• Rite Aid pharmacy closures have hit Midwest cities particularly hard.
• Walgreens has announced it may close as many as 25 percent of its 8,200 stores.
• Decreased reimbursements are putting the squeeze on drug retailers, and some point the finger at pharmacy benefit managers, which are the target of a new FTC lawsuit, but PBMs are not the only cause of the struggles.

New Lebanon, Ohio, population 3,756, has three dollar stores, a Groceryland grocery store, a few fast-food restaurants, a public library branch, and a spirit-filled school system. What it doesn't have is a pharmacy.

As part of Rite Aid's bankruptcy filing in October 2023, the chain announced it was closing 800 stores, with Ohio especially hard hit, at 180 closings slated largely in struggling small towns or Rust Belt cities. According to Rite Aid's website, the chain currently has 1,700 locations, down from the 2,111 reported at the time of bankruptcy. The company has stated it will emerge from bankruptcy with about 1,300 stores.

New Lebanon's Rite Aid closed in September.

"My community needs a pharmacist. It is concerning to me that the residents don't have one here," said New Lebanon Mayor David Nickerson.

Some smaller towns near New Lebanon have their own pharmacies, but even those are a 15-minute drive away. New Lebanon's Rite Aid prescriptions were transferred to a Walgreens 30 minutes away in Dayton.

Nickerson, who was just elected last year and has a military background, recently found himself walking the Walgreens parking lot in Dayton. He even strolled around the back of the building at night, doing a thorough inspection to tell his constituents he had done his due diligence and made sure it was a safe place to go. But even coming away convinced that Walgreens was safe and clean won't be enough for some of New Lebanon's residents.

"We have many elderly residents who are uncomfortable going that far with the traffic and unknown area," Nickerson said.

Getting a prescription filled in New Lebanon, which sits on a busy thoroughfare leading to Dayton, wasn't always so difficult.

"Before we moved to New Lebanon two years ago, there were three pharmacies," said Joyce Dingman. "Last year New Lebanon's CVS closed, and now Rite Aid is closing, leaving us with none." 

She and her husband will head to a town 30 minutes away to get prescriptions filled at a Kroger pharmacy.

 A spokesman for Rite Aid confirmed the outsized impact the closings are having on Ohio.

"Nearly all our stores in Ohio will be closing by the end of September as part of our recent Chapter 11 process to create a stronger, healthier company," the spokesman said, adding that there would only be four Rite Aids remaining in Ohio. There were over 140 before the latest round of closures.

New Lebanon, though, is hardly alone in its struggle to hold on to a pharmacy.  Experts say the retail pharmacy model has been squeezed by complicated and sometimes lower reimbursement rates for medication while competition for sales of candy and paper towels, items that used to pad profits, has grown more fierce.   

The pharmacy squeeze

At a time when the federal government is suing the primary drug market's middlemen, the pharmacy benefit managers — with the Federal Trade Commission alleging inflated prices on drugs like insulin — some are pointing the finger at the PBMs for the pharmacy deserts.

Miranda Rochol, senior vice president of provider solutions at healthcare technology company Prescryptive Health — who worked her way up in the business, starting as a pharmacy technician before moving to Walgreens health technology team — says the PBMs are largely to blame for the current problems in the industry. "PBMs can steer patients into their own pharmacies, drive profit to their pharmacies, and under-pay community pharmacies," she said.

In June, the FTC issued a scathing report about PBMs and the "squeezing" of Main Street pharmacies caused by decades of mergers and acquisitions. According to the FTC, the three largest PBMs control nearly 80% of all prescriptions filled in the United States, negotiating the terms and conditions for access to prescription drugs for hundreds of millions of Americans. The report blames falling reimbursement rates from PBMs for many of the financial troubles of smaller pharmacies.

"As long as the big three PBMs go unchecked, more pharmacy deserts will appear," Rochol said.

The three largest PBMs are CVS's Caremark, OptumRX (part of UnitedHealth), and Express Scripts, owned by Cigna.

A spokesperson for Express Scripts pointed to its lawsuit filed against the FTC in response to the report, calling it unfair, biased, erroneous, and defamatory, and claims the report " wrongly concluded that PBMs inflate drug costs and harm independent pharmacies."

Tim Wentworth, Walgreens Boots Alliance CEO — who was CEO of Express Scripts from 2016–2021 — addressed PBMs in Walgreens' third quarter earnings call, saying the company was "in active discussions with our PBM and payer partners to align incentives and ensure we are paid fairly."

Walgreens has announced that it may close as many as 25 percent of its 8,200 stores, which will further squeeze communities that lack pharmacies. A spokesman for Walgreens pointed out that while they may be large in size, they are still "independent" — unaffiliated with a PBM — so they face many of the same price pressures as smaller stores.

CVS has also closed stores, and for its part, a CVS Caremark spokesman disputes claims that it is economically squeezing smaller pharmacies, citing Georgia as an example. Between 2023 and 2024, independent pharmacies in the CVS Caremark pharmacy network were reimbursed 67.5% higher on average than CVS Pharmacy locations, and 51.9% higher than other chain pharmacies in the state. 

"Local, independently owned pharmacies serve as vital partners in CVS Caremark pharmacy networks, representing more than 40% percent of our in-network pharmacies," the spokesman said. "CVS Caremark reimburses independent pharmacies substantially more, in aggregate, than chain pharmacies."

The CVS spokesman also said that CVS pharmacies are not all serviced by Caremark, working with over 70 different PBMs. None of CVS's closings, the spokesman said, were related to PBM issues, but due to changes in consumer buying patterns and population shifts.

"Claiming that PBMs are under-reimbursing independent pharmacies is not based on the fact. Research in fact shows that PBMs are reimbursing independent pharmacies at higher amounts than chain pharmacies," said Greg Lopes, spokesman for the Pharmaceutical Care Management Association, the national trade group representing PBMs. "There are unfortunately many factors for pharmacy closures in rural areas, including population declines and the growing use of online pharmacies."

Data from the National Community Pharmacists Association illustrates the concern over PBM pricing.

Almost all pharmacies (99%) have experienced a reduction in the reimbursed dollar amount of prescribed medications at the point of sale. More than half say that insurance plans and their PBMs are reimbursing pharmacies less than the cost to purchase the drug for at least three of every 10 prescriptions they fill.

The National Association of Chain Drug Stores is pressing for PBM reform legislation. "The U.S. Congress has done the hard work to get bipartisan pharmacy benefit manager (PBM) reform ready to go, and that is 'must-pass legislation' before the 118th Congress adjourns," said Steven C. Anderson, president and CEO of NACDS.

CVS pulled out of NACDS in 2022 amid the trade association's support of PBM reform.

The vital role of the local pharmacist in Amazon era

According to experts, PBMs, are just one of many reasons retail pharmacies are struggling.

With the neighborhood pharmacy's demise, patients have to get more creative in getting their medicines. Dr. Colin Banas, chief medical officer of health-care solutions company DrFirst, says there are various other ways for patients to get medicine if their neighborhood pharmacy closes.

"For urgent medications, if patients cannot drive to an available pharmacy, they may explore prescription pickup and delivery services offered by ride-share services such as Uber and Lyft," Banas said.

He added that it's also worth checking with local hospitals to see if they have in-house pharmacies that can dispense prescriptions. "Even some doctors' offices and urgent care centers stock certain medications, so it's worth making a few calls," Banas said. 

But Banas believes the pharmacy deserts will only grow, and lead to an increase the number of apps and digitization.

"As pharmacy deserts become more common, patients should keep an eye on new apps and digital tools that will increasingly begin to fill some of the gaps," Banas said.

This week, Amazon announced that its same-day prescription delivery would expand to roughly half the U.S. next year.

Patient advocates say that technology can't replace humanity.

All the focus on PBMs, reimbursements, and profits misses the human aspects of the profession, says Dr. Tamera Hughes, an assistant professor at High Point University's School of Pharmacy who spent several years working at a community pharmacy in Georgia during the last decade before entering academia.

Hughes says PBM business models do prefer to shuttle people more towards medication by mail, but what may be gained in short-term savings is lost in the value of the pharmacist-patient relationship.

"Medication delivery takes away the engagement and rapport that pharmacists build within the communities they serve," Hughes said.

During her time working at a pharmacy, she got to know her regulars, their needs, and their ailments. "I knew all my customers by name; I asked about their holidays and grandchildren. By removing that one-on-one upfront engagement with the communities they serve, you strip away what it means to holistically look at someone else's health," Hughes said. "Pharmacists are not just dispensing the medication, but some of the other lifestyle things that produce a healthy individual, and pharmacies have been great historically doing it."

In fact, Hughes says that a pharmacist often serves as a de facto doctor for someone who can't afford a visit.

"People would come to the pharmacy counter to pick up a prescription, while another two to three people would come to pharmacy because their child is sick and say to the pharmacist 'What can you recommend for a sore throat or a cough?' ... At least five times an hour, I walked from behind the counter to assist someone in picking out medication for their children, and we are able to ask questions to get them the best over-the-counter medicine," Hughes said.

Pharmacies are being squeezed from all directions — by rising PBMS costs, competition from online pharmacies like Amazon, and retail competitors like dollar stores — but Hughes says by serving as a first defense against illness, neighborhood pharmacists can save greater strain on the larger health system. With the drug store chains like Rite-Aid closing hundreds of retail locations, that line of defense is being lost.

A spokesman for Rite Aid said the closings were the result of trying to create a more "efficient company."   

In New Lebanon, city officials and the mayor just want their pharmacy back. Acting village manager Rob Anderson says it is a real inconvenience for some residents, and the Rite Aid closing served as a blow to the town.

"Having Rite Aid leave makes it seem like your town is on a negative path when, in reality, New Lebanon's doing is just fine," Anderson said.  "But it makes you think the big corporations don't value your town like they once did."