“It’s not the way I wanted it to go,” he says sadly. “You do what you’re supposed to do. You go to college, get a doctorate, start a small business in a small town, support the community and it’s not even close to being a viable option.”

“This isn’t because the community didn’t support us. It’s because we lose money on every prescription we fill.”

Those are the words of Tom Wullstein, owner of Brandon Pharmacy. He is talking about his own pharmacy, but the same words could have been said by over a thousand pharmacy owner/operators this year alone.

In pharmacy policy circles, a lot of numbers get thrown around trying to variously prove that a) small business pharmacy is dying and needs change or b) small business pharmacies are doing fine, there’s more of them than ever before! Whenever I see these white papers, especially those put out trying to prove hypothesis b, I feel like the authors are saying “who ya going to believe, me or your lying eyes?” So, I decided to tackle the question myself, recruiting help as I could from like-minded people.

Over the last several weeks, I’ve worked on a dataset of pharmacies that were active in the National Council of Prescription Drug Programs (NCPDP) database on 1/1/2024 and were no longer active on 9/1/2024. Pharmacies can be de-listed in NCPDP for basically 2 reasons:

1. The pharmacy closes
2. The pharmacy comes under new ownership and obtains new numbers (NCPDP, NPI, DEA, state license, etc.)

I wanted to sort out how many of the de-listings from NCPDP were closures and how many were changes of ownership, so here’s what I did (with help from a ton of volunteers):

1. Pull a list from NCPDP of Community/Retail Pharmacy NPIs that were present on 1/1/2024 and were no longer present on 9/1/2024. This yielded a list of 2577 pharmacies.
2. I assumed that CVS/Walgreens/Rite Aid don’t randomly get new NPIs and I assumed that their corporate HQ is competent in maintaining their NCPDP profiles so I just marked all of them as “Chain Closure.”
3. Winn Dixie very publicly closed all of their pharmacies and sold files to CVS/Walgreens in the process of selling their chain to ALDI, so I just marked all of theirs similarly as “Chain Closure”
4. I put out the list to a few groups of pharmacy employees nationally with ~6000 members total, and asked folks to mark stores they knew about from their local area
5. I googled every remaining pharmacy and marked as closed if the Google Maps location was permanently closed or the reviews said it was closed.
6. I ran the remaining phone numbers through a phone number validation service to weed out disconnected numbers, which were marked as closed.
7. I and several other volunteers placed phone calls to the remaining pharmacies. If the person on the other end answered “pharmacy”, I verified that they were still operating at the same address, and if not, I marked as closed — mostly those were scenarios where a location had acquired the records of a nearby pharmacy.

I estimate that in total, about 40 man-hours of effort was put into this project. The results are as follows:

• 1139 chain closures of large chain pharmacies as per my steps 2 and 3.
• 1136 Closures of independents and small to mid-sized chains as per steps 4-8.
• 298 changes of ownership
• 4 records were duplicates1

I’ve created a map here:

The raw spreadsheet where I did this work is available here.

Since starting this project, many people have asked how to interpret this information. To start with, this data shows that nearly 2300 pharmacies’ worth of employees have been laid off. Most pharmacies employ about 10 people, so that’s about 23,000 pharmacy staff laid off. Additionally, about 1100 entrepreneurs have had their dreams of pharmacy ownership crushed just this calendar year, and can probably resonate with Tom Wullstein’s comments.

For context, on 1/1/2024, there were 60,867 active Community/Retail NPIs/locations in NCPDP, and there have been 857 new NPIs added in the relevant time frame23. While I find “netting out” of openings and closures very distasteful, this means that there are 1720 net closures since 1/1/2024, or in other words a 2.8% drop in number of pharmacy locations nationwide. You can also contextualize this information against any number of academic papers on the same topic, Guadamuz, Alexandar, Zenk, et al. in JAMA in 2019, for example, shows that an average of 1631 pharmacies closed each year as reported in NCPDP from 2010 to 2015, with and average of 2435 pharmacies opening each year for a net average figure of 804 openings every year in that period.

To reiterate, on average every day since January 1, 2024:

• ~5 pharmacy owner-operators have closed their businesses permanently
• ~5 chain pharmacy Pharmacists-in-Charge have had their stores closed
• ~11 neighborhoods lost their pharmacy
• ~110 pharmacists and pharmacy technicians have been laid off

For those that have read this blog before, I think this is unnecessary to say, but the root causes of this incredible number of closures are obvious to me:

1. PBM reimbursements are insultingly low – see the bit about “dispense fee” here
2. PBM reimbursements are based on competition on nonexistent prices outside of 340b — AWP minus 26.3% is not reasonable or relevant, kids.
3. PBM reimbursements are unevenly distributed, with the lion’s share of the money going to “specialty drugs” instead of evenly across prescription drugs – see also: every drug that Mark Cuban talks about when he talks about PBMs.
4. The largest wholesalers charge prices to independents that are much higher than the prices charged to chains, which is visible in the NADAC fluctuations over the last 6 months
5. The opioid litigation has put the largest pharmacies into a lot of debt, which combined with 1, 2 and 3, has resulted in mass closures of pharmacies, particularly Rite Aid, which just exited bankruptcy.
6. Our payment system largely pays variable prices for the service of dispensing based on the exact identity of the pills in the bottle, not based on the service rendered. In other words, PBMs are concentrating all of the profit into a small fraction of items, which their integrated mail-service and “specialty” pharmacies can capture the lions share of the volume from.

I don’t know 100% how to solve this problem of pharmacy closures, but I have ideas about some good places to start:

• H.R. 9096, the Pharmacists Fight Back Act, would go a long way to resolving my concerns 1,2,3 and 6 – it would ensure payments to pharmacies be based on actual cost of goods plus a 2% markup plus a cost-of-dispensing based professional dispense fee across all of the major government programs: Medicaid, Medicare, Federal Employees and TRICARE. I think that if anything like this bill becomes law, ACA exchange plans should be included. This bill would make the pharmacy payments system fair and legible, instead of illegible and slot-machine-esque.
• A Glass-Steagall for Healthcare – Glass-Steagall was a New Deal era law that structurally separated community banking and investment banking. Similarly, I think that in healthcare, we desperately need to outlaw “payvidors.” The opportunities to take advantage of your competitors, evade reasonable regulation, and exploit anyone not inside your system are far too numerous and pervasive to continue to allow United Healthcare and OptumRx to own Optum Specialty Pharmacy and Optum Physicians Group, or to allow CVS/Caremark and Aetna to own CVS/Pharmacy. Pharmacies should not own PBMs, PBMs should not own pharmacies. Health Insurers should not own physician practices. In short, if your job is to manage other people’s money to buy healthcare products and services, you should not be ALLOWED to be in the business of selling those same products and services. These vertically integrated companies are simply too big to care.
• Robinson Patman Act enforcement – the existence of thousands of different prices for identical products in the PBM and pharmaceutical wholesaler businesses is proof that the big 3 in each market have far too much power to twiddle, and in a regime with visible and agressive enforcement of the RPA, none of this nonsense would exist.

All of these solutions are centered in government policy, because even the most red-blooded free-market fundamentalist has to recognize that pharmacy as it exists today is a product of government policy. Medicaid, Medicare, ACA, the FEHBP, state public employee plans, and TRICARE together account for somewhere north of 70% of a typical pharmacy’s revenue. My profession as it exists, exists primarily at the behest of and mercy of the folks in Washington DC and in the various State Capitols. The policy choices that have been made over the last 20+ years are why my profession is struggling and dying. We need help. I hope that we’ll be able to make it so that when an entrepreneurial person gets a doctorate, saves some money, opens a pharmacy to serve their community, and the community chooses to support that pharmacy, that pharmacy thrives.