Empire State Today

New York is experiencing a surge in “pharmacy deserts” as an increasing number of drug stores are forced to close—a trend that experts and lawmakers largely blame on the “unmanageable” relationships between pharmacies and insurance companies' Prescription Benefit Managers (PBMs) that set reimbursement rates that fail to align with the actual costs of doing business.

Increasing drug store closures in New York are leading to more “pharmacy deserts” in New York—a trend that experts and lawmakers largely blame on the “unmanageable” relationships between pharmacies and insurance company's Prescription Benefit Managers (PBMs) who determine reimbursement rates that aren't matching up with the cost of doing business.  

"The relationship with prescription benefit managers is becoming unmanageable," Don Arthur, owner of Brighton Eggert Pharmacy in Tonawanda, told ABC 7 Buffalo. "The reimbursement that Walgreen and Rite Aid and independent community pharmacies are getting from those prescription benefit managers just aren't covering their cost."

Arthur said that PBMs are like “middlemen” for insurance companies and that they “keep most of the rebates.” 

According to studies published on U.S. Pharmacist, the impact of PMBs is especially significant for smaller, independent pharmacies, which are often excluded from more lucrative insurance contracts. This has led to decreased patient volume and revenue for these establishments. Competition from large chain pharmacies, which often have more resources and bargaining power, has further exacerbated the situation for smaller players in the market.

In a bid to combat skyrocketing drug prices and bring greater transparency to the pharmaceutical industry, lawmakers in April announced the a bipartisan initiative aimed at reining in PBMs, according to the Staten Island Reporter.

H.R. 2880, the "Protecting Patients Against PBM Abuses Act," is a bipartisan bill sponsored by U.S. Rep. Nicole Malliotakis (R-N.Y.) along with Reps. Earl L. "Buddy" Carter (R-GA), Lisa Blunt Rochester (D-DE) and Jake Auchincloss (D-MA). 

“When it comes to PBMs, there’s little to no transparency on their practices, and oftentimes they also own the insurance companies and pharmacies and are dictating what their competitors, smaller ‘mom and pop’ pharmacies, are able to make on prescription drugs while they pocket big profits,” Malliotakis told Staten Island Reporter. “Because of this, ‘mom and pop’ pharmacies in my district are being crushed, and the costs are being passed down to consumers."

PBMs are third-party administrators of prescription drug programs for commercial health plans that are supposed to negotiate with drug manufacturers for reimbursement rates and rebates for pharmacies, but these organizations have actually caused a decrease in the rate of reimbursement to pharmacies, according to the study by U.S. Pharmacist.

A pharmacy desert is a location where the average distance to the nearest pharmacy is 1 mile or more. Stat News reports that pharmacy deserts are more likely to occur in low-income, minority neighborhoods. This disparity is particularly evident in New York City, where boroughs like the Bronx, Brooklyn, Queens, and Staten Island have significantly fewer chain pharmacies per capita compared to Manhattan.

Over the past decade, CVS has shuttered hundreds of stores and plans to close hundreds more, and Rite Aid, which declared bankruptcy in late 2023, has closed at least 13 stores in the region over a two-year period. Similarly, Walgreens has announced numerous store closures nationwide, according to ABC 7. 

Besides PBMs, Arthur said that shoplifting has also been a concern for his pharmacy.