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Are Retail Pharmacies and Pharmacists Becoming Endangered?
The retail world of pharmaceutical drugs is being shaken up like never before.
According to TheStreet, CVS Health stated in late 2021 that it will “reduce store density in certain locations and close approximately 300 stores a year for the next three years.” Closing store locations that no longer make sense for the company might be beneficial for CVS in the long term when it comes to reducing operational costs and paying employees, but 900 is a lot of stores to close.
The company’s statement about this initiative explained that CVS “has been evaluating changes in population, consumer buying patterns and future health needs to ensure it has the right kinds of stores in the right locations for consumers and for the business.”
CVS has not released a detailed forecast of the locations being affected, but so far this year there have already been store closures in:
- Nebraska
- Iowa
- Florida
- Missouri
- Virginia
- California
- New York
Now, Rite Aid is following suit, but its intentions are even more dire and clear. According to TheStreet, the company “has been reportedly toying with the possibility of filing Chapter 11 bankruptcy and liquidating many of its stores. It currently has some $3.3 billion in debt. The proposed deal would permanently shutter 400 to 500 of the chain’s current 2,100 stores and hand them over to creditors or other interested buyers.”
Beginning with a location in Berkeley, California, Daily Mail added that Walgreens has also recently announced plans to close 150 of its stores “as part of a cost-saving strategy.” The rest of its remaining stores are receiving upgrades to move the brand forward.
Combined, that’s at least 1,550 retail drug stores being closed across America.
This initial exodus is believed to be a result of how “more shoppers are turning to buying online in the wake of the pandemic, as well as rocketing levels of shoplifting affecting sales in stores.” And after these store closures, online purchases might be heavily relied upon for those who need regular medications but find their local retail drug store gone.
Yet, even as times are shifting, “retail chains remain the most popular type of primary retail pharmacy, with 47 percent of respondents selecting it. However, the likelihood of respondents reporting a retail chain as their primary pharmacy decreased as the number of monthly medications increased,” according to a survey by McKinsey.
Over the last decade and a half, several online pharmacies that operate independently from PBMs have emerged, amassing over $3 billion in financial backing so far. Simultaneously, established entities like retail chains are diversifying their offerings by incorporating a mix of in-store, online, and mail services. Take Walgreens, for instance — it not only operates a mail-order pharmacy system but also boasts same-day delivery from a vast network of 8,000 locations and allows customers to handle prescription orders via its mobile app.
One last aspect to consider is the fact that Walmart has been “asking some of its 16,000 pharmacists across the U.S. to voluntarily take pay cuts by reducing their working hours in a bid to lower costs,” Reuters reported. Additionally, the retailer “scaled back the operating hours of its pharmacies by two hours at more than 4,500 U.S. stores, amid a shortage of pharmacists and pharmacy technicians that began during the pandemic.”
Walmart’s moves might be necessitated by the company settling a national opioid lawsuit for $3.1 billion, facing challenges from insufficient pharmacy technicians, and experiencing sales losses from a weight-loss medication.
According to Reuters, Walmart attributed the hourly cuts to “a dropoff in demand for drugs during the summer and requests from pharmacists for a better work-life balance.”
Regardless, the retail pharmacy industry is being impacted by these closures, with a huge amount of jobs being affected. Employees might find themselves jobless if their retail location closes, and a Walmart “pharmacist could go from an 80-hour, two-week pay period to one lasting 64 or 72 hours.”
Pharmacists have expressed concerns over increasing work pressures, as indicated by discussions on Facebook and various independent forums popular among Walmart workers. They emphasize that, despite facing staff reductions and limited work hours, they are expected to process the same number of prescriptions.
Discussion Questions
Are there other ways for these drugstore brands to increase sales and profits? Do you think independent pharmacies will be able to thrive under these circumstances?
Poll
Loading …BrainTrust
Mark Ryski
Founder, CEO & Author, HeadCount Corporation
Kenneth Leung
Retail and Customer Experience Expert
The challenges facing drugstore operators are serious and the closures reported by the large chain drugstores are significant. However, the demand for pharmaceuticals is and will remain high, in part driven by an aging population who will require more, not less health services. As the market recalibrates in response to these changes, new competitors will emerge to take their place. Online pharmacies, independent pharmacies, grocery retailers and other players will find a business model that works. I believe that independent pharmacies are especially well suited to fill pockets left in the market.
Walgreens is the worst offender here, but I really feel like many of their problems are self-inflicted. Expense management has ruled. It’s just too easy to get prescriptions anywhere, and as cheaply. RiteAid has been in trouble for a long time. CVS took a different position than the others, focusing on health. I think it’s got the most legs, right now, but it’s tough when everyone from Costco to the corner grocer sells scrips and OTC meds.
There are many factors at play as the largest drugstore operators in the country face uncertain times. From staffing challenges to retail theft, mounting costs to their lack of nimbleness, the pressures are significant.
There remains one group — the 20,000+ independent pharmacy operators — who have repeatedly proven their resilience. Dedicated to patient care and accessibility with an unwavering focus on health, I am bullish about this segment of the industry. Having been actively serving this sector for 30+ years, I personally can’t wait to see their rise!
I don’t think that is the right question. There are at least two factors influencing the closure of what appears a too large a number of locations to be normal. The first factor is that there may just be too many drug stores in general (that is not a new theme) and some of these many are not worth keeping open. The second is what appears to be a shortage of pharmacists. This second factor may have other root causes. One of those is aptly pointed out by BrainTrustmate, Mark Ryski. The aging population is not dying, it is living longer and requires more health care, including prescription medicine. This causes more demand on pharmacies and therefore, on pharmacists. The pressure on pharmacists increases and, with it, burnout.
Agreed. There was a period of about 2 years when CVS and Walgreens were opening boxes in Miami on every corner. Now it seems to be cell phone stores, so that’ll be the next big panic
Walgreens is badly run and the staff are extremely demoralized. The new CEO will, hopefully, drive some change. But, with $1 billion of cuts in the offing it’s going to be pretty tough to reinvigorate the business against a background of expense reduction. As for increasing sales, perhaps if the likes of Walgreens and CVS focused on improving the retail experience they might produce some better results.
Walgreens (and to some degree CVS) operated for years with the premise that the biggest possible physical footprint and largest number of stores was a winning strategy. It trumped good customer service and the ability to staff its pharmacies properly. While it’s no surprise to see the big chains close locations — in light of more online and independent competition — the fundamental problem of pharmacist and tech shortages continues.
Remember the prediction that a lot of boomers would be retiring with not enough skilled replacements coming up behind them? It’s here!. Demographic changes happen so slowly they never make headlines. Long lead time, highly trained roles like pharmacists, nurses, air traffic controllers are leaving their jobs, and there aren’t even enough of them in teaching positions to bring on the next generation of replacements which makes the situation worse. A completely predictable situation that has no short-term answer, other than worsening customer service.
On the ground floor of our office building is a small, independent pharmacy. They seem to thrive but their goal isn’t to be on every street corner. Elderly are constantly going in and out for a variety of health related items. Getting a quick consultation is easy, parking is easy. Well run pharmacies like should, for the most part, be ok. They add value by being a trusted source of information + product for customers.
As for the large chains, whenever someone gets a prescription filled online, that’s one less trip to the store where a shopper might add a non-prescription item to their basket. That adds up. And it’s a confluence of events. Online meds, C-stores are getting better, some broadening their offering, delivery to home, over saturation of stores. I think those larger chains have to ask what value they are offering or can they offer. If all the Walgreens in the country closed, would anyone know? Would anyone care? In 5 minutes people could just go to CVS. That’s a problem.
The challenge is the density of pharmacies like Walgreen and CVS is too high to be supported by the pharmacy side of the business. Before COVID many of these pharmacies are competing against convenience stores for snacks, soda, health and beauty care etc, and locations set accordingly. Post COVID traffic pattern decreased the non-pharmacy side of the business to the point it doesn’t support the density of locations. Filling prescriptions is still done in person except for long term medicines, pharmacists are still busy that I can see. The issue is location density against the changing population traffic concentration
The chains need to automate the pharmacy more than they already have in order to increase service levels and lower costs. Most of the time when I am picking up prescriptions at Walgreens or CVS, the pharmacists almost always seem universally harried. If all you want it to pick up a prescriptions then why not just make it available somehow as a mobile pick up? Something. Independent pharmacies that differentiate on local and service levels might have a chance, but I fear this business model is going the way of the Department store segment.
Drug store brands have always been popular for their convenience – it’s nice to be able to pick up your prescription plus a few odds and ends you needed in one place, cutting down on a second trip to another store. They need to lean harder into that reputation using technology, and specifically AI.
AI solutions can help brands create an even more convenient, personalized shopping trip for customers. For instance, in-app notifications highlighting coupons for a commonly purchased item for that consumer or providing recommended products that pair well with items they often purchase.
Pulling customers back in through the convenience factor will be key to getting the foot traffic these stores need to remain successful and garner the revenue needed to properly staff.