Why are so many pharmacies closing?

The shift to pharmacy benefit managers has caused the margins in my store to plummet — often to unsustainable lows.

By Michael Wilson
Updated March 11, 2024, 3:00 a.m.

The recent spate of Walgreens closures in Boston has understandably spurred a lot of discussion and concern about the future of pharmacies in the city — particularly in underserved neighborhoods. As an independent pharmacist, I believe it is clear more needs to be done to ensure the continued presence of trusted neighborhood drug stores — particularly when it comes to recent health care law changes.

I share the community’s sadness at the news that Walgreens has decided to close its pharmacies in Mattapan, Roxbury, Lower Roxbury, and Hyde Park. As the owner of a pharmacy that has been located in Dorchester for more than 50 years, I am in competition with Walgreens — but it’s also a partner that has served this ever-changing neighborhood that has seen a steady ebb and flow of new immigrants and elderly residents among others.

So, what is behind the recent closures? Some have pointed to the spike in robberies and thefts in Boston. Others have pointed to the expansion models of large pharmacy chains. But there is another force at play, driving down revenues for pharmacies big and small.

Many of the Dorchester customers I serve are covered by MassHealth, which is a joint state and federally funded insurance plan for primarily low-income families. About five years ago, the Baker administration made significant changes to MassHealth to switch thousands of MassHealth recipients to a so-called Accountable Care Organization. The move involved changing beneficiaries’ prescription drug coverage from state oversight to commercial for-profit plans managed by middlemen called pharmacy benefit managers.

The change mirrors a shift to PBMs that has been happening at the national level for years. Three PBMs doing business with MassHealth currently account for 80 percent of all prescriptions dispensed in the United States. The combined revenues for these companies in 2023 were a whopping $924.7 billion.

For independent pharmacies like mine, the shift to PBMs has led to the plummeting of store margins — often to unsustainable lows. Every day, we are forced to dispense multiple prescriptions at a lower cost than what we as independent pharmacists pay — in effect, subsidizing giant Fortune 100 companies. The same is true of Massachusetts taxpayers, who are footing the bill for prescription payments to these PBMs to the tune of more than $1 billion every year. Paying pharmacies lower prices is not reducing drug costs — it is just increasing PBM profits.

But the true cost of this law is the slow exodus of drug stores from the neighborhoods that need them most. Indeed, with increasing evidence citing PBMs’ low reimbursement policies as a key reason why pharmacies large and small are discontinuing doing business in urban neighborhoods, it is critical that the Healey administration and the Legislature take action soon.

There is a clear fix to this problem. MassHealth could carve out pharmacy services from its managed care plan and restore a system that was working well for patients and pharmacies alike. Doing so would allow policy makers to preserve the goals and benefits of the Accountable Care initiative. And instead of delivering business to the top three commercial PBMs in the country, it would allow pharmacy services to again be managed by the state, provide fair payment to participating pharmacies, and ensure our most vulnerable neighborhoods have the lifeline to medications, household goods, and groceries they need.

For a half century, my family has been proud to be a part of the Dorchester community — doing business, employing residents, and giving back to the neighborhood. We have stood by this community in both good times and challenging ones — and nothing will ever change that. But what does need to change is how PBMs are regulated. And with several reform bills currently being considered by the Legislature, we have a real chance of driving meaningful change for independent pharmacists and the customers we serve.