The heyday of drugstore chains in the United States is over. For decades, drugstore chains filled U.S. cities, suburbs, and even small towns with new stores. But that changed when Rite Aid, CVS, and Walgreens began to close a number of their locations across the country in the past few years. Read on to find out the different factors that led to these closures and how these impact the access to healthcare of the general public.
How many Rite Aid, CVS, and Walgreens stores are closing?
Rite Aid, which filed for bankruptcy on October 15th, 2023, will reportedly close 400 to 500 of its 2,200 stores nationwide. Rite Aid is currently the third-largest standalone pharmacy chain in the country.
Meanwhile, CVS, the largest drugstore chain in the U.S., already closed 244 stores between 2018 and 2020. In 2021, it announced that it would be closing 900 more stores by 2024.
Lastly, Walgreens revealed in 2019 that it would shut down 200 stores. In June 2023, it announced that 150 more stores were set to close.
The exact locations of these stores are not clear, but according to a study published in the Journal of the American Medical Association, independent pharmacies and drugstores with a large customer base on public insurance, which have lower reimbursement rates than private plans, have the greatest risk for closures.
What are the factors that contribute to the drugstore closures?
The series of drugstore closures is brought about by a number of factors, which include the following:
Lower reimbursement rates for prescription drugs
Drugstore chains make most of their money from filling prescriptions. However, reimbursement rates from insurers for prescription drugs have been declining in recent years. This is due to a number of factors, including competition from generic drugs and increased pressure from insurers to reduce costs. As a result of declining reimbursement rates, drugstore chains have been forced to raise prices for consumers. This has led to a decline in sales of prescription drugs.
Rising competition with other retailers
Drugstore chains also face rising competition from big-box stores with pharmacies like Walmart and Dollar General in rural areas.
These retailers sell many of the same items as drugstores at lower prices. For example, Walmart offers a $4 prescription drug program for select medications. This program has been very popular with consumers, and it has put pressure on drugstore chains to lower their prices.
Changing consumer landscape
More and more consumers are shopping online for prescription drugs and other health and wellness products. This is due to a number of factors, including convenience, price, and selection.
For example, online pharmacies often offer lower prices for prescription drugs than brick-and-mortar pharmacies. Online pharmacies also offer a wider selection of prescription drugs and other health and wellness products.
Changing business strategy
Drugstores are shifting their focus to the more profitable healthcare industry, becoming primary care providers and acquiring health insurers. For instance, CVS acquired health insurer Aetna, and Walgreens took a majority stake in primary care network VillageMD. This strategy, however, requires fewer physical stores.
Theft
Drugstore theft is a thorny issue, and stores are struggling to find a balance between preventing theft and providing a good customer experience. One solution that some stores have tried is to lock up products, but this has had the unfortunate side effect of making it more difficult and time-consuming for customers to shop, which leads to smaller foot traffic.
What’s the impact of these store closures on consumers?
The weakening presence of retail pharmacies is causing a disproportionate impact on low-income and rural communities. These communities often have fewer drugstore options to choose from, and people from this sector may have to travel longer distances to fill their prescriptions. This can be a challenge for people who rely on public transportation or who have limited mobility.
The closure of drugstore stores is also having a negative impact on access to healthcare services. Many drugstore chains offer a variety of healthcare services, such as immunizations, blood pressure monitoring, and diabetes testing. When a drugstore store closes, people in the community may lose access to these important services.
What does the future hold for drugstore chains?
The future of drugstore chains is uncertain. However, it is clear that the industry is facing a number of challenges. Drugstore chains will need to find ways to improve their profitability or more store closures are expected.