How pharmacy deserts are formed

PBMs play a big role in the formation of a pharmacy desert.
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In some parts of the US, it seems no matter where you look, you can find a Walgreens, CVS, or Rite Aid. But many neighborhoods still lack convenient access to a pharmacy.

These areas are called “pharmacy deserts,” but unlike actual deserts, they’re all over the US. More than 40% of all US counties are considered pharmacy deserts, per research from drug marketplace GoodRx.

Pharmacy deserts disproportionately affect Black and Hispanic/Latino neighborhoods, too. A 2021 study from the University of Southern California (USC) found there are “persistently fewer pharmacies” in Black and Hispanic/Latino neighborhoods compared to white or diverse neighborhoods.

Defining a pharmacy desert

There are multiple ways to define a pharmacy desert, according to Dima Qato, a senior fellow at USC’s Schaeffer Center for Health Policy and Economics. Her team identifies pharmacy deserts using metrics like location, economic status, and vehicle ownership. 

If most people in an urban neighborhood live more than a mile away from the nearest pharmacy, it’s a desert. If that neighborhood is low income and few households own a car, then that threshold drops to half a mile, said Qato.

A pharmacy desert in the suburbs occurs when most people live more than two miles away from the nearest pharmacy, or a half mile if most residents don’t own a car, said Qato. And a pharmacy desert in a rural area constitutes people living farther than 10 miles from the nearest pharmacy.

The financials behind a pharmacy desert

When it comes to the financials behind pharmacy closures, “it may seem complicated, but actually isn’t,” said Qato.

Pharmacy benefit managers (PBMs) play a big role in pharmacy closures. They create pharmacy networks for insurers, which direct patients to visit specific pharmacies. Often, the closest pharmacy in a pharmacy desert is an independent pharmacy rather than a chain—and that independent pharmacy is often not part of pharmacy networks, Qato said.

“A patient really can’t go there to fill their medications unless they want to pay a higher price,” she added. “They actually have to travel even farther to get their medications filled, and then that pharmacy slowly ends up losing customers and patients. So, not only do they get paid less, but increasingly, now they have fewer patients coming into their doors because of the growth of narrow networks.”

PBMs also decide how much a pharmacy gets reimbursed for dispensing a prescription, and rates can be less than what it costs the pharmacy to dispense the drug. According to a 2021 study from Yale Law School, some pharmacies report that up to 80% of their reimbursements are less than what it costs to dispense the drugs.

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“Taking that altogether, if it ends up being pharmacies filling fewer prescriptions and getting reimbursed less for prescriptions, pharmacies aren’t making enough money to be viable or survive as a business. So they close,” said Qato. 

It’s even harder for pharmacies to stay open in neighborhoods with large Medicaid populations, as pharmacies get the lowest reimbursements for filling Medicaid prescriptions. A disproportionate share of Medicaid enrollees are Black or Hispanic/Latino, so pharmacies in predominantly Black and/or Hispanic/Latino neighborhoods are more likely to face these reimbursement challenges.

A costly problem

Lacking access to a pharmacy makes people more likely to stop taking their medications, creating “dangerous, potentially life-threatening consequences,” said Qato.

And people not taking their medications costs the US healthcare system a lot of money. In 2016, ineffective medication therapy, including nonadherence, cost the US about $528.4 billion, or 16% of the total US healthcare spend, a study found.

“If you need those medicines at a pharmacy—and you’re less likely to get them because you live in a pharmacy desert—that’s going to have direct implications on the health of that community,” said Qato.

Potential solutions

Since USC published its 2021 study, the issue of pharmacy deserts has only worsened, Qato said. But there are measures that could help.

“At a minimum, at a policy level, we need to improve the regulation of PBMs to ensure that they meet certain standards, they’re transparent, [and] they reimburse equitably,” said Qato.

A wider tiered reimbursement system could also make reimbursements more equitable, she said. Medicaid programs in rural states include a tiered system that calculates reimbursement based on a pharmacy’s prescription volume and location. “So if you’re a pharmacy that fills fewer than a certain number of prescriptions, you get reimbursed by Medicaid more per prescription than a pharmacy even in the same state that fills a lot of prescriptions—just to make sure you’re financially viable,” said Qato.

Overall, pharmacy deserts are “not a rural problem only,” Qato said. “It’s an urban problem. It’s a suburban problem. But, it’s a disparities problem, I think, first and foremost.”

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Healthcare Brew covers pharmaceutical developments, health startups, the latest tech, and how it impacts hospitals and providers to keep administrators and providers informed.