Independent pharmacies, a mainstay of rural business and healthcare, were among the hardest hit, new research reports.
Rural America is losing pharmacies, especially independently owned drug stores that are mainstays of rural communities.
Challenged by slow payments, decreasing reimbursements from insurance companies and Medicare, and growing competition, nearly 600 independent rural pharmacies have closed since 2003, a study from the RUPRI Center for Rural Health Policy Analysis at the University of Iowa found. During the same period, the number of franchise pharmacies fell by about 70, while chain pharmacies like CVS and Walgreens grew by about 90 stores.
“One reason [for the closures] is negotiated pricing,” said one of the study’s authors, Keith Mueller. “Reimbursement pricing is not always keeping pace with the cost changes to the pharmacy.”
Looking at data from the National Council for Prescription Drug Programs on institutions providing pharmacy services in all 50 states and the District of Columbia – more than 81,000 institutions as of December 2021 – from 2003 to 2021, researchers were able to determine whether areas gained or lost pharmacies and what kind of pharmacies they were.
Researchers used zip code data to determine which pharmacies were in rural areas and identified the pharmacies as independent, chain or franchise pharmacies. The study excluded government pharmacies, such as Indian Health Services or military pharmacies, and alternate dispensing sites like doctor’s offices, emergency departments, rural health facilities, and mail-order pharmacies.
The study found that the number of rural retail pharmacies declined by 9.8%, while the number in metropolitan areas increased by 15.1%. Of the retail rural pharmacies, independently owned pharmacies declined by 16.1%, while the number of independently owned metropolitan pharmacies increased by 28.2%. There were 3,698 independently owned rural pharmacies in 2003. By 2021, there were only 3,102. Nearly half of the pharmacies located in rural areas are sole, independently owned retail stores, researchers said.
Independently owned pharmacies are crucial to rural communities, Mueller said, because they are less likely to close if profits fall.
“They’re more likely to stay with it, if you will, and less likely to say they absolutely can’t do it based on… some kind of business model,” he said. “At the end of the day, the local independent pharmacy is part of the community. It’s embedded. It’s just a different cultural feel and a difference in the commitment to sustaining that service in that community.”
The number of chain pharmacies in rural areas, however, grew during the study period. In 2003, rural areas had 2,030 chain pharmacies, while there were 2,124 in 2021, an increase of 4.6%. However, chain pharmacies saw nearly triple that growth in metropolitan areas, growing by more than 10%, researchers found.
Rural independent pharmacy owners have said that low reimbursement rates from insurance providers, Medicare and Medicaid, as well as delays in payments, have made staying open difficult. Additionally, competition from not just the chain pharmacies, but mail-order pharmacy services works against the independent retail store. Another challenge, researchers said, is the aging rural population, and the difficulties handling these more complex patient cases.
Those financial challenges put them at risk of closing, the study said, many times without a viable replacement.
“Rural towns often have only one pharmacy serving the community, often dependent on a single pharmacist/owner to maintain the business,” the study said. “Because pharmacy workforce shortages are common in rural areas, recruiting and replacing these pharmacists has been difficult.”
Without a local pharmacy, rural residents are forced to travel further to get their medications, which creates added hardships for the elderly and those with lower incomes.
Mueller said that pharmacies are often also the sole source for obtaining health services in rural areas. From patient education to vaccinations to blood pressure checks and health screenings, Mueller said, rural pharmacies are often the first place rural residents go for health care. For patients managing multiple diagnoses, a pharmacist can be the person who manages the treatment for those diagnoses, he said.
But even though pharmacies provide those services, they are often hard to get reimbursements for which contributes to the pharmacies’ financial struggles.
Mueller said, the trend may be changing.
Between 2020 and 2021, large chain pharmacies changed their distribution model, allowing independent pharmacies to fill in the gaps. The study noted that in several rural towns in Iowa, Montana, and Idaho, independent pharmacies are filling the hole left when large chain pharmacies closed in rural areas.
Additionally, the United State Supreme Court’s decision on Rutledge v. Pharmaceutical Care Management Association may have helped as well. In that case, the court found that rural independent pharmacists were entitled to adequate reimbursement from pharmacy benefit managers. Prior to the decision, rural independently owned pharmacies often received lower reimbursements than their chain pharmacy counterparts did, with 80% of rural independently owned pharmacies reporting they received reimbursement rates below the cost of acquiring and dispensing some drugs.
Still, researchers found, rural residents will likely continue to face challenges in accessing pharmacies until rural independent pharmacies begin to move into the space left empty by pharmacy chain store closures in their area. And that could take years, Mueller said.