While mass closures among drugstore chains grab attention, independent drugstores also are fretting about their financial health — but may stand to benefit.

The National Community Pharmacists Association’s NCPA Digest estimated that the number of independent pharmacies fell from 19,432 in June 2023 to 18,984 in June 2024. “Independents have been closing at a consistent rate for years, often with no fanfare, even though the impact on communities is usually more significant,” said Micah Lansford, owner of Roden-Smith Pharmacy in Clovis, New Mexico, vice chair of the New Mexico Pharmacy Business Council and incoming president of the New Mexico Pharmacists Association. “The perception is that every independent pharmacy is just a rundown, old-fashioned operation trying to stay open where other chains are dominating and they just can’t get the hint to disappear, but in many cases, they are the only remaining pharmacy serving in the community or they are outperforming the local chain competition with their service and offerings.”

Longer term, a study published in the journal Health Affairs in December by the University of California, Berkeley School of Public Health’s Jenny Guadamuz; Johns Hopkins Bloomberg School of Public Health’s Caleb Alexander; University of Southern California Sol Price School of Public Policy’s Genevieve Kanter; and University of Southern California Alfred E. Mann School of Pharmacy and Pharmaceutical Sciences’ Dima Qato found that from 2010 to 2021, 38.9% of independent pharmacies in the U.S. closed, compared with 21.9% of chain pharmacies. While the sheer number of closures of chain pharmacies was higher, the weakening of independent pharmacies was more acute, the study suggested. Independent pharmacies in urban, predominantly Black and predominantly Latino neighborhoods have borne the brunt of this trend, the research showed.

The Pharmaceutical Care Management Association, or PCMA, however, analyzed data from the National Council for Prescription Drug Programs and found that from 2014 to 2024, the number of independent retail pharmacies grew 5.8% to 23,384 while the number of retail chain pharmacies shrank 10.3% to 36,209 chain pharmacies. The reason for the difference between numbers from the National Community Pharmacists Association and the PCMA, a trade organization for pharmacy benefit managers, is unclear.

Are Pharmacy Benefit Managers to Blame?

Among the reasons independent pharmacies worry about their future are competition with big chains and pharmacy benefit managers, or PBMs. According to a November 2023 paper in the JAMA Health Forum by University of Utah College of Pharmacy’s Joey Mattingly, Georgetown Law’s David Hyman and the Johns Hopkins Bloomberg School of Public Health’s Ge Bai, PBMs act as intermediaries among pharmacies, insurance companies and employers, drugmakers, and wholesale distributors. “Pharmacy benefit managers emerged in the late 1950s in response to demand for specialized management of prescription drug benefits,” the authors wrote. “Over the decades, PBMs have expanded their influence in the pharmaceutical supply chain and now handle claims processing, formularies, pharmacy networks, mail order pharmacies, and contracting with wholesalers and manufacturers.”

Among PBMs’ roles as intermediaries is negotiation with drugmakers and pharmacies to set prices. “Criticism of the PBM industry centers around the lack of competition, pricing, agency problems, and lack of transparency,” according to the paper.

According to the Pharmacists Society of the State of New York, a PBM determines how much to bill an insurer for each prescription, then reimburses a pharmacy for dispensing the prescription. The PBM keeps the difference between the two prices, referred to as the “spread.” In a 2024 interim staff report from the Federal Trade Commission concluded that “PBMs may be using their market power across the distribution chain to set reimbursement rates at untenably low levels for independent pharmacies.”

Independent pharmacist Ashley Seyfarth said PBMs have inflicted economic pain on her business. Her two drugstores last year rejected signing a PBM contract for prescription drugs for the first time ever, and the locations continued their no-PBM policy this year. Seyfarth said her pharmacies lost hundreds of patients as a result but that the below-cost reimbursements that would have come with the contracts “were going to be unsustainable to the pharmacies’ well-being and cash flow.” Seyfarth is chair of the New Mexico Pharmacy Business Council, president of the New Mexico Pharmacists Association and vice president of the NCPA.

The PCMA insists PBMs aren’t responsible for financial stress and potential closures among independent pharmacies. “PBMs recognize the vital role pharmacies play in creating access to prescription drugs for patients and are supporting community pharmacies in rural areas through programs that increase reimbursements,” said PCMA vice president of public affairs and communications Greg Lopes. Citing a study by economist Dennis Carlton, the association said independent pharmacies actually are reimbursed 4% more for non-specialty, brand-name drugs than chains are and 24% more for non-specialty generic drugs.

Seyfarth and Lansford advocate for state and federal reforms that they said would toughen regulation of PBMs and help independent drugstores survive. Among their desired reforms is the federal Patients Before Monopolies (PBM) Act, which would ban a single company from ownership of both a PBM and a pharmacy. CVS Health, for example, owns a PBM, Caremark; pharmacy chain CVS; and health insurer Aetna.

The PCMA maintains that “further government intervention” in the PBM market aimed at helping independent pharmacies would boost costs for patients and employers.

Independent Pharmacies’ Outlook

Whether or not PBMs dampen independent pharmacies’ future, Placer.ai head of analytical research R.J. Hottovy said independent pharmacies stand to benefit from the ongoing closure of hundreds of chain drugstores. In part, that’s because independent drugstores often face less competition than chain drugstores, said Hottovy. “Many of the independent drugstores operate in smaller markets where there are fewer chain drugstores or other stores with pharmacies,” he said. In Clovis, for instance, Lansford’s pharmacy competes against one Walmart, one Walgreens and one hospital pharmacy.

Hottovy and others said independent pharmacies have an advantage over chains thanks to personalized service, medication counseling and drug compounding, the latter of which, according to the National Council on Aging, involves altering, mixing or combining drug ingredients to customize medication for a patient. These businesses are well-positioned to retain existing customers while attracting customers of shuttered chain drugstores, he said.

Overall, independent pharmacies deliver the kind of “trust, flexibility and true community engagement with personalized treatment” that big chains don’t, Lansford asserted. He and Seyfarth remain optimistic about the future of independent pharmacies, despite their challenges. “I have no intention of allowing these pharmacies to fail,” said Seyfarth.

Hottovy did offer a caveat, however. “Although independent drugstores have faced less direct competition in recent years, that may not always be the case,” he said. “Many grocery chains that offer pharmacy services are now expanding into markets where regional [pharmacies] have a strong presence, likely increasing competition in the years ahead. Additionally, as customers remain highly price-sensitive, regional [pharmacies] may struggle to match the lower prices that national chains can offer.”

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