Health Affairs Paper Shows High Rate of Pharmacy Closures ... In Exactly the Places They're Needed Most

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One of the key evidentiary pieces of the case against PBMs is that they’re killing retail pharmacy. The anecdotal evidence here -- the almost daily stories of pharmacies shutting their doors (documented well by Luke Slindee on LinkedIn) -- is overwhelming, but PBMs have long pushed back against that central fact. 

The PBM lobby loves to say “The market for independent pharmacies remains stable”: that phrasing was the title of a press release a year ago, and it popped up in another missive about a month ago. 

The problem is, that’s not remotely true, and there’s now some solid evidence of that. 

A new Health Affairs piece surveyed the pharmacy landscape and found that, of pharmacies open between 2011 and 2020, almost 30% were gone by 2021. Heartbreakingly (but perhaps unsurprisingly), many were in areas with already underserved populations or independent pharmacies.

Not good. 

And, as AP points out, this is a trend that has probably accelerated since 2021. 

I’ve long suggested that the death of retail pharmacy was both the biggest and the most-untold story in American health care. The good news (?) is that it’s a story that is getting more and more exposure (with the New York Times publishing the definitive take), and my great hope is that with that exposure will come better solutions.

Michigan is shaping up to be the next great 340B battleground. State lawmakers there are gearing up for a fight over legislation that would make it harder for manufacturers to set conditions around when they’ll send meds to contract pharmacies. 

Similar laws have passed in a handful of other states, essentially derailing one industry approach to trying to restrain the out-of-control growth of 340B. But -- like pretty much everything 340B related up until this point -- it’s hard to imagine that the lawmakers are getting super-deep. 

That’s not a knock on policymakers! This is hard stuff, and very few people have the kind of background needed to parse the topic. 

But things are changing, slowly. The HRSA reporting over the past few years had made clear that, even with contract pharmacy provisions in place by manufacturers, hospitals are still making bank. And the solid coverage of the Minnesota 340B transparency report (more on that below) has also boosted our collective understanding of who is winning (big hospitals, for-profit pharmacies) and who isn’t (true safety-net clinics). 

So the question in Michigan is whether contract pharmacy use should go unchecked. PhRMA doesn’t think much of the bill -- they have a thoughtful blog post making the case against the legislation -- and I’m hoping that unlocks the right conversation. 

It seems like one of the arguments for a cautious approach to lawmaking is the Minnesota experience, which found that contract pharmacies and other middlemen took $16 out of every $100 in profit generated by 340B in that state -- $120 million total -- a percentage that was far higher at some hospitals. 

That’s $120 million that didn’t go to patients. It didn’t go to innovation. It didn’t even go to the hospitals. It was just sucked up by the middlemen -- about two-thirds of whom are owned by PBMs -- whose only incentive is to grow the program as fast as possible. 

There are some breaks on that trend, but the Michigan approach would toss those breaks. 

So, a modest suggestion: perhaps the Wolverine State should instead push for a Minnesota-style transparency effort first before just jumping headline into a policy that’s going to -- among other things -- insulate PBM-owned pharmacies from meaningful regulation.

I’ve always figured that the discussion of the Minnesota 340B transparency report wouldn’t be complete until Adam Fein weighed in, and he provided his take, incisive as always, yesterday. 

Adam’s second two points -- the way that the 340B program is built on the back of employers/employees and the intersection with the state Medicaid program -- are worth extra consideration. 

The line of the week: “The list price of Enbrel is about $7,900. Imagine being a patient who paid a $1,500 coinsurance for your Enbrel prescription, while your plan paid more than $6,000. Then you and your plan find out that the hospital bought the drug for $0.01 and paid a PBM-owned pharmacy and a venture-capital-backed TPA more than $1,000 to facilitate the transaction. True magic.”

BTW: Adam has his “Outlook 2025” webinar next week. Well worth considering. 

ELSEWHERE: 

• I keep forgetting to link to this NPR piece on Paragon Health, a think tank staffed by several Trump 1.0 health wonks. My assumption has been that the Paragon folks are likely to provide the intellectual heft for the Trump 2.0 health agenda, the current nominees notwithstanding, so it’s worth keeping an eye on that. 

• Later this month, ICER will release its “unsupported price increases” report, which is a fatally flawed effort to spot companies that took unjustifiable price hikes on certain drugs. It’s not that the idea itself is terrible. It’s just nearly impossible to execute. And new research from NPC adds another reason to look gimlet-eyed at the UPI numbers: ICER doesn’t account for inflation in its calculus, inflating the price hikes it analyzes. 

• The market for specialty biosimilars is looking grim, and that’s a bad sign for realizing the promise of biosimilars as a cost-control approach. Coherus is now 100% out of the game, even as PBMs are ramping up their involvement. It feels like something needs to be done to keep this from ending badly. 

• Nine (!) of the top 10 most-lobbied health care bills in 2024 involve PBM reform, per Modern Healthcare. 

• Biogen execs expect “linear” growth in Alzheimer’s drug sales, according to Reuters. I flag this statement mostly to emphasize that the government has been fear-mongering about the budget impact of the new Alzheimer’s meds. Biogen/Eisai’s drug, Leqembi, had $39 million in U.S. sales last quarter, but the government somehow projected that it’ll spend $3.5 billion on that drug next year. 

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