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You've probably heard of food deserts. Areas where the nearest grocery store is far enough away that getting fresh food requires a car, a long bus ride, or just giving up.

Pharmacy deserts work the same way. And right now, nearly 16 million Americans live in one.

A pharmacy desert is defined as an area where residents need to travel more than a mile in urban settings or ten miles in rural areas to reach their nearest pharmacy.

By those definitions, nearly half of all US counties have at least one. And the number is growing.

Between 2010 and 2021, roughly 29% of all retail pharmacies in the US closed. That's about 26,000 locations gone in a decade. And the closures have accelerated since: CVS announced the closure of 900 locations, Rite Aid filed for bankruptcy and now has shut its almost 2,000 stores, and Walgreens closed 1,200 more and sold itself to private equity. Independent pharmacies, meanwhile, were closing at roughly one a day by the end of 2024.

Now, the easy explanation is that these are just businesses making rational decisions. Unprofitable stores close. That's how markets work. But what made them unprofitable in the first place is a more interesting question.

The answer isn't simple: rising costs, staffing shortages, and online competition all played a role. But one factor stands out above the rest.

Most people have never heard of a pharmacy benefit manager, or PBM. They’re the middlemen hired by health insurers to manage prescription drug benefits.

There are three big ones — CVS Caremark, Express Scripts, and Optum Rx — and between them they process around 80% of all prescriptions in the United States.

Each of them, and this is the part worth paying attention to, is owned by a major health insurer. And each of them also owns their own pharmacies. 

Which means the same company that decides how much your independent pharmacist gets reimbursed also owns the competitor they'd rather you use instead.

And as you can guess, they had been systematically underpaying small pharmacies for years, driving hundreds out of business.

PBMs generate over $315 billion annually in revenue. And the model is self-reinforcing: the more independent pharmacies that close, the more customers are funnelled toward the mail-order and retail chains the PBMs already own.

So, in the end, a small pharmacy ends up closing in a low-income neighbourhood because it cannot survive the reimbursement rates set by three companies that profit directly from its closure. The market is functioning exactly as designed. And that would almost be fine, if pharmacies were just shops.

But pharmacies are often the most accessible healthcare professional in a community — the person checking blood pressure, administering flu shots, catching dangerous drug interactions, and explaining new medications to patients who don't have a GP.

Nearly 7 in 10 adults between 40 and 79 take at least one prescription drug and around 1 in 5 take five or more. When pharmacies close, those people don't stop needing their medication. They just have a harder time getting it.

As a consequence, older adults on statins and beta blockers stop taking their pills. Chronic conditions go unmanaged and hospitalisations follow.

Those hospitalisation costs don't fall on the PBMs. Economists call that a negative externality: when one party makes another worse off but doesn't bear the cost of doing so.

And in this case, they don't just avoid the cost. They profit from it.

The EU and the US have the largest bilateral trade relationship in the world: almost $2 trillion in goods and services crossing the Atlantic every year. It’s more than either bloc trades with China, and more balanced than most people realise.

And right now, Europe is quietly reassessing how dependent on that relationship it actually wants to be.

In our latest video, we look at what a real decoupling between Europe and the United States would actually cost, which countries would feel it worst, and why the headline trade deficit numbers are more misleading than they look.

Is Europe building genuine independence or just buying time?