What happens to pharmacies when the COVID-19 vaccine demand wanes?

Photo: CVS Health
Feb 18, 2022

The need for vaccination against COVID-19 has driven a huge influx of foot traffic to retail pharmacies since the shots became widely available in early 2021. COVID-19 cases are currently way down in much of the U.S. and, with less demand for vaccines and pandemic-related services, retail pharmacies are anticipating taking a hit.

CVS is expecting a big drop in both vaccinations and COVID-19 testing this year, but plans to position itself as a healthcare services destination as its next step, according to CNBC. While the chain beat analyst expectations for Q4, it did not raise its 2022 outlook.

Analyst George Hill of Deutsche Bank, in discussing the quarterly results with Marketplace, said that retail pharmacies are reinventing themselves to be thought of as part of the healthcare system rather than as convenience locations.

Amanda Starc of Northwestern’s Kellogg School of Management noted that customers have begun to see retail pharmacies in this light thanks to their role in the COVID-19 vaccine rollout. More customers, she said, are more comfortable getting vaccines in a retail pharmacy than before, when they would have opted for a doctor’s office.

CVS announced in 2021 that it would operate three distinct store formats: traditional CVS pharmacies; a second concept dedicated to providing healthcare services; and a HealthHUB format with everyday health and wellness products and services.

The chain, last year, also launched a suite of health-oriented wearables and smart devices called Symphony, meant to meet the needs of seniors aging at home.

CVS has also made moves into in-store mental health offerings. In May of 2021 the chain expanded a pilot which allows customers to get in-store, on-the-spot counseling from mental health professionals and social workers.

Despite the planned focus on healthcare-related offerings, CVS has not abandoned its convenience side. The chain has delivery relationships with Instacart, DoorDash and Shipt.

Rival Walgreens has gone even farther in offering same-day delivery for its CPG assortment. Last year it began making a selection of its household essentials, over the counter medicines and other products available through the UberEats app.

DISCUSSION QUESTIONS: What do retail pharmacies need to do to prepare for a future where COVID-19 vaccination is less of a traffic driver than it has been? Do you see any of the major retail pharmacy operators as best positioned to emerge from the pandemic as a healthcare leader?

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25 Comments on "What happens to pharmacies when the COVID-19 vaccine demand wanes?"

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Mark Ryski

Retail pharmacies played a critical role in providing vaccination and testing services throughout the pandemic. And while traffic most certainly will decrease, there’s no doubt that they will play a critical role in any future pandemics as they have earned the trust of countless store visitors who may be new to their stores. The expansion of health services appears to be a major trend that all significant pharmacy players are calibrating to, and I can see this continuing indefinitely.

Georganne Bender

Two words: health care. The craziness of the pandemic may be slowing down but consumers still need what pharmacies can provide, specifically medications and the opportunity to speak with the pharmacist.

The services pharmacies have added will stay, as will the ability to pick up grocery and other items at the drive-up. COVID-19 strengthened the relationship consumers have with their pharmacy of choice and, like every other retailer, pharmacies will need to continue to add new products and services to keep customers close.

Michael La Kier

There’s no doubt that COVID-19 (after the initial lockdowns) has boosted retail pharmacy traffic. Tests and vaccines have lifted traffic; as the pandemic wanes (please, please, please) pharmacies will dust off their toolbox to intentionally drive traffic. But the shopper has changed which means the retailers that will emerge as the leaders are the ones that invested more in their digital toolbox.

Dave Wendland

You’re absolutely right, Michael. Should retail pharmacies return to the “old normal” without an emphasis on the digital toolbox, expanded point of care capabilities, and the realization that they can be at the center of end-to-end patient care, they will surely fall behind.

DeAnn Campbell

Pharmacies have already begun transforming from drug providers to wellness partners as they become a local neighborhood hub for all manner of products and services that add value and convenience for consumers. Walgreens’ partnerships with Kroger and Birchbox and CVS’ partnership with Glamsquad and Public Goods are a few examples of how broadening your range of services can help grow shopper traffic and repeat business. It’s going to be important for retail pharmacies to design flexibility into their operating models to enable continued expansion of partnerships, white label products, broader health and wellness services, and even micro-fulfillment center capabilities to stay relevant in the face of increasing competition from Walmart, Amazon and tele-health providers.

Rich Kizer

Sounds to me like their plan is to be a “mini me” hospital. Maybe it is a good idea. I and others won’t have to wait so long in line to just pick up a prescription if they scatter and serve.

David Spear

All of the retail pharmacies can play a role in the delivery of healthcare and services. Those that take a leader role will have invested in advanced data and analytics that continuously model, score, and infuse insights back into their business units. This is not just a few models. With thousands of products, thousands of stores and thousands of consumer segments, we’re easily into the hundreds of millions of models that must be developed, trained, run and re-trained on a continuous basis. Doing this will deliver a treasure trove of insights that enables executives to make key strategic decisions, despite a possible drop in traffic and consumer demand.

Richard Hernandez

Most large chain pharmacies have become health hubs in my area. While I think they definitely increased foot traffic during the pandemic, they have also been proactive in being there for the yearly trends (flu, hay fever, pollen, etc.) but I see them truly becoming the health hub for ensuring a family’s overall health.

Jenn McMillen

Well, there’s this company called Theranos that could be a real game changer for them. Just kidding. A little Friday humor for ya.

Patricia Vekich Waldron

The pandemic has permanently changed consumers’ perspective on health and wellness. Pharmacies played a critical role during the pandemic while our traditional health care system was overwhelmed. Providing products and a range of wellness services is an opportunity for drug chains to fill an urgent need while driving growth and loyalty.

Scott Norris

Earlier this week the Mayo Clinic put out estimates that easily 2+ million Americans will be suffering from Long COVID to such a degree that they won’t be able to work. Sadly, that represents sustained significant growth of folks needing long-term therapy and medicinal support – which the pharmacy sector could certainly get its arms around with well-thought staffing and store layouts.
(Also sadly, there’s another 2 million who won’t be returning to the workforce – further exacerbating our staffing shortages.)

Patricia Vekich Waldron

Staggering (and sad) stats for sure! Along with the need for longer-term care, the aging of the population, and more focus on well-being and preventative care, there is a big gap in health services that pharmacies can fill.

Lisa Goller

Retail pharmacies need to reposition their brands as one-stop wellness shops. The race is on to own this space.

In-store healthcare clinics would give pharmacy patrons more primary care options. The aging population boosts demand for home care, including walkers and health monitors. Amid a mental health crisis, pharmacies can be leaders in self-care products and services that lessen consumers’ anxiety and burnout. Prompt home delivery of essentials like medications will also modernize pharmacies’ value proposition.

CVS and Walgreens are top-of-mind pharmacy brands; however retail giants are doubling down on this category. Amazon and Walmart added prescription services as membership perks to complement their existing pharmacy and healthcare strategies and gain share.

Gene Detroyer

I agree with the comments in the discussion. COVID-19 vaccines and tests have opened the eyes of many that the pharmacy/drug store/convenience store is more than just a place to pick up something. Like many things with the pandemic, this realization has been accelerated. The pharmacy is becoming the place to go for health care. Could it be a primary care facility? I hope so.

The health care system in the U.S. is an embarrassment. It doesn’t serve those who need it the most. The cost of the system is outrageous–more than twice that of countries with considerably better outcomes. Pharmacies can be an important part of the solution.

Dick Seesel

I just finished reading an article about variant BA.2 — known as “stealth Omicron” — which is potentially more contagious and with more serious consequences. (It may earn its own Greek alphabet letter.) If these early indications are true (let’s hope not), then the pharmacies’ work as COVID-19 hubs is far from over.

Chains like Walgreens and CVS have been overwhelmed the past two months, between demand for tests, a rise in vaccination demand, and staff shortages. If COVID-related demand calms down, then the pharmacies can return to executing their core business (filling prescriptions) in a more predictable manner. Maybe my neighborhood Walgreens can reopen its drive-thru window for something other than COVID-19 testing!

Steve Montgomery

After several years of building a convenience store model of a chain drugstore, with the advent of COVID-19 retail pharmacies quickly switched to being the place you went to get tested and/or vaccinated. This exposed many Americans to the broader offer that chain drug location now offered and as an alternative to going to a doctor for a vaccination. I expect them to continue to push that they are the place to go for flu shots and other vaccinations.

I have also noticed that we now have a great deal more communication from our local Walgreens about not only their health related offers but about their non-health related items.

Brandon Rael

The pandemic has served as a great acceleration for many trends. Most significantly, the increased awareness and importance around health and wellness needs. We have seen the retail pharmacy giants shift their operating models to build on health, wellness, organic, and more natural assortment strategies. These approaches and a diversification strategy to become the one-stop shop for all your health, wellness, beauty, and grocery needs, will enable retail pharmacies to do quite well in a post-pandemic world.

Shep Hyken

Plan for it! The pharmacies know the drop is coming, so there shouldn’t be a surprise. The one big benefit to pharmacies providing the vaccines was their customers learned to get comfortable with the pharmacist giving the shot. The more they get customers in the door for health care needs and services, beyond what they have done in the past, the more it will grow that part of their business.

Brian Cluster

As we start to come off the Omnicron spike and hopefully return to a lower transmission rate going forward, retail pharmacies have an opportunity to move into new areas to proactively address long-term health concerns.

Unfortunately, Americans have opportunities on the health front. Per the CDC, the adult obesity rate has increased substantially between 2019 and 2021. It may be prudent at this time to not only drive traffic with the health check-ups in-store but also to focus on overall wellness in their communities and find other digitally-driven programs to help consumers be more proactive with their health.

Dave Wendland

They will emerge stronger, more relevant, and as a central part of the health care system.

As the consumerism of health continues to take hold, people are reminded that retail pharmacies have been a well-kept secret to provide support and guidance to prevent future conditions, maintain chronic conditions, recover from short-term illness, and offer support to those caring for loved ones.

Michael Blackburn
5 months 29 days ago

The pandemic has opened consumers to telehealth, alternative care — and there is a big opportunity for pharmacies to help lower the cost of primary care. However it’s a long way from the current state of a CVS/Walgreens store to that promised land. Meanwhile, Rite Aid will be left behind in the dust.

Peter Charness
Well — if they can get their digital CX working a bit better they could get a bigger share of customer wallet. Like many other retailers they have a blend of convenience based on lots of locations, an assortment that is a mix of private label and national brands, and a broad series of commodity offerings which include amongst other things vaccinations and tests. They also have access (properly controlled I hope) to an above average amount of customer data. While I understand the corners that had to be cut to get the vaccine program online, my experience (with the two major chains available in Portland, OR) is that the experience of scheduling appointments and then access to records was terrible, The ongoing CX consists of endless pestering me to renew prescriptions I don’t need, and the “marketing” is a neverending series of high low offers to get me into their store – which may work for some people but just adds to the annoyance factor for me. So pharmacies that can offer a decent… Read more »
Craig Sundstrom

I find it hard to believe Covid vaccinations were much of a “traffic driver” for CVS (or anyone else). It may have been an opportunity to showcase themselves to people who wouldn’t otherwise come in, and ideally it was put to good use — or at least it wasn’t a negative — but hoping for much beyond that was simply delusional.

CVS will go back to what it was doing: being America’s number one dispenser of scratch paper (aka: 2 foot long receipts). 🙂

Ken Lonyai

It’s ridiculous that COVID-19 vaccinations were ever part of a business strategy. It was a temporary windfall except for those that want to believe the ever-morphing statements of Fauci, Gates’ claims, and the recent undercover FDA Executive Officer, Christopher Cole, all of whom state that COVID-19 vaccinations will never end.

Mom and Pop drugstores are waning. The chains have made it so by upscaling their offerings into more non-pharmacy SKUs and added services. Real business planning/success will expand on that and not be based on emergency adaptations.

Anil Patel

To sustain the post-pandemic normal in the long run, retail pharmacies can consider the following:

Instead of diversifying, pharma companies should focus on leveraging existing c-stores and making the best out of them. They should evolve themselves on the digital front and upgrade if they are using legacy software.

They should build a strong network through meaningful partnerships with health care providers. Scaling up or establishing a distribution framework from scratch won’t be so easy. Collaborating with healthcare providers will help these organizations improve customers’ purchase experiences and increase delivery capabilities.

This will not only help retail pharmacies prepare better but also enable them to take baby steps towards the much-needed disruptions in the healthcare industry.

Secondly, I don’t feel any difference between the experiences provided by the giant retail pharmacies. They are almost the same in terms of quality of engagement and delivery capabilities.

"Retail pharmacies need to reposition their brands as one-stop wellness shops. The race is on to own this space."

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