Managing partner at Numerof & Associates.

Michael Abrams, Numerof & Associates

Do you live in a pharmacy desert? It’s got nothing to do with climate change, unless you mean the economic climate. A pharmacy desert is a geographic area—a neighborhood, town, or county where some or even all of the pharmacies have closed, leaving residents to travel long distances to fill a prescription or get advice on use of medicines and other health-related issues.

There was a time when chain pharmacies bragged about the number of stores they were opening, and pharmacy deserts were a problem in a few rural areas. That has changed. More than 7,000 US pharmacies have closed since 2019;

 on average, one pharmacy closes every day across the country.

Urban areas, rural areas—even whole counties—are seeing pharmacies disappear. And with them goes access to drugs, vaccines, health advice, and more. More than 40% of all US counties are considered pharmacy deserts, per research from drug marketplace GoodRx.

Lack of access to a pharmacy means that people who take maintenance medications for complex conditions are more likely to stop taking them. That costs the US healthcare system a lot of money—an estimated 16% of total US healthcare spend.

 Lower adherence to medication regimens leads to a higher incidence of acute care episodes (i.e., diabetic ketoacidosis) and ultimately a higher incidence of complications from chronic conditions, resulting in higher healthcare costs. Since the contributing economic factors are typically worse in poor urban and rural areas, these closures impact poor communities disproportionately.

The list of factors driving the wave of pharmacy closures is a long one. Many are related to the economy. These include:

Labor cost inflation for pharmacists and physician assistants.

Economic pressure on consumers and their subsequent pullback.

Competition for non-pharmacy items from big box/online stores.

Theft, partly in response to economic conditions.

But by far, the biggest factor has been relentless pressure by pharmacy benefit managers (PBMs) to lower reimbursement for prescription drugs. PBMs select which pharmacies will be in-network for insurers. The three largest PBMs—ExpressScripts, owned by Cigna; CVS Caremark, owned by CVS Health; and OptumRx, owned by the same company as UnitedHealthcare—control a majority of the market. Patients pay less when they buy their medicines at in-network pharmacies. PBMs also set the reimbursement pharmacies get for dispensing a prescription. As PBMs have consolidated, they’ve used their market power to lower reimbursements to the point that 80% of the time reimbursement to the pharmacy is less than it paid to stock the medicine.

Adding the financial stress of the above economic factors to PBM-imposed hardships is what has driven a wave of pharmacy closures across the country, creating pharmacy deserts in the process.

One of the most obvious fixes for this problem would be for the FTC and DOJ to take action against PBMs for using their market power to deny pharmacies, particularly out-of-network pharmacies, reasonable reimbursement for the medicines they sell.

In addition, PBMs should be required to be transparent in reporting the rebates and other payments they receive from drug manufacturers in exchange for placing their products on formularies, and to explain where those rebates go.

The bottom line is that if nothing is done to stop PBM policies from driving pharmacies out of business, even you could find yourself living in a pharmacy desert. 

Michael Abrams is a managing partner at Numerof & Associates.

1. Murphy, T.; Pananjady, K. As Pharmacies Shutter, Some Western States, Black and Latino communities are Left Behind. 

https://apnews.com/article/pharmacy-closure-drugstore-cvs-walgreens-rite-aid-91967f18c0c059415b98fcf67ad0f84e

2. Le Coz, E. High Drug Prices and Pharmacy Deserts: Protesters Blame Drug Middlemen, Demand Regulation. 

https://www.usatoday.com/story/news/investigations/2024/05/17/pbm-practices-spark-outrage-and-protests-outside-express-scripts/73732395007/

3. Pisikian, K. How Pharmacy Deserts Impact Communities. March 30, 2022. GoodRx Health. 

https://www.goodrx.com/hcp-articles/providers/pharmacy-deserts

4. Watanabe, J.H.; McInnis, T.; Hirsch, J.D. Cost of Prescription Drug-Related Morbidity and Mortality. 

https://pubmed.ncbi.nlm.nih.gov/29577766/

5. Knox, R.P.; Gagneja, D.; Kraschel, K.L. Independent Pharmacies Gain Unanimous Victory in Recent US Supreme Court Case. 

https://jamanetwork.com/journals/jama-health-forum/fullarticle/2777061

Articles

A lack of access could shut out patients in need of maintenance drugs for complex conditions.

Pharmacy Deserts are Becoming a National Problem

		Successful companies, even entire industries, have a life cycle. All of them eventually reach the point where their current business model is no longer viable. Companies that recognize the shift early on and take action to reinvent and execute a successor model effectively become leaders as the next stage emerges.

		Inherent limitations of the current pharma business model are driving the emergence of a fundamentally new approach for the industry. A market-driven model rests on the assumption that successful companies of the future will determine what therapeutic areas they will “own,” which in turn will drive investments. Unlike the current approach, which is really product-centric, the new model will be patient-centric and take a continuum of care approach versus an episodic care approach. What this will mean is a core focus on prevention, diagnosis and treatment of the range of conditions within a therapeutic area, taking into account the needs of specific markets around the globe.

		The central imperative of the new model is delivering real value to all stakeholders—payers, regulators, physicians, providers and patients&mdash;and understanding whose voice matters in terms of relative weight is of critical importance.

		The power of payers is growing globally as product acceptance and purchase decision-making moves further and further from the physician. Payers and hospitals are clamping down on healthcare costs by saying “No” to new products, line extensions and, of course, price increases. Reacting to the prospect of exponentially increasing liabilities, payers of all types are demanding hard comparative clinical and economic data to justify any change with bottom-line impact.

		This represents a significant change for many companies. Those tasked with product marketing face internal resistance in trying to address market access considerations—specifically, the need for comparative effectiveness research and the identification of new ways of obtaining appropriate evidence. They are increasingly seeking help translating these messages internally and implementing sustainable changes within their companies.

		Regulators also remain a critical constituency. FDA has created new regulatory programs in an attempt to expedite the approval process in order to get much-needed drugs more quickly to patients requiring them. One of these, the Breakthrough Therapy designation, has had a successful start since its creation in 2012. In its first year, the regulatory agency granted the designation a total of 31 times, compared to initial estimates that only three or four drugs per year would earn the designation. Even with these expedited programs, manufacturers will still need to ensure that the right evidence is being collected to gain approval in the accelerated time frame.

		Companies need to change their go-to-market models, redefining the value delivered to physicians, payers and patients, while lowering costs. While the numbers have declined since their peak, there is still heavy reliance on physician detailing. This practice is inconsistent with cost constraints and the need for more tailored and responsive dialogue. The role of personal promotion to physicians hasn’t disappeared, but it requires greater sophistication, clinical knowledge and business acumen than typical sales reps possess today. Companies will need to define new approaches and develop new competencies to deliver value in ways that are cost-effective and tailored to meet individual needs. In addition, opportunities to develop relationships with patients/consumers need to be part of the equation.

		The new world of patient-centricity means changing the way in which manufacturers engage with patients, acknowledging them as legitimate healthcare decision-makers, essentially “patients as partners.” This means identifying the types of evidence (e.g., patient-reported outcomes) that will best resonate with patients, and incorporating patient perspectives into trial design. Just as manufacturers must leverage comparative effectiveness research (CER) and real-world evidence (RWE) to gain favorable positioning with payers, they need to collect data and demonstrate outcomes that matter in a way that makes patients listen.

*excerpted from Bringing Value to Healthcare: Practical Steps for Getting to a Market-Based Model, R. Numerof and M. Abrams, CRC Press, available at 

Rita Numerof, PhD, is president of Numerof & Associates (St. Louis, MO), a firm that helps businesses across the healthcare sector define and implement strategies for winning in dynamic markets. Her bachelor’s degree is from Syracuse University, and her PhD is from Bryn Mawr College.

Michael Abrams, MA, is co-founder and managing partner of Numerof & Associates. In addition to his consulting work, he has been an adjunct professor at Washington University in St. Louis and other schools. His MA is from George Washington University, Washington, DC.

A new, market-driven model of drug development and commercialization is appearing*