As pharmacies disappear nationwide, Oregonians among the hardest hit (2024)

Brooklyn Pharmacy in Southeast Portland is a throwback to the days of mom-and-pop neighborhood pharmacies.

The compact corner drugstore, on Southeast Milwaukie Avenue just south of Powell Boulevard, still has glass display cases and shelves filled with old medicine bottles. Pat Hubbell, the pharmacist and owner, claims he knows his pharmacy’s 4,000 or so patients by name. And his dog Hal, named after the drug Haloperidol, greets every customer who walks in.

But as one of just a handful remaining independent pharmacies in Portland, Hubbell said Brooklyn Pharmacy survives uneasily and teeters precariously on the brink of extinction.

Big-box retail chains, mail-order and online pharmacies can offer lower prices, Hubbell said, making it harder for small brick-and-mortar pharmacies to survive when combined with plunging prescription reimbursem*nts from pharmaceutical intermediaries.

“I still believe independent pharmacies are a critical part of a community and that there’s still that one-on-one connection needed in a community to provide essential pharmaceutical care,” Hubbell said. “Unfortunately, the powers on top of us are making it incredibly hard to do that job.”

Oregon has the second fewest retail pharmacies per 100,000 residents, according to pharmacy data from the National Council for Prescription Drug Programs and obtained by The Associated Press.

The state also has among the lowest number of independently owned drug stores — more than 70% of retail pharmacies in Oregon are owned by big box chains.

Both independent and national chain pharmacies alike have disappeared from many parts of the state.

According to The Oregonian/OregonLive’s analysis of state pharmacy data, 23 of Oregon’s 36 counties have fewer than two pharmacies per 10,000 residents. Two counties — Wheeler and Sherman — don’t have any pharmacies at all, while Gilliam and Grant counties each have only one.

That leaves thousands of Oregonians without easy access the medication, health services and counseling pharmacists provide.

Keith Mueller, a professor of health management and police and the director of the Rural Health Policy Institute at the University of Iowa, said local pharmacies offer more than just filling prescriptions.

In many rural communities, he said, “the pharmacist is the last health care professional standing.” Particularly in areas that have lost a hospital or physician groups but still have a pharmacy, “the pharmacist becomes somebody people can go to,” he said.

But pharmacy owners and policy experts say a confluence of factors, including financial and competitive pressures, have made it harder to make pharmacists available in communities.

The rise of big-box chains like Walgreens, Rite Aid and CVS have made it difficult for independent pharmacies to compete. Independent pharmacies don’t have the same scale or resources to absorb financial shocks in the challenging market.

Mueller said a “big spike” in pharmacy closures came after the full implementation of the Medicare Part D in 2006 under the Medicare Modernization Act. Medicare didn’t used to cover prescriptions, so patients paid themselves. Medicare Part D added drug coverage through private insurers.

While Medicare Part D expanded access to prescription drugs for millions of older Americans and people with disabilities, Mueller said it also may have had an unintended effect of reducing reimbursem*nt rates for pharmacies and increasing their administrative workloads.

“Private insurance companies are the ones determining the prices that they’ll pay,” he said. “That resulted in lower revenue streams for pharmacies, particularly independent ones.”

The implementation of Medicare Part D, he said, has also resulted in higher negotiating power by the pharmacy benefit managers — the health care middlemen working between drug manufacturers, health insurance companies and drug stores.

A number of other issues have also hurt pharmacies, including staffing shortages, higher costs to health plans, increased competition from Amazon and Walmart and opioid lawsuits. Retail theft has also become a growing problem for some drugstores’ bottom lines, prompting stores to ramp up security and lock up products — preventative measures that cost money.

But multiple pharmacy owners told The Oregonian/OregonLive that an even larger challenge is the big share of profits leeched off by the pharmacy benefit managers.

Pharmacists say that doing business as an independent pharmacy is becoming less sustainable because of how pharmacy benefit managers can dictate the terms of contracts — such as how much they get reimbursed for filling prescriptions. Three pharmacy benefit managers — UnitedHealth Group’s OptumRx, CVS Health’s Caremark and Cigna’s Express Scripts — control roughly 80% of the U.S. market.

The trade group that represents such intermediaries say pharmacy benefit managers work to reduce drug costs for patients and employers who provide health coverage benefits, which they say has translated to patient savings of more than $1,000 each year.

Melissa Netland, a pharmacist who bought Stayton Pharmacy in 2006 with her husband, said pharmacy owners like herself must either take the contracts offered by pharmacy benefit managers or give up the ability to provide prescription drugs for their customers altogether.

“They control everything. They are the strong giants,” she said, adding that the middlemen have ratcheted down what they will pay for prescription medications, sometimes causing her pharmacy to take a loss for prescriptions. “They’re literally squeezing us out of business.”

Netland said their love of medicine and advocating for patient safety and preventative care motivated them to run a pharmacy in a small community. But, she said, the growing consolidation in the health industry, where health insurance plans own their own pharmacy benefit managers and either own or network with drugstore chains, have made independent pharmacies financially unviable.

The lack of pharmacy services in a community means patients must spend more money and time traveling farther distances to obtain necessary medications, Netland said. It can also mean longer waits to get a prescription filled, or turning to mail-order arrangements without the benefit of in-person counseling or having the ability to directly ask questions about taking medications safely, she said.

“People come to us for questions or concerns all the time, and we make time to see them,” Netland said. “We are that face and presence in the community that can be an advocate for patients to get help. … If pharmacies were no longer in the community, I really don’t know what would happen.”

Pharmacy benefit managers argue that there are more independent pharmacies today than there were 10 years ago. A report commissioned by the Pharmaceutical Care Management Association, a trade organization that represents pharmacy benefit managers, showed a 13% increase in the number of independently owned pharmacies from 2010 to 2019.

In Oregon, though, the same study showed a 10% decrease in independent pharmacies.

An audit released last summer by the Oregon secretary of state found that pharmacy benefit managers paid independent pharmacies less than they did national retail chains. Their position in the drug market ecosystem, auditors said, allows them to favor certain companies in their dealings with drug manufacturers, insurers and pharmacies.

Meanwhile, more independent pharmacies have fallen off the map.

In December, Jamaica Standiford, who co-owned Reedsport Pharmacy in Douglas County with her husband, announced that they were shutting the pharmacy’s doors because of “negative reimbursem*nts from insurance companies, retroactive fees on filled prescriptions, and the rise in cost of medication” that left the business unsustainable.

Standiford said in a statement that she spent the last two years trying to cut costs. She also looked for a buyer without success.

The pharmacy’s closure left Reedsport’s 4,400 residents with one pharmacy, inside Lower Umpqua Hospital. The next nearest retail pharmacy is a 30-minute drive, either to North Bend to the south or Florence to the north.

“Unfortunately our current healthcare system has made it extremely difficult for pharmacies to stay profitable or even break even,” Standiford said. “Many independent pharmacies and even larger pharmacies across the country have met this same fate.”

Indeed, Reedsport Pharmacy is not alone. The historic Hillsboro Pharmacy and Fountain, founded in 1873 and located at 243 E. Main Street since the 1920s until a 2022 fire, announced last week that it was closing. The owner, Jasmine Nguyen, who also owns a pharmacy in Southeast Portland, blamed low reimbursem*nt prescription rates and staffing woes for the closure.

When the national retail chain Rite Aid filed for bankruptcy last fall, it became clear that even the big chains cannot escape the challenges that have shut down many of the mom-and-pop operations. Rite Aid has closed more than a dozen stores across Oregon and southwest Washington.

That’s because even when his pharmacy makes a profit on filling a prescription, there’s no guarantee they can keep much of that money, said Hubbell of the Portland-based Brooklyn Pharmacy.

For one, Hubbell said, health plans charge pharmacies a fee every time they need to interact with the middlemen’s claims database. While those fees average roughly 15 cents per transaction, a pharmacy might check the database hundreds of times daily.

Pharmacies are also on the hook for hefty fees, including “pay-to-play” charges for network participation, levied by pharmacy benefit managers based on performance metrics they set, Hubbell said. Until this year, such fees have been assessed by intermediaries after the sale, and pharmacies oftentimes would wind up losing money on a prescription they filled months earlier, he said.

Starting this year, the federal government required those fees be assessed at the point of sale, a change intended to help pharmacies with accounting, but the fees nonetheless make reimbursem*nt rates hard to predict, Hubbell said.

“But the reimbursem*nt rate is the big crux of why we’re not OK,” he said. “This year has been the actual year that I’ve seen the worst reimbursem*nt rates.”

Penelope Culbertson, a Portland resident and Brooklyn’s customer of 27 years, said Brooklyn’s is the epitome of a community pharmacy. She said she’s been a loyal customer due to the store’s customer service and short wait times. She hopes the pharmacy can stay in business.

“It’s like a family here,” Culbertson said. “They take really good care of you.”

And it’s true, she said. “They always know your name.”

-- Kristine de Leon covers the retail industry, small business and data enterprise stories. Reach her at kdeleon@oregonian.com.

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