Reddit reviews Horror Guide to Massachusetts

It's a twofer really, since the real life Colchester, CT was also named after the original UK one (just without the "New" prefix in RL), so you weren't exactly wrong, just missing a more specific reference.

Further pontificating: we take the "few miles away" part somewhat literally, I find myself wondering if Rook City is either in Rhode Island (since said state of course has a RL stereotype of being run by the, ahem, "Organization"), or I also could vote for it being an analog for Holyoke, MA which also started out as a shiny, All-American city and has basically turned into a hellhole, though its industrial output revolved around paper rather than pharmaceuticals. (Like there was one site that gave Holyoke, MA a violent crime index of 87 out of 100, and in comparison the general MA average is 32.)

Tangent: Yeah, a lot of the stuff Lovecraft and modern New England writers like Stephen King draw from really exists or existed; Horror Guide to Massachusetts is one particular reference to look at.