Independent Pharmacies Under Pressure: The Impact of PBMs and Vertical Integration

Independent pharmacies play a significant role in delivering prescription medicines to Americans across the country, representing 35% of all retail pharmacies in the U.S.  

In recent years, there has been an alarming and continuing rate of independent pharmacy closures - nearly one in three pharmacies have closed since 2010, leaving almost 800 ZIP codes that had at least one pharmacy in 2015 now having none.  

A primary factor behind the decline of independent pharmacies is the vertical integration of large insurers, PBMs, and chain pharmacies in recent years as they increasingly merge or align their operations, consolidating control over drug pricing, reimbursement, and patient access. This structure enables PBMs to direct prescriptions to their own mail-order or affiliated chain pharmacies while under-reimbursing independent pharmacies, creating a system that disadvantages smaller, community-based pharmacies. 

PBMs also create financial disparities in how pharmacies are compensated. Independent pharmacies are often underpaid, while PBMs direct higher reimbursements to their own affiliated pharmacies, reinforcing their market advantage and further disadvantaging competitors. One study found that PBM’s charged markups 35 times higher when selling brand-name drugs through their mail-order pharmacies as opposed to independent ones. Other studieshave reported similar results. As a result of these practices, PBM-affiliated pharmacies make  18 to 109 times more profit over the cost of the drugs than the typical community pharmacy. 

Without meaningful reforms, the continued consolidation of power within vertically integrated PBM-insurer-pharmacy networks threatens to further reduce access, choice, and competition in the pharmacy market. 

Members of the National Community Pharmacists Association experience the effects of PBMs and vertical integration firsthand - they discuss the challenges and the need for Congressional action below:   

Learn more about the PBM issue and legislative solutions here.