New York City Does Not Need Another Pharmacy

A few weeks ago, the Vanderbilt Policy Accelerator (a political think tank) published a proposal called CityRx: A Blueprint for Public-Powered Pharmacies in New York City.

The report begins with a problem I know very well.

Pharmacies are closing across New York. Large chains have abandoned locations. Independent pharmacies are being squeezed by pharmacy benefit managers. Patients are being steered toward vertically integrated mail-order pharmacies. Reimbursement rates are often lower than what pharmacies pay to purchase the drugs.

So far, so good.

Then the report proposes a solution.

New York City should open its own pharmacies.

The plan would begin with a citywide prescription delivery service and mobile pharmacy vans. From there, NYC Health + Hospitals would expand its existing pharmacies and open new retail locations, starting with one in each borough. Eventually, the city would create an alliance of independent pharmacies, become a drug wholesaler and potentially manufacture its own generic drugs.

It is ambitious.

It is well-intentioned.

And it is an extraordinarily complicated way to avoid solving the problem staring us directly in the face.

New York City does not need to become a pharmacy.

It needs to make pharmacy financially possible again.

The CityRx report correctly identifies nearly every force destroying community pharmacy.

It discusses PBMs.

It discusses vertically integrated insurers.

It discusses patient steering.

It discusses below-cost reimbursement.

It discusses the enormous leverage that a handful of healthcare conglomerates hold over independent pharmacies.

Then, after identifying the disease, it decides to treat the symptom.

The major assumption behind CityRx is that the government can operate pharmacies more sustainably because it has greater purchasing power. New York City is enormous. It buys a lot of healthcare. Presumably, it could negotiate lower drug prices and use that scale to succeed where smaller pharmacies cannot.

There is just one problem.

Purchasing power is not the primary reason pharmacies are closing.

Reimbursement is.

I explained how pharmacies purchase medication earlier this year in How Does Your Pharmacy Buy Drugs? Pharmacies like mine already spend an absurd amount of time negotiating with wholesalers, joining buying groups, shopping among suppliers and chasing every available discount.

My pharmacy, C.O. Bigelow, employs a full-time purchasing manager. We buy from multiple wholesalers. We constantly compare prices. We squeeze our acquisition costs as aggressively as almost any independent pharmacy in the country.

If dispensing could work anywhere, it should work here.

It doesn’t.

Because no matter how intelligently we purchase a drug, the PBM ultimately decides what it will reimburse us when we dispense it.

If we buy a drug for $100 and the PBM pays us $90, we lose $10.

Perhaps New York City can buy that drug for $95.

Congratulations. It still loses $5.

That is not a purchasing problem.

It is a broken business model.

In January, I opened my pharmacy’s books and showed readers exactly what pharmacy finance looks like.

The numbers were ugly then.

They have not become prettier.

During the first six months of 2026, C.O. Bigelow spent approximately $5.17 million purchasing medications to fill 55,342 prescriptions billed through insurance. After reimbursement, our gross profit was approximately $397,000.

That left us with a gross margin of 7.68%.

Seven point six eight.

From that margin, we are expected to pay pharmacists, technicians, rent, insurance, software, delivery expenses, regulatory costs, credit-card fees and every other expense involved in operating a pharmacy in Manhattan.

That margin needs to be at least twice as high for the model to be sustainable.

So forgive me for being skeptical when policy experts survey the wreckage and conclude that the missing ingredient is government management.

I do not mean this disrespectfully, but there is a certain arrogance to the idea.

Independent pharmacy owners have devoted their lives to making these businesses work. They know their patients, neighborhoods, inventory, employees and operating costs. In many cases, their own savings and homes are on the line.

If these pharmacists cannot make the economics work, why should we believe a city agency will?

The government would not discover some secret operational brilliance that generations of pharmacists missed. It would face the same acquisition costs, PBMs, networks, staffing shortages and miserable reimbursement.

The only difference is that taxpayers would absorb the losses.

Now, a defender of CityRx might reasonably argue that public pharmacies do not need to be profitable. Access to medication is a public good, and operating at a loss may be justified in a neighborhood with a genuine access gap.

I agree.

But CityRx repeatedly suggests that municipal scale will make pharmacy more affordable and sustainable. The report never demonstrates that. It simply transfers an unrepaired reimbursement problem onto the public balance sheet.

Imagine an NBA game where one team owns the referees, writes the rules and decides how much the opposing players get paid.

The CityRx solution would be to leave those rules intact and start a city-owned basketball team.

I would rather fix the officiating.

Earlier this year, I wrote about Tennessee’s attempt to prohibit PBMs from owning pharmacies. Arkansas passed a similar law before it.

Those states looked at vertical integration and recognized it for what it is: an antitrust problem.

A company should not be allowed to decide which drugs are covered, determine how much competing pharmacies are reimbursed, steer patients away from those competitors and then pay its own pharmacy to dispense the prescription.

You can be the referee.

You can own the team.

You should not be allowed to do both.

New York City does not necessarily have to begin with a complete ban on vertical integration. Everything should be on the table, but there are more immediate places to start.

Prohibit reimbursements below a pharmacy’s acquisition cost.

Require a fair professional dispensing fee.

Eliminate spread pricing.

Ban anticompetitive patient steering.

Require transparent reimbursement based on NADAC, plus a reasonable percentage and dispensing fee.

These changes would not require the city to open storefronts, purchase delivery vans or learn how to operate a drug wholesaler.

They would allow the pharmacies already serving New Yorkers to survive.

Ironically, the strongest idea in the CityRx report has very little to do with opening pharmacies.

The report points out that New York City recently awarded a health-plan contract to UnitedHealthcare reportedly worth approximately $60 billion over five years.

That is around $12 billion of business per year.

UnitedHealthcare and the PBM, OptumRx, are both owned by UnitedHealth Group. OptumRx does not directly administer the main pharmacy benefit under the new city employee plan, but the corporate relationship still gives New York leverage.

The city could make its position clear:

If UnitedHealth Group wants $60 billion of business from New York City, its subsidiaries cannot simultaneously make it impossible for New York City pharmacies to survive.

The city could demand stronger reimbursement terms for independent pharmacies from OptumRx as a condition of its relationship with UnitedHealth Group. It could require transparency around spread pricing and related-party transactions. It could insist that affiliated businesses stop steering patients away from community pharmacies.

There are legal and contractual details to work through. I am not pretending the mayor can change every OptumRx contract in New York with one angry phone call.

But a $60 billion customer gets to ask for things.

That is real purchasing power.

The city’s most valuable leverage is not its ability to negotiate a few dollars off a bottle of pills. It is its ability to decide which healthcare corporations receive billions of dollars in public business.

Use it.

From January through June 2026, C.O. Bigelow spent approximately $807,000 purchasing medications for patients covered by OptumRx. Our gross margin on those prescriptions was 6.84%, leaving us with approximately $59,000 before paying a single pharmacist, technician, rent bill, delivery expense or software fee.

If New York used its leverage to secure even a few additional percentage points and a fair dispensing fee, I could reinvest that money into expanding Bigelow’s delivery service to patients beyond our current range and spare the city from having to figure out how to make it work.

The infrastructure already exists.

The pharmacists already exist.

The patients already need the service.

We do not need the city to replace us.

We need it to stop the companies it does business with from starving us.

The report says nearly 40,000 New Yorkers live in pharmacy deserts and argues that the city should eventually ensure everyone has a quality pharmacy within a fifteen-minute walk.

Access matters. Some patients need acute medications immediately. Some elderly and homebound patients cannot navigate mail order. Some neighborhoods have genuine access problems when their only nearby pharmacy closes.

But New York City is not rural America.

We have independent pharmacies, hospital pharmacies, chain pharmacies, delivery services and inexpensive mail-order options. Physical distance alone does not prove that the city needs to build a parallel retail pharmacy system.

Where a real access gap exists, fund the missing service.

If patients need delivery, reimburse existing pharmacies for delivery.

If homebound patients need immunizations, pay pharmacists to travel to them.

If patients need medication reconciliation at home, create a reimbursement model that allows community pharmacists to provide it.

I argued in What Do We Want Community Pharmacy to Be? that pharmacists are an underused clinical workforce. We are capable of doing far more than putting pills into bottles. Mobile pharmacists performing vaccinations, medication reviews and other clinical services could produce tremendous value.

None of that requires a city-owned pharmacy.

It requires paying pharmacists for the healthcare they already know how to provide.

If a neighborhood truly cannot support a private pharmacy after fair reimbursement and targeted incentives, then perhaps a public pharmacy makes sense as a last resort.

But it should be the last resort.

Not the opening move.

I do not believe the authors of CityRx are acting in bad faith.

They see pharmacies closing. They see patients losing access. They see corporations extracting money from the system. They want the government to do something.

So do I.

But CityRx builds an elaborate new structure around a problem whose solution we already understand.

Pharmacies cannot survive when the companies controlling patient access are allowed to reimburse them below cost.

Fix that.

New York can regulate spread pricing and reimbursement. It can attack vertical integration. It can use its enormous healthcare contracts to demand better behavior from UnitedHealth Group and other conglomerates. It can pay existing pharmacists to deliver clinical services where patients need them.

That would be less flashy than opening a city pharmacy.

There would be no ribbon-cutting ceremony.

There would just be hundreds of existing pharmacies, many owned by New Yorkers rooted in the communities they serve, finally being paid enough to remain open.

New York City does not need to prove that the government can run a pharmacy better than pharmacists.

It needs to stop making pharmacy impossible.

Treat the disease, not the symptom.

Giddy up!

Alec Wade Ginsberg, PharmD, RPh
4th-Gen Pharmacist | Owner & COO, C.O. Bigelow
Founder, Drugstore Cowboy