Small Pharmacy Closures Spur Statehouse Battles on PBM Practices

Pharmacy trade groups are pushing for state legislation to regulate pharmacy benefit managers, arguing that PBMs are forcing community pharmacies to close across the US, including regions with few health-care options.

In 2024 state legislative sessions, lawmakers introduced more than 170 bills in 41 states seeking to regulate the entities that manage prescription drug benefits, according to the National Academy for State Health Policy. The top three PBMs—CVS Caremark, Cigna’s Express Scripts, and UnitedHealth Group’s OptumRx—control nearly 80% of the market.

Groups representing small, independent pharmacies and chains unaffiliated with PBMs have focused their advocacy on PBM practices they say put the most financial pressure on pharmacists: low reimbursement rates, charging health plans more than they pay back to pharmacies in a practice known as spread pricing, and pushing patients toward large pharmacy chains affiliated with PBMs.

Measures introduced in more than 30 states—10 of which were signed into law—include provisions to increase reimbursements PBMs give to pharmacies for purchasing and dispensing medications, and prohibit PBMs from steering patients away from independent pharmacies.

The surge in legislative activity around PBMs comes as the National Community Pharmacists Association reported nearly one independent pharmacy closure a day in the last year, with more than three times as many chain pharmacies shutting their doors. Nearly a third of NCPA members surveyed in February said they were considering closing this year due to lower reimbursements by PBMs.

PBMs are also in the spotlight at the federal level, with legislation under consideration to improve oversight on their role in shaping what Americans pay for prescription drugs. A July 9 report from the Federal Trade Commission detailed how PBMs’ low reimbursements to independent pharmacies and steering of patients to affiliated pharmacies could be limiting competition and inflating drug costs.

The PBM industry has pushed back on the criticism, arguing they rely on pharmacies to serve beneficiaries and that the independent pharmacy market is stable overall. But PBM legislation has advanced with bipartisan support, and bills are pending in a small number of states where legislatures are still in session, including California and Massachusetts.

Pharmacy trade groups say they aren’t letting up on their lobbying, arguing additional closures could add more Americans to the nearly 16 million people in the US living in pharmacy deserts.

“It could potentially be catastrophic,” said Anne Cassity, NCPA’s senior vice president of government affairs.

“The more vulnerable populations will definitely suffer, especially in very rural areas where there may not be any health-care providers,” Cassity said.

Problematic Practices

Pharmacists enter contracts each year with PBMs, but Cassity said these are “not negotiated contracts, they’re take it or leave it contracts” for many independent pharmacies.

“When they do accept these contracts, much of the time, the reimbursements are really below the cost for them to acquire the drug,” Cassity said. Meanwhile, she said, pharmacies continue to see their operating costs go up, including purchases of pill bottles, electricity, and other basic necessities needed to run a drug store.

Luke Slindee, a second-generation pharmacist from rural Minnesota, said it’s difficult for pharmacies to justify not interacting with PBMs due to their “concentrated buying power.”

Slindee’s hometown of Harmony hasn’t had a physical pharmacy since 2022, forcing residents to travel at least 10 miles to access the nearest pharmacist, he said.

Spread pricing is also a central issue to be addressed, said Christie Boutte, senior vice president of reimbursement, innovation and advocacy at the National Association of Chain Drug Stores.

“The health plan has agreed to pay a certain amount of reimbursement, but the PBM is not paying that price forward to the pharmacies,” Boutte said.

Slindee said PBMs may also not allow patients to use a community pharmacy, including for “specialty” drugs—high-cost medications that treat complex, chronic health conditions or serious illnesses like cancer, rheumatoid arthritis, and multiple sclerosis.

“There are certain drugs that are high cost that the PBM can say, ‘Sorry, you can’t get that drug at your local pharmacy, so you have to get it through a pharmacy that we own,’” Slindee said.

PBMs Push Back

The Pharmaceutical Care Management Association, the trade group representing PBMs, maintains that while the pharmacy market is changing with the growth in online, mail-order pharmacies, the independent pharmacy market is stable.

“PBMs recognize the vital role the pharmacies play,” PCMA President and CEO JC Scott said in an interview. “We need them to be part of the networks that our companies designed that are offered to their employer clients, and we have a vested stake in the success of the retail pharmacy marketplace.”

PCMA-analyzed data from the National Council for Prescription Drug Programs found that the number of independent retail pharmacies increased by more than 1,000 stores from 2014 to 2024, while the number of retail chain pharmacies decreased by more than 4,000 during the same period.

“There’s probably a broader set of market dynamics that have to be considered when you look at any particular trend around closures and openings,” Scott said, specifically citing the possibility of an excess capacity of chain pharmacies within certain urban areas, or “other overhead issues or corporate considerations for some of the larger chain companies.”

State Approaches

All 50 states have enacted legislation related to PBMs, though they vary in their degree of regulation. West Virginia is considered a leader when it comes to tackling PBM reimbursements, with legislation signed into law in 2021 prohibiting PBMs from reimbursing a pharmacy for a prescription drug or other service less than the National Average Drug Acquisition Cost plus West Virginia’s set professional dispensing fee.

A total of 15 other states have requirements for PBM reimbursements to pharmacies, with West Virginia and 12 others also explicitly limiting or prohibiting spread pricing.

Pennsylvania Gov. Josh Shapiro (D) on July 17 signed into law bipartisan legislation prohibiting PBMs from steering patients to pharmacies they own or control. It also requires PBMs to submit a comprehensive report on their business practices to the Pennsylvania Insurance Department.

NCPA is now focused on passing legislation in California (SB 966) that would require PBMs to pass through the total payments they get from health plans to pharmacies, among other requirements. The Senate-passed legislation awaits action by the Assembly’s appropriations committee before it can go to a final floor vote.

The independent pharmacy trade group is “trying to provide education in California to some of these employer and union groups, talk to them about how more transparency is not a bad thing, and more transparency is not going to increase your cost,” Cassity said.

PCMA is also meeting with California policymakers, employers, and unions on the legislation to flag their concerns with the bill, which the group’s recent fiscal analysis claims will increase premiums by $2 billion annually.

With the Massachusetts legislative session ending this month, trade groups are ramping up activity there over legislation (H.1215) that would ban spread pricing and prohibit PBMs from reimbursing a pharmacist less than the amount reimbursed to a PBM-affiliated pharmacy. NACDS earlier this month participated in an advocacy event at the Massachusetts statehouse in support of the proposed regulations.

PCMA, meanwhile, is engaging with a coalition of employer and labor unions called Save Our Benefits Massachusetts to fight back on the legislation.

As PBMs increase their opposition efforts, pharmacists’ financial difficulties will only get worse without legislative action, said Chris Krese, the senior vice president of congressional relations and communications for NACDS.

“Not a day goes by that we’re not hearing stories of the immense pressures on pharmacies that are flowing from PBM reimbursements and the tactics of PBMs,” Krese said.