residents in these communities, she said.
“At the same time many states are making efforts to expand the scope of pharmacy services beyond dispensing drugs to include the provision of preventive and emergency care, we found that there are — for the first time for at least a decade — fewer pharmacies available to provide them,” Qato said in a press release issued by Berkeley Public Health.
“Without safeguarding pharmacies in marginalized neighborhoods, expanding health care services at pharmacies may enhance convenience for more affluent populations while failing to address the health needs of communities disproportionately affected by pharmacy closures, particularly Black and Brown populations in low-income urban areas,” added Jenny Guadamuz, first author of the study and an assistant professor at the UC Berkeley School of Public Health.
Lower reimbursement rates by Medicaid and Medicare, relative to private insurance, may have been a contributing factor in some of the store closings. PBMs steering patients toward their own pharmacy networks and reimbursing rivals at low rates may have factored into closings among independent pharmacies.
To prevent racial disparities from worsening in terms of access to prescription medications and other pharmacy services, the researchers suggested that policymakers consider strategies that would increase participation of independent pharmacies in Medicare and Medicaid preferred networks managed by PBMs and increase public insurance reimbursement rates for pharmacies at the greatest risk of closing.
“Federal, state, and local policies and programs should consider targeted strategies, including increases in Medicare Part D and Medicaid pharmacy reimbursement rates, to protect critical access pharmacies most at-risk for closure, particularly those serving neighborhoods that are or are at risk of becoming pharmacy deserts,” Qato said in the press release.
Our Take: The study dovetails with an interim report the Federal Trade Commission released in July on the agency’s findings from an ongoing inquiry into PBM practices.
The FTC report described how increasing market concentration in the PBM industry and vertical integration of PBMs with the nation’s largest health insurers and pharmacies have allowed PBMs “to profit at the expense of patients and independent pharmacies.”
The FTC’s investigation also found that PBMs “hold substantial influence over independent pharmacies by imposing unfair, arbitrary, and harmful contractual terms that can impact independent pharmacies’ ability to stay in business and serve their communities.”
The House Committee on Oversight and Accountability also released a report in July on its findings from an investigation into PBM practices. One of the key findings was that the three top PBMs, CVS Caremark, Express Scripts, and Optum Rx, have used their position as middlemen — along with their integration with health insurers, pharmacies, providers, and drug manufacturers — to steer patients to their own pharmacies and artificially reduce reimbursement rates for competing pharmacies.
Regarding pharmacy closures, the percentage of stores that have closed has likely increased in the years following the period the researchers evaluated. We’ve reported on multiple occasions in the last few years about CVS Health’s and Walgreens’ closures of hundreds of underperforming stores. And Rite Aid closed hundreds of its stores in connection with the company’s bankruptcy.
What we would like to know is what role online pharmacies, including Amazon Pharmacy, have played in the closing of both chain and independent pharmacies at the neighborhood level. Online pharmacies can’t provide some of the other health care services that a brick-and-mortar pharmacy can, such as vaccinations, but Amazon could possibly steer consumers to a local primary care provider in its network for those additional services. Even so, residents of marginalized communities would most likely still be at a disadvantage.
There’s no telling what will happen with the PBM investigations, lawsuits, and proposed legislation under the new administration, and we don’t envision the 119th Congress being overly receptive to the study authors’ suggestions for alleviating racial disparities in access to pharmacy services. Even if PBM reforms are passed, they would take years to make a difference. Meanwhile, more independent pharmacies will surely be forced to close.
With both CVS and Walgreens trying to shore up their bottom lines these days, there’s roughly zero chance either company will take steps to address the increasing number of pharmacy deserts throughout the country. Walmart is still filling prescriptions but has shuttered (and in some cases sold) its health clinics.
As far as we can see, there doesn’t seem to be a solution on the horizon.
What else you need to know
UnitedHealthcare CEO Brian Thompson, 50, was fatally shot Wednesday morning in Midtown Manhattan while in New York City for UnitedHealth Group’s annual investor conference. The shooter had not been apprehended as of press time, although the New York Post reported that NYC Mayor Eric Adams told reporters at an event in Harlem on Saturday that authorities had identified the suspected gunman; police have not confirmed whether they know the shooter’s identity. According to earlier reports, police said the suspect left the city on a bus soon after the shooting.
While a motive has not been established, the words “delay,” “deny,” and “depose” were written in marker on three shell casings recovered from the crime scene, similar to the phrase “delay, deny, defend,” which has been used to describe tactics insurers are accused of implementing to avoid paying claims.
Thompson had been with the Minnetonka, Minn.-based health insurer, which provides coverage for more than 49 million Americans and is the largest in the U.S., since 2004 and became CEO in April 2021.
Novartis will pay $1 billion up front to in-license a Huntington’s disease drug candidate that Warren, N.J.-based PTC Therapeutics has been developing. The drug, PTC518, which Novartis said in a press release could become the first oral disease-modifying therapy for Huntington’s disease, is being evaluated in a Phase II study.
According to a PTC Therapeutics news release, interim results from the study showed the once-daily tablet led to a durable, dose-dependent reduction of mutant huntingtin protein in participants’ blood and cerebrospinal fluid. After the placebo-controlled portion of the trial has been completed, Novartis will assume responsibility for the drug’s development, manufacture, and commercialization.
Under the licensing agreement, Novartis could pay PTC Therapeutics up to an additional $1.9 billion in milestone payments. The transaction, which is subject to customary closing conditions, is expected to close in the first quarter of 2025.
New York City-based Mount Sinai Health System opened a new $100 million research center dedicated to developing AI tools and technologies to enhance patient care. Situated on the campus of The Mount Sinai Hospital, the 12-story, 65,000-square-foot Hamilton and Amabel James Center for Artificial Intelligence and Human Health will initially house about 40 principal investigators, as well as an estimated 250 graduate students, postdoctoral fellows, computer scientists, and support staff, the health system said in a press release.
CommonSpirit Health and University of Utah Health have formed a strategic clinical alliance that will give patients at five CommonSpirit Holy Cross hospitals in Utah access to physicians and other providers at Salt Lake City-based University of Utah Health. CommonSpirit acquired the five hospitals from Dallas-based Steward Health Care in May 2023. University of Utah Health has more than 26,000 faculty and staff members and is Utah’s only academic health care system, according to the announcement of the partnership.
The Ohio State Wexner Medical Center and Siemens Healthineers cemented a 10-year, $105 million partnership to “foster breakthroughs in clinical care,” expanding on an existing strategic relationship between the two. The new partnership, which will include equipment purchases and consulting services, will focus on accelerating innovation in diagnostic and therapeutic imaging, AI and machine learning in radiology and radiation oncology, and access to high-quality care for underserved patients.
Siemens Healthineers, a Malvern, Pa.-based provider of health care equipment, solutions, and services, noted in a press statement that a team of the company’s scientists would join clinical and research teams from various entities within The Ohio State Wexner Medical Center to collaborate on translational research, with the intent of advancing clinical practice at a new center for imaging excellence.
UPMC Enterprises and Vanderbilt Health have joined the Digital Consortium, a strategic alliance launched in April by New York City-based Aegis Ventures and nine founding health systems. Dr. John Noseworthy, emeritus president and CEO of Mayo Clinic and chair of the Digital Consortium, said a news release, “We launched the Digital Consortium on the founding premise that health systems should be in the driver’s seat when it comes to innovation. By aligning incentives between innovators and health systems, we create sustainable technologies that are better for patients, providers, and administrators.” UPMC Enterprises is the venture capital arm of Pittsburgh-based UPMC. Vanderbilt Health is part of Nashville, Tenn.-based Vanderbilt University Medical Center.
What we’re reading
What Is the Future of Wellness? McKinsey & Company, 11.20.24
Recommendations to Ensure Safety of AI in Real-World Clinical Care. JAMA, 11.27.24
Medicare’s New Mandatory Bundled-Payment Program — Are We Ready for TEAM? NEJM, 11.30.24 (subscription required, audio available)
