New York City Pharmacy Industry Jan. 2023
1. Pharmaceutical Industry Overview
Market size:
Pharmacies are a key component of the U.S. healthcare economy. Prescription dispensing revenues alone reached $501 million in 2021 – the highest ever. (1) In 2021, the average U.S. consumer spent just over $1,000 on retail prescription drugs. (2) According to a nationwide study from the Journal of the American Pharmacists Association, 88.9% of Americans live within five miles of a community pharmacy, and less than half of those surveyed live within one mile of a pharmacy. (3)
Spending projections:
National health spending is projected to grow at a rate of 5.5% per year from 2018-2027. This number is expected to reach $6 trillion by 2027. In 2018, prescription drug spending increased by 2.5% to $335 billion, almost twice the 1.4% growth in 2017. (4)
Pharmacy landscape:
There are more than 66,000 pharmacies in the United States.5 Around 20,000 of these are independent. (6)
Pharmacy chains are the largest type of pharmacy, comprising 62% of the market. A 2021 report by IQVIA identified top five largest retail pharmacies by number of stores: CVS Health, Walgreens, Rite Aid, Walmart and Kroger. (1)
CVS publishes a slightly higher number, 9,900 retail pharmacies and 1,100 Minute Clinics nationally and fills more than 1 billion prescriptions per year. (7)(8) For comparison, there are more than 570 of these CVS pharmacies in New York State. (9) 70% of prescription drugs are distributed through chain pharmacies, supermarkets or retailers like Target. (10) Put another way, in the United States, just three corporations control more than 80% of prescriptions - those of 266 million Americans: CVS, ExpressScripts, and OptumRx.
Still, independent pharmacies are a major economic force in the national market.
National landscape: Independent pharmacies:
In 2022, there were 23,254 independent pharmacies operating in the United States. This total represented a net increase of 1,719 pharmacies since 2017. (11) However, despite a contraction in the number of locations, no single retail pharmacy company outsizes the total number of independents, which represent 35% of the market. (12)
2. New York State Pharmacy Market
Market Overview:
In 2021, New York had around 4,800 pharmacies across all categories. (13) In New York State, the number of independently owned pharmacies grew by 572 during the period spanning 2010-2018. (14) Based on data from Quest Analytics, the total figure for independently owned pharmacies was 2,813. (15) Other estimates put the number at around 2,500. (16) Another figure puts the total number of independent pharmacies across the entire state of New York at 2,000. (17)
Spending:
Yearly healthcare spending for New Yorkers who had employer-sponsored health insurance reached an all-time high in 2017 at $6,335 per person. Furthermore, the rate of per-person spending in New York increased at a sharper rate - 6.4% - in comparison to the national rate of 4.2%. (18) In the four-year period between 2013 and 2017, the per-person cumulative spending on prescription drugs in New York increased by 40.4%.
According to The Pharmaceutical Care Management Association (PBMA), which represents PBMs in New York, the number of pharmacies in New York state are growing, not shrinking: “Independent pharmacies are operating successfully nationwide, including in New York. In fact, in New York, between 2011 and 2021, the number of independent pharmacies actually grew from 2,276 to 2,857, a 25.5% increase.” (19)
In comparison, national trends for independent pharmacy growth find that category growth is “essentially flat”, according to a 2022 PCMA study. (20) The study also found that from 2017-2022, there was only a 1.2% increase in U.S. independent pharmacies. (21)
3. New York City Pharmacy Market
Overview:
There are approximately 2,600 pharmacies operating in New York City. The most accurate data of pharmacy by borough comes from the New York State Education Department’s Office of the Professions, which makes an annual survey of pharmacies and pharmacists.
Retail chains:
New York City is home to more than 2,600 pharmacies. Of these, 643 are chain pharmacies (2017), composing only 24% of the city’s pharmacies. The top three chains in the city are Duane Reade (194), Rite Aid (175), and CVS (153).
Data from NYC Future’s State of the Chains 2022 illustrates trends in top retail chain pharmacy growth over the last five years:
Retail Chain Pharmacies in New York City 2018-2022
Retail Chain Pharmacies in New York City, by borough (2022)
Independent pharmacies:
Of the approximately 2,600 pharmacies operating in New York City, 2,000 are independent pharmacies. (25)
Issues affecting independent pharmacies:
While neighborhood pharmacies outnumber any one chain location, they have faced significant economic pressures in recent years, due in large part to the pharmacy industry’s revenue and reimbursement structures. A typical pharmacy generates around 90% of its revenue from prescriptions. In recent years, the rise of Pharmacy Benefit Managers, or PBMs, have directly affected how much money independent pharmacies make from these sales. PBMs are effectively the “middle-man” between insurance companies and pharmacists, determining how much pharmacies are paid by insurers when people buy medication from their stores.
The influence of pharmacy benefit managers, or PBMs, has greatly impacted the pharmacy landscape in recent years. According to Drug Channel’s analysis, the salary for pharmacists owning a single pharmacy have dropped for the fifth consecutive year.
In Brooklyn, 90% of independent pharmacy owners are facing or considering potential cuts to their staff and hours. In a January 2019 survey, the New York City Pharmacists Society polled 532 independent pharmacies and found that 99% of respondents were worried that PBMs could impact their business. (27)
Economic pressures are affecting independent pharmacies at the national level as well. The annual National Community Pharmacists Association survey found that in 2022, 93% of respondents said inflation was affecting their business and that 76% had experience staff shortages in the last six months. (28)
Again, many of these challenges are attributed to pharmacy benefit managers driving down drug reimbursement numbers to the point where some pharmacists lose money with every prescription they fill.
Over the last few years, pharmacists across New York have taken action against PBMs. In early 2022, New York introduced new laws regulating PBMs and the formation of a Pharmacy Benefits Bureau under Governor Kathy Hochul. (29)
Benefits and opportunities:
This does not mean that chain pharmacies like CVS and Walgreens are operating as clear leaders in the industry. In fact, a recent The New York Times article points to the growing pressures faced by retail chain pharmacists to keep up with staggering daily demands and chronic understaffing. (30)
A 2018 Consumer Reports survey of 78,000 CR members in 2018 revealed a number of interesting findings, namely that independent pharmacies scored high on service evaluations including the pharmacist’s knowledge and accuracy, speed of filling prescriptions, and courtesy. In contrast, national chains ranked lowest in these areas. (31)
What separates independent pharmacies from large chains is their ability to develop long-term relationships with customers and to provide personalized care informed by real conversations and a holistic understanding from their position in the community.
Furthermore, local pharmacies are good for the New York economy. In 2017, neighborhood pharmacies generated $8.7 billion in outlet-wide sales and employed 22,000 people. (32)
While facing growing competition from large national chains, independent pharmacy operations have proven their ability to provide exceptional, personalized customer service and focus on what is most important: the person on the other side of the counter.
4. COVID-19
New York City’s independent and community pharmacies have played a key role during the COVID-19 pandemic, particularly in administering the COVID-19 vaccines. As of April 2021, 200 independent pharmacies in NYC had received around 300,000 doses, roughly a third of the 1.13 million doses distributed to chain pharmacies. (33) According to Yuliya Chernoca of The Wall Street Journal, “By virtue of being local, as well as by the personal connection they have with their patients, often in their native languages, small non-chain pharmacies are able to serve those reluctant or unable to travel to mass-vaccination sites or navigate online registration, as well as those hesitant to get the shot.” (34) According to the National Community Pharmacists Association, one in four Americans put their pharmacy as the first or second place they would like to receive their vaccine.
•••
1 https://www.drugchannels.net/2022/03/the-top-15-us-pharmacies-of-2021-market.html
2 https://www.nicerx.com/prescription-drug-report-2021/
3 https://www.pharmacytimes.com/view/study-88-9-of-us-population-lives-within-5-miles-of-a-community-pharmacy
4 https://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/NHE-Fact-Sheet
5 https://www.onekeydata.com/downloads/reports/2021_US_Pharmacy_Market_Report.pdf
6 https://ncpa.org/pharmacy-locator
7 https://cvshealth.com/about/our-offerings/cvs-pharmacy
8 https://cvshealth.com/about/facts-and-company-information
9 https://www.scrapehero.com/location-reports/CVS%20Pharmacy-USA/
10 https://www.chicagotribune.com/business/ct-biz-nyt-pharmacy-mistakes-20200201-wp2ftrt2sjhfvjwnmwbtnl3y3i-story.html
11 https://www.pcmanet.org/the-independent-pharmacy-marketplace-is-stable-see-for-yourself/
12 https://www.drugtopics.com/article/independent-pharmacies-not-dead-yet
13 https://www.onekeydata.com/downloads/reports/2021_US_Pharmacy_Market_Report.pdf
14 https://pix11.com/2019/02/01/local-pharmacies-worry-they-may-have-to-close-their-doors-for-good-survey
15 https://brooklyneagle.com/articles/2019/05/20/the-price-of-filling-a-prescription-independent-pharmacies-fight-for-survival/
16 https://ilovetheupperwestside.com/little-pinch-an-independent-pharmacy-stays-alive-in-manhattan/
17 https://www.ny1.com/nyc/all-boroughs/politics/2021/06/02/ny-pharmacists-rally-to--save--independent-pharmacies
18 https://nyshealthfoundation.org/resource/health-care-spending-prices-and-utilization-for-employer-sponsored-insurance-in-new-york/
19 https://www.ny1.com/nyc/all-boroughs/politics/2021/06/02/ny-pharmacists-rally-to--save--independent-pharmacies
20 https://www.pcmanet.org/the-independent-pharmacy-marketplace-is-stable/
21 https://www.pcmanet.org/the-independent-pharmacy-marketplace-is-stable/
22 https://www.op.nysed.gov/professions/pharmacist/license-statistics#stores
23 https://nycfuture.org/pdf/CUF_StateoftheChains_final_2022.pdf
24 https://nycfuture.org/pdf/CUF_StateoftheChains_final_2022.pdf
25 https://pix11.com/news/local-news/manhattan/nyc-independent-pharmacies-warn-of-closures-during-pandemic/
26 https://brooklyneagle.com/articles/2019/05/20/the-price-of-filling-a-prescription-independent-pharmacies-fight-for-survival/
27 https://www.ny1.com/nyc/all-boroughs/news/2019/05/15/bronx-pharmacy-forced-to-cut-employee-hours-amid-battle-with-insurance middleman
28 https://ncpa.org/sites/default/files/2022-08/Pharmacy%20economic%20health%20survey%20AUG%2022.pdf
29 https://www.frierlevitt.com/articles/new-york-announces-establishment-of-new-bureau-responsible-for-pbm-oversight/
30 https://www.nytimes.com/2020/01/31/health/pharmacists-medication-errors.html
31 https://www.consumerreports.org/pharmacies/consumers-still-prefer-independent-pharmacies-consumer-reports-ratings-show/
32 https://www.nydailynews.com/opinion/ny-oped-neighborhood-pharmacies-under-siege-20190909-gca6eanb2fb63psmxf2f6u22qa-story.html
33 https://www.wsj.com/articles/new-york-independent-pharmacies-struggle-to-get-covid-19-vaccine-11618761601
34 https://www.wsj.com/articles/new-york-independent-pharmacies-struggle-to-get-covid-19-vaccine-11618761601
