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The small-town drugstore closed for the last time on a clear and chilly afternoon in February. Jon Jacobs, who owned Yough Valley Pharmacy, hugged his employees goodbye. He cleared the shelves and packed pill bottles into plastic bins.
Mr. Jacobs, a 70-year-old pharmacist, had spent more than half his life building his drugstore into a bedrock of Confluence, Pa., a rural community of roughly 1,000 people. Now the town was losing its only health care provider.
Obscure but powerful health care middlemen — companies known as pharmacy benefit managers, or P.B.M.s — had destroyed his business.
This has been happening all over the country, a New York Times investigation found. P.B.M.s, which employers and government programs hire to oversee prescription drug benefits, have been systematically underpaying small pharmacies, helping to drive hundreds out of business.
The pattern is benefiting the largest P.B.M.s, whose parent companies run their own competing pharmacies. When local drugstores fold, the benefit managers often scoop up their customers, according to dozens of patients and pharmacists.
The benefit managers’ power comes from two main sources. First, the three biggest players — CVS Caremark, Express Scripts and Optum Rx — collectively process roughly 80 percent of prescriptions in the United States. Second, they determine how much drugstores are reimbursed for medications that they provide to patients.
Pharmacies buy those drugs from wholesalers, in the hope that P.B.M.s will reimburse them at a profit when the medications are provided to patients. But the largest benefit managers have strong incentives to set those rates as low as possible. A key reason: They make money in part by charging employers more for certain drugs than what the P.B.M.s pay pharmacies for them.
P.B.M.s frequently pay the pharmacies at rates that do not cover the costs of the drugs, according to more than 100 pharmacists around the country and dozens of examples of insurance paperwork and legal documents.
To take just one example: For a month’s supply of the blood thinner Eliquis, several pharmacists in different states said, the big three P.B.M.s routinely paid them as much as $100 less than what it cost the pharmacies to buy the medication from a wholesaler.
By contrast, the P.B.M.s sometimes pay their own pharmacies more than what they pay local drugstores for the same medications.
Independent pharmacies are powerless to fight back. As the unprofitable transactions pile up, some are unable to stay afloat.
The companies “chopped us off at the knees,” Mr. Jacobs said.
In every state, The Times identified at least one example since 2022 in which an independent drugstore closed and the pharmacist blamed P.B.M.s. In some states, like Pennsylvania, such closings have become routine. They have disproportionately affected rural and low-income communities, creating so-called pharmacy deserts that make it harder for residents to get prescriptions and medical advice.
Newly Created Deserts
Nearly 800 ZIP codes that had at least one pharmacy in 2015 now have none.
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Pharmacy deserts
Newly created
– Lost all pharmacies since 2015
Darrington, Wash.
– No pharmacy in 2015 or now
Existing
Currently has at least one pharmacy
Harmony, Minn.
Confluence, Pa.
Each circle
represents
a ZIP code
Pharmacy deserts
Newly created
— Lost all pharmacies since 2015
Existing
— No pharmacy in 2015 or now
Currently has at least one pharmacy
Darrington, Wash.
Harmony, Minn.
Confluence, Pa.
Each circle
represents
a ZIP code
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