When pharmacies close: Why pharmacy deserts are a growing financial risk for health systems

Retail pharmacy closures are accelerating across the United States — and the consequences extend well beyond the retail sector. Since 2020, thousands of retail pharmacy locations have closed nationwide, with independent pharmacies accounting for a disproportionate share of the losses. In many states, closures are outpacing new openings, particularly in rural and low-income communities.

As pharmacies disappear, health systems are increasingly left to absorb the downstream clinical, operational and financial consequences.

These closures are contributing to what public health researchers call “pharmacy deserts” — areas where patients lack timely, reliable access to prescription medications. By some estimates, more than one-third of U.S. counties now meet pharmacy desert criteria, with rural areas disproportionately affected. For health systems operating under value-based contracts, pharmacy deserts are no longer a theoretical concern — they are an emerging enterprise risk.

What is a pharmacy desert?

A pharmacy desert generally refers to a geographic area with limited pharmacy access, often defined as:

• No pharmacy within one mile in urban areas
• No pharmacy within two miles in suburban areas
• No pharmacy within ten miles in rural areas

While definitions vary, the implications are consistent: patients must travel farther, wait longer or forgo medications entirely — especially those without reliable transportation, broadband access or flexible work schedules.

Why closures are accelerating

Multiple forces are converging to destabilize the pharmacy landscape:

• Unsustainable reimbursement.
  Many pharmacies dispense medications at or below acquisition cost due to PBM reimbursement practices, retrospective fees and narrow networks.
• Rising operating costs.
  Labor shortages, rent increases, regulatory compliance and theft have eroded already thin margins.
• Shifts in consumer behavior.
  Mail order and specialty distribution models have reduced front-of-store revenue that once subsidized dispensing operations.
• Erosion of contract pharmacy revenue.
  Since 2020, more than 20 pharmaceutical manufacturers have imposed restrictions on 340B contract pharmacy participation, prompting dozens of lawsuits nationwide. For many independent and safety-net pharmacies, contract pharmacy arrangements provided essential financial support. As those revenues decline, closures have accelerated — often in the most vulnerable communities.

Together, these pressures are reshaping pharmacy access, fastest in areas with high Medicaid and Medicare populations.

The patient impact: access delayed is care denied

When a local pharmacy closes, patients do not transition seamlessly. Health systems often see:

• Delayed or abandoned prescriptions, particularly after hospital discharge
• Interrupted therapy for chronic conditions such as diabetes, hypertension and COPD
• Increased emergency department visits and avoidable readmissions

For rural patients, closures may mean traveling 30 to 50 miles for medications. In urban low-income neighborhoods, closures frequently cluster in ZIP codes already experiencing health disparities.

For organizations accountable under shared savings, bundled payments or capitated models, medication access gaps directly translate into higher total cost of care.

Why CFOs should pay attention

Pharmacy access disruptions surface in financial performance in measurable ways:

• Lower medication adherence affects quality scores and shared savings outcomes
• Poor discharge medication access increases readmission risk
• Avoidable ED utilization drives preventable cost
• Care management workload increases

In short, pharmacy access is no longer a retail issue — it is a balance-sheet issue.

As value-based exposure grows, pharmacy closures represent a multiplier of risk across contracts, particularly in markets with already thin operating margins.

What leading systems are doing

Forward-looking health systems are responding with targeted strategies:

• Meds-to-beds programs to ensure patients leave with medications in hand
• Health system–owned outpatient pharmacies in high-risk markets
• Mobile or telepharmacy solutions in rural areas
• Data-driven access mapping, using geographic and claims data to identify emerging pharmacy deserts and target high-risk ZIP codes before closures disrupt care

The strongest ROI typically comes from prioritizing same-day medication access for high-risk discharges, where preventing a single readmission can offset significant operational investment.

The path forward

Pharmacy deserts are not merely a byproduct of retail disruption; they are an early warning indicator for health systems navigating value-based care. As reimbursement pressures and contract pharmacy litigation continue, access instability is likely to persist.

Organizations that proactively integrate pharmacy access into enterprise financial planning — rather than treating it as an ancillary function — will be better positioned to protect both patients and performance.