In recent years, prominent drugstore chains such as CVS, Walgreens, and Rite Aid have began shutting locations around the United States. This wave of closures, which affects hundreds of sites, raises conce:rns about the future of community pharmacies and the reasons that influence their decisions. Here’s a closer look at why these firms are closing and what it implies for customers, particularly in disadvantaged areas.
The Shift Toward Online Shopping
The COVID-19 epidemic has drastically altered how people purchase. Consumers are increasingly turning to internet shopping, curbside pickup, and delivery services like Instacart. In reaction to this transition, CVS has announced intentions to shut 900 shops by the end of 2024. The business began this procedure in 2022, shutting over 300 locations every year. This move supports CVS’s goal of focusing on digital services while minimizing its physical footprint.
CVS had 10,000 retail sites previous to the closures, so it still has a significant presence in many towns. However, the business intends to upgrade many of its existing locations, transforming them into HealthHubs that provide a broader variety of health services than typical pharmacies.
Financial Struggles and Competition
Financial concerns are a key factor for shop closures in the pharmacy sector. Walgreens, for example, has reported that around 25% of its U.S. locations are unprofitable. The firm, which has around 8,600 stores, has struggled with thievery, competition, and unsuccessful expansion initiatives. Walgreens has announced that they intend to eliminate a “significant” number of shops in an effort to reduce costs and enhance profitability.
This tendency is not exclusive to Walgreens. CVS, Rite Aid, and other large retailers are all struggling financially as prescription drug reimbursement rates plummet. The pharmacy sector relies significantly on prescription fillings for income, but reduced reimbursement rates from pharmacy benefit managers (PBMs) are reducing earnings.
The Role of Pharmacy Benefit Managers (PBMs)
One of the most significant difficulties that pharmacists face today is the involvement of PBMs. These middlemen negotiate medicine rates between pharmacies, insurance, and manufacturers. While PBMs claim to help keep prescription prices low, pharmacists allege that PBMs are lowering reimbursement rates, making it difficult to make a profit.
Elizabeth Anderson, an analyst at Evercore IRI, stated that “if reimbursement rates begin to fall and drug stores are unable to offset it with other growth, it has a negative impact on their profitability.” Many pharmacies have closed due to the economic downturn, particularly in places with lower reimbursement rates, such as localities with a larger proportion of public insurance subscribers.
The Future of Retail Pharmacies
CVS, Walgreens, and Rite Aid’s closures indicate a bigger upheaval in the retail pharmacy market. As consumers turn to internet shopping and healthcare services improve, conventional drugstores must adapt in order to survive. While these closures may help firms increase profits, they may also have long-term consequences for poor communities’ access to healthcare.
According to one observer, “We are at a point where the current pharmacy model is not sustainable”. For many communities, the loss of a local pharmacy means fewer places to get prescriptions, as well as fewer alternatives for daily necessities and healthcare services.
