Major United States pharmacy chains CVS, Walgreens, and Rite Aid have announced plans to close numerous locations across the country, reflecting broader challenges in the retail pharmacy sector. Walgreens CEO Tim Wentworth disclosed that the company would shutter a significant number of its approximately 8,600 U.S. stores, citing issues such as unprofitability and theft. This follows Walgreens’ earlier closures of 350 stores since 2019.
CVS, the largest U.S. pharmacy chain, previously announced plans to close 900 stores between 2018 and 2021, as well as 244 stores in recent years. Rite Aid, struggling with bankruptcy, plans to close up to 500 stores, including 27 recently added in Michigan and Ohio.
All three companies have identified factors behind the reasoning for the closures, including
- Falling Reimbursement Rates: The primary revenue for these pharmacies comes from prescription drugs, but falling reimbursement rates from pharmacy benefit managers (PBMs) have squeezed profits. PBMs negotiate drug prices with manufacturers and have been reducing payments to pharmacies to boost their own profits.
- Increased Competition: The rise of online pharmacies, such as Amazon Pharmacy and GoodRx, has significantly impacted brick-and-mortar stores. Consumers increasingly prefer online shopping for its convenience and competitive pricing.
- Retail Challenges: The front-end retail sections of these pharmacies, selling household goods and snacks, have become less profitable due to competition from big-box stores like Walmart and Costco, as well as the growth of dollar stores in rural areas.
- Operational Costs and Theft: Walgreens and other retailers have faced increased theft since the pandemic, leading to higher operational costs and decisions to close high-theft locations.
The closure of these pharmacies will significantly affect access to healthcare, particularly in urban and rural areas. Research indicates that pharmacy closures lead to health risks, such as older adults failing to take their medication. Pharmacies in low-income neighborhoods, which rely more on public insurance with lower reimbursement rates, are at greater risk of closure.
To adapt, CVS and Walgreens have expanded into primary care, integrating doctors’ offices into their stores. However, these ventures have not been as profitable as expected. Walgreens, for instance, invested $5.2 billion in VillageMD, a primary care network, but has since decided to divest from the company to cut costs.
The closure of hundreds of pharmacy locations by CVS, Walgreens, and Rite Aid highlights the ongoing struggles of the retail pharmacy sector amidst declining profits, increased competition, and operational challenges. As these companies navigate these issues, the impact on community healthcare access and the broader retail landscape remains a significant concern.
