On The Cover
Aina Abell and Rachel Balick
Across the United States, pharmacies are shutting their doors.
Last year, CVS Health closed 46 underperforming stores, including some in Missouri, Illinois, California, and Texas. The pharmacy giant also announced last November that it would close an additional 22 locations in the first quarter of 2020.
Walgreens announced last August that it planned to shutter approximately 200 stores, which make up about 2% of the nearly 9,600 Walgreens in the country.
The epidemic is hitting grocery store pharmacies, too. Just last year, Raley’s Supermarkets, a grocery store chain based in West Sacramento, CA, shut down 27 of its nearly 100 pharmacies. Oregon-based Bi-Mart closed 13 pharmacies in Portland in 2019. And the small, Minnesota-based supermarket chain Lunds & Byerlys closed all 14 of its pharmacies last year.
Those are just some of the closures that made a splash in the news cycle. A study published last October in JAMA Internal Medicine reported that one in eight pharmacies shut their doors between 2009 and 2015. Independent pharmacies operating in underserved areas, whose demise aren’t nearly as covered, bore the brunt of the closures.
A grocery chain changes hands, and its pharmacies are first to fall
Matthew Shimoda, PharmD, had served as regional district manager for SuperValu, the parent company of the Washington, DC, metro area grocery store chain Shoppers, since 2013. In 2018, the company was acquired by United Natural Foods (UNFI), a large distributor of organic and natural foods. When UNFI decided to get out of the retail business, the chain’s approximately 30 pharmacies were the first to be jettisoned.
“We closed all the pharmacies in one fell swoop over a couple of weeks,” Shimoda said.
“Typically, in grocery, the pharmacy contributes an average of about 10% to the total store volume as far as dollars. So it’s not the biggest department, but it’s the highest payroll department in the store,” he said.
“Pharmacy customers spend more dollars when they shop, and they probably visit the store two to three times more often than the average consumer. There is value to having a pharmacy that breaks even or at a slight loss,” Shimoda said. “But margins have decreased so significantly that pharmacies became basically a service center for the convenience of some customers. It was not a profit center, and it hadn’t been for a few years.”
According to Shimoda, the impact on patients was “devastating.”
“Here’s the pharmacy that you’ve been taking your prescriptions to for 20 years-plus. It’s a lower volume than you would see in CVS and Walgreens, and that allowed us to be much more independent minded,” he said. “I can’t tell you the number of tears that were shed over the 2 weeks we were closing up those 30 pharmacies.”
Once the patients were notified, the closing pharmacies worked with the buying pharmacies to collect all the records needed by law or contract—essentially all the records for at least a 2-year period by prescription—and transfer them electronically. And the buyers acquired all the inventory, so SuperValu pharmacy staff had to make sure that nothing was outdated or within 6 months of expiration.
“Literally we closed at night, closed out all the pending medications that were still hanging in the pick-up bins,” Shimoda said. “And the next morning, the signs were up.”
There were larger business decisions at play in the SuperValu closures. But that doesn’t mean PBMs didn’t have a role.
“When you’re losing money on a third of your prescriptions, pharmacy becomes a difficult proposition. The PBMs with their DIRs contributed significantly to our losing money,” Shimoda said. “We would not get the clawback charges for 6 months or even longer, and then you’d find out, ‘Oh, there’s a $200,000 bill for our pharmacies that comes off the bottom line.’”
Why is this happening?
In the JAMA Internal Medicine study, Guadamuz and colleagues sought to identify factors that put pharmacies at risk of closing. They looked at different neighborhood characteristics, such as urbanity, percentage of minority populations, percentage of populations living in poverty, medically underserved area status, and number of pharmacies per 10,000 persons. They also looked at the role health insurance might play, assessing the ratio of publicly versus privately insured individuals and the percentage of uninsured individuals in the population.
While the researchers found that the total number of pharmacies in the United States grew by 7.8% from 2009 to 2015, that growth was undercut by the collapse of 12.8% of the nearly 75,000 pharmacies operating during this time period.
Pharmacies located in cities, compared with those in rural areas, were hit the hardest. Those operating in underserved areas, particularly ones serving primarily low-income, uninsured, or publicly insured patients, were most at risk of closing.
Independent pharmacies were among those most heavily affected, whether they were located in cities or rural areas. In fact, 27% of the pharmacies that closed in urban areas and 23% of those in nonurban areas were independently owned.
Low reimbursement rates from Medicare or Medicaid are part of what’s to blame, said study author Dima M. Qato, PharmD, MPH, PhD, who is associate professor of pharmacy systems, outcomes, and policy at the University of Illinois at Chicago College of Pharmacy.
“Pharmacy reimbursements for Medicaid and Medicare prescriptions are generally lower than for private or commercial insurance,” Qato told Pharmacy Today. “Pharmacies serving disproportionately publicly insured populations are less likely to profit than pharmacies serving more privately insured populations.”
Independent pharmacies face an additional challenge because preferred pharmacy networks “often exclude independent pharmacies, especially in urban areas,” said Qato.
In preferred pharmacy networks, prescription drug plans select a group of preferred pharmacies that are able to give them a larger discount. When patients choose to fill their prescriptions at an in-network pharmacy, they can receive lower prices for their medications. “Therefore, patients are encouraged to go and pay less if they fill at a preferred pharmacy, which is usually a chain,” said Qato.
PBMs and direct and indirect remuneration (DIR) fees aren’t helping, either.
“The amount of revenue that pharmacies are able to generate from each prescription has decreased, especially those for which the payment flows through a PBM,” said David Zgarrick, PhD, FAPhA, professor of pharmacy at Northeastern University Bouvé College of Health Sciences in Boston, who was not involved in the study.
“Pharmacies who are forced to accept contracts that pay them less per prescription than they received in the past, and also experience DIR fees and other clawbacks from revenue after a prescription is dispensed, are seeing their overall revenue from dispensing decrease, despite continuing to fill large numbers of prescriptions,” Zgarrick added.
And these barriers are true for all pharmacies—chain, grocery store, mass merchandise, government, and clinic-based—not just the urban and independent pharmacies that are most at risk.
When Raley’s Supermarkets decided to close roughly one-third of its pharmacies in 2019, it cited industry consolidation, high operating and drug costs, and low reimbursement rates from Medicare, Medi-Cal, and private health insurers as the main factors that contributed to the pharmacies’ demise. Similarly, Bi-Mart announced that the pharmacies it closed ceased to be profitable because of rising fees on Medicare Part D prescriptions by PBMs and restricted access to health care plans, among others.
But that’s not the whole story. The entire landscape of the retail marketplace is changing, said Zgarrick, and community pharmacies are now feeling the pressure to compete not only with other brick-and-mortar stores but also with online retailers.
“E-retailers like Amazon, as well as the e-commerce divisions of typical brick-and-mortar retailers like Target and Walmart, are competing for business by lowering their prices and touting their convenience,” he said. “Pharmacies, especially retailers like grocery and discount stores that operate pharmacy departments that depend on nonprescription revenue, are at risk of declining sales and profit margins.”
These disruptions in the pharmacy landscape may just be the new norm. In 2018, Amazon purchased the San Francisco-based online pharmacy startup PillPack, hinting at plans that the online retail giant will enter the pharmacy market. Only time will tell how this will affect the operation of local community pharmacies in the United States.
After 100 years, a pharmacy succumbs
George Garmer, BSPharm, did everything you’re supposed to do. He researched the national marketplace. He stayed active in his professional associations. He diversified his services. He shared his expertise beyond the walls of his pharmacies, out in the community. He met with policymakers and shared the story of his pharmacies and their patients. But years ticked by without change, and profits dwindled. “I knew time was running out,” he said. Eventually, he had to sell his pharmacies before he became unable to pay bills and meet payroll.
The 2019 decision to close Halethorpe Pharmacy and Independent Drug, the two pharmacies he owned in Baltimore County, MD, still brings “a lump in my throat and tears to my eyes,” Garmer said. “I continue to ask if there was something more I could have done.”
Halethorpe was in business for more than 100 years, including Garmer’s 20 years as owner. He opened Independent Drug in 2004 in an economically depressed pharmacy desert, and most patients accessed the location on foot. When the pharmacy closed, they lost access to care.
His pharmacies provided durable medical equipment, therapeutic shoe fittings, long-term care, immunizations, nutritional supplements for bariatric surgery patients, and more. Garmer worked with the Baltimore County Department on Aging to offer health classes at area senior centers and was even named the agency’s Business Partner of the Year in 2017.
What went wrong? The blame, Garmer said, lies squarely with PBMs. “Over time it became increasingly difficult to know how much money we were making on a prescription. The initial slow drip of prescriptions filled at a loss turned into a flood of upfront and hidden fees that turned more and more prescriptions into money losers,” he said. Garmer also lost longtime customers to restricted networks and forced mail service. Another huge blow to the stores was the introduction of Electronic Quality Improvement Platform for Plans and Pharmacies (EQuIPP), which Garmer said PBMs use to penalize pharmacies for factors over which they have no control.
Further, PBMs misled patients into believing they could no longer use their insurance at his pharmacies. “I found myself explaining the truth increasingly often over the phone and sending mailings of my own to dispel this misleading information.” He brought the deceptions to PBMs’ attention many times. “There was never any effort on their part to correct the situation.”
In the end, he sold his patient files to Walgreens and now works as a pharmacy manager at one of their locations in Ft. Lauderdale, FL. “I feel lucky to have a job at a quality company in our tough job marketplace.”
But the lessons he learned as he fought to keep serving the patients he loved still sting. “Over time I saw that the political activity of one individual is not enough to overcome the lobbying influences and big money in Washington,” he said. “Meanwhile, financial conditions in retail pharmacy keep getting worse for everyone—except the companies that decide how much we get paid.”
And of course, there’s the pain of leaving his patients behind. “The single most heart-wrenching part of my decision to close was how it would affect our patients and my 38 employees,” Garmer said. “My staff were a family to each other and to our patients. Our final days were like a funeral every day.”
Like Garmer, his staff have all since moved on, landing new jobs and doing their best to continue caring for patients. “But we are no longer together, and many of us are no longer in community pharmacy. It is not the same.”
A ripple effect
When a pharmacy shuts its doors, the effects ripple throughout the community, and patients’ health often suffers as a result.
In a study published on April 19, 2019, in JAMA Network Open, Qato and colleagues found that older patients’ adherence to essential heart medications plummeted with pharmacy closures.
The researchers looked at nearly 3.1 million individuals aged 50 years and older who filled a prescription for cardiovascular medications in the United States between 2011 and 2016 across all types of pharmacies. Of these patients, 3% used a pharmacy that subsequently closed.
Within the first 3 months after the pharmacies shut their doors, the patients’ adherence to statin, beta-blockers, and oral anticoagulants immediately and significantly plunged by 5.90%, 5.71%, and 5.63%, respectively. This persisted even after 1 year of closure.
The drops in adherence were greatest among patients who used independent pharmacies, filled prescriptions at a single store, or lived in low-access areas. The closures disproportionately affected pharmacies in predominantly black, urban, and low-income neighborhoods.
“Pharmacy access impacts access to prescription medications and ultimately, health outcomes,” said Qato. “Health outcomes, including disparities, may worsen if access barriers due to closures are not addressed.”
Pharmacy closures impact patients, communities, pharmacists, and other pharmacy personnel, added Zgarrick. “I had personal experience with this, as the pharmacy in Wisconsin where my parents were patients for over 40 years closed with little notice in late 2018,” said Zgarrick. “My parents were able to transfer their prescriptions to another pharmacy in their town, but many patients, particularly those in rural and underserved urban areas, are not so fortunate.”
This is why efforts and policies aimed at reducing nonadherence to prescription medications need to consider the role of pharmacy closures, the study authors emphasized, and with it the influence of low reimbursement rates, PBMs, and preferred pharmacy networks.
“Policies should address the regulation of PBMs and ensure pharmacy reimbursement rates for Medicaid and Medicare prescriptions are fair and transparent for all chain and independent pharmacies,” Qato told Today. “Ensuring health plans and their PBMs meet pharmacy access standards for preferred pharmacies is also important.”
The fewer options that patients have to fill prescriptions make way for more barriers to accessing those medications or taking them as prescribed, said Zgarrick. “This ultimately puts the health of these patients at risk.”
If a pharmacy does close, patients need to know right away, said Qato. “Inform patients as soon as possible, and implement a transition plan with the patients affected,” she said. This includes transferring prescriptions to nearby or preferred pharmacy locations, if they are available.
Bonds break when a pharmacy owner sells to a chain
Fourteen years into his pharmacy career, Dan Singh, RPh, decided to strike out on his own and open Dan’s Wellness Pharmacy in Stafford, VA. Seven years later, he was ready to expand. Singh had done his research. After some market analysis, he picked a location and opened The Pharmacy of Culpeper in Culpeper, VA, in 2013.
Five years in, the numbers started going south. “We started realizing that we were really off from previous years,” he said. Singh and his partner attributed the losses to the pharmacy’s high proportion of Medicare Part D patients. They picked up their marketing to attract non-Medicare patients.
It wasn’t enough.
Soon a chain began hovering. “They wanted to evaluate the pharmacy, and I agreed,” Singh said. The chain’s initial offer wasn’t persuasive. “But then they came back with more.”
Singh and his partner elected to persevere for another few months. “Medicare reimbursement was getting even worse. Because of the retroactive DIR fees, most taken 3 to 6 months after filling the prescription, it was almost impossible to evaluate our future. Volume was actually increasing—but we were barely making a profit,” Singh said. “If we were going to continue on the path of the high Medicare percentage of our business, we weren’t going to make it.” They decided to sell.
For the community, the news was not easy to hear. “The pharmacists who worked on a daily basis knew everybody, they counseled everybody, they had a very intimate relationship with almost all the patients. The Part D and elderly patients really needed that help,” Singh said. “When we closed, a lot of people in the community were upset because there’s nowhere else to get that care.”
He did what he could for his employees. “One of the pharmacists who owned part of that store with me, he’s at Dan’s Wellness Pharmacy in Stafford full-time now. One technician came here to Stafford—it’s kind of a drive for her, but she just didn’t want to work for the chain.”
The other pharmacist from the Culpeper location and a second tech got a job with the chain that bought the pharmacy. Neither lasted long in their new setting. “I heard that [the pharmacist] had a horrible, horrible, horrible experience and left after a couple of months,” Singh said.
The chain made Singh sign a nondisclosure agreement that prevented him from being able to give that pharmacist a heads-up before the sale went through. “He wasn’t happy with me selling the business, so I haven’t communicated with him too much since.”
His first pharmacy, the one in Stafford, remains open. Compounding, a drive-through, a pill-pack machine, clinical services, and a successful front-end buttress the location beyond dispensing services.
Still, he said, “[my experience] made me very worried about where the payment model is going in pharmacy for traditional pharmacies that don’t have other things going on besides filling prescriptions.”
A bright future
Patients aren’t the only ones reeling from the blow of pharmacy after pharmacy shutting their doors.
Pharmacists and other pharmacy staff are forced to contend with the threat these closures pose to their livelihoods. And the harrowing uncertainty of their future can have devastating effects on well-being in a landscape where pharmacists are already feeling the mounting weight of occupational stress and burnout.
But pharmacists shouldn’t lose hope, said Zgarrick.
“Change has always been a constant in pharmacy,” he said, and the need for pharmacists’ expertise is only increasing. “Society’s increased reliance on medications, combined with their increase in costs, has resulted in more opportunities for pharmacists—the medication experts—to enhance the value of medications and their use.”
In some cases, pharmacy closures may even become a flower bed of opportunities, said Zgarrick. As an example, he cited the effects from the 2019 demise of pharmacy departments operated by ShopKo, a regional chain of retail stores based in Green Bay, WI.
The closures “resulted in an increased number of independent pharmacy openings in the areas where this chain operated, many of them being started by the chain’s former employees,” said Zgarrick. “These pharmacists recognize that the demand for medications and the need for pharmacist services still exists in these communities.”
There are also ways that pharmacists can shield themselves from the threat of closures, he added.
One of the most crucial things pharmacists can do is remain connected to their clinical skills. “Knowledge of medications and their use is what sets pharmacists apart from any other health professional,” said Zgarrick. “Since the need for and use of medications isn’t decreasing—if anything, it’s increasing—there will still be opportunities for pharmacists with clinical skills, regardless of what may happen to their employer.”
Pharmacists can use these clinical skills to expand the scope of services they offer at the pharmacy. “Expanding services diversifies revenue streams, which is vitally important, particularly at times when pharmacists’ primary source of revenue (sales of selling prescriptions) is at risk,” said Zgarrick.
It’s also important to remain connected to patients and prescribers, he added. “Patients and prescribers not only are the source of a pharmacy’s business, they also can become their advocates, particularly when it comes to expanding their scope of practice.”
Finally, Zgarrick said that pharmacists should develop and maintain their network. “Professional associations are a natural source of networks for pharmacists, as are university alumni groups, professional fraternities, and even fellow employees of large organizations,” he said.
While it can be difficult to see a glimmer of hope amid the bleak portents of pharmacies shutting their doors, Zgarrick maintains that the future is bright.
“I remain optimistic for the future of our profession, even with the challenges that many pharmacies and pharmacists are facing today.”
A health-system pharmacist still doesn’t understand why
The e-mail arrived at 1:00 pm, telling them to close the pharmacy at 3:00 pm and arrive at another location at 4:00 pm.
There was little doubt what it all meant. “We walked into an auditorium full of Kleenex boxes,” said Miranda Jones,* PharmD. “A higher-up delivered the news, and human resources was there.” Around 300 employees were affected, one-third of them pharmacists.
Jones and her colleagues were employees of a Midwest health system that 5 years earlier had merged with a nonprofit health care provider and insurance company to form an organization that integrated health care and health care financing. The combined entity served more than one million members.
Jones worked for more than 15 years in a pharmacy located inside one of the health system’s clinics. Patients would come right from their prescriber to pick up their meds, and the pharmacy also provided medication therapy management services as well as refill authorizations and therapeutic substitutions within the electronic medical record system. “We were very hands-on with our patients,” Jones said. “Our patients were part of our family. We knew almost all of them personally as soon as they walked up to the counter.”
The public justification for the pharmacy closures was that the health system could not be equipped with modern conveniences like drive-throughs and extended hours, and that the system was too small to get a reasonable price for drugs. Jones questions these explanations. “Most of us feel that the health plan side did not sign up enough Part D patients, and that plus a lack of reimbursement from PBMs were the real issues,” she said.
The news was hard to swallow. “Patients were in disbelief—shocked, upset, and sad. So many called and e-mailed on our behalf,” she said. “So did providers.” Most of the final month of the pharmacy’s operation was spent transferring prescriptions to other pharmacies. Patient files went to Walgreens.
She describes the experience as “life-altering.”
“We had sites in very underserved locations. People took the bus, a cab, or walked to get to us,” she said. “They will not take any of those to another pharmacy. Many will no longer take their meds.”
*Not her real name