Your Pharmacy May Close Soon: 2,000+ Walgreens Store Closures Pending & How You'll Be Affected

This week, Walgreens announced it would close a significant number of its pharmacies due to financial losses, marking the latest retreat by a major drugstore chain. This decision follows a broader trend within the industry, as CVS plans to close 900 more stores, and Rite Aid, facing bankruptcy, intends to shutter up to 500 locations. These closures highlight the challenges faced by traditional retail pharmacies, including lower reimbursements for prescription drugs from pharmacy benefit managers (PBMs), loss of sales to online and discount retailers, and increased theft since the pandemic.

The Ripple Effects on Communities

The closures of these pharmacies have profound implications for the communities they serve, particularly in low-income neighborhoods. When a local pharmacy closes, patients may have to travel greater distances to access medications, which can lead to health risks such as older adults failing to take their prescribed medications. The loss of a nearby pharmacy disrupts access to healthcare services, exacerbating health disparities in underserved areas.

Pharmacies play a crucial role in providing accessible healthcare, especially for those reliant on public insurance. The study published in the Journal of the American Medical Association found that pharmacy closures disproportionately affect independent pharmacies and low-income neighborhoods, where customers are more likely to be on public insurance plans. These closures leave a void in healthcare access, impacting the overall well-being of the community.

Trends Driving Pharmacy Closures

The closure of retail pharmacies is driven by multiple factors that are reshaping the industry. The primary challenge is the declining profitability of prescription drugs. The majority of drugstores’ sales come from filling prescriptions, but profits have dwindled due to lower reimbursement rates and higher fees imposed by PBMs. PBMs negotiate rebates from drug manufacturers to insurers, but in the process, they have been cutting reimbursement rates to boost their own profits. This financial squeeze has made it difficult for pharmacies to maintain profitability, especially in low-income neighborhoods where public health insurance reimburses at lower rates than private plans.

In addition to reimbursement issues, the front-end sales of drugstores, which include snacks and household staples, have also suffered. Consumers increasingly purchase these items online from retailers like Amazon and at big-box stores such as Walmart and Costco, further eroding the revenue base of traditional pharmacies. The growth of dollar stores in rural areas has also siphoned off potential customers from local pharmacies.

Industry Response and Future Outlook

In response to these challenges, major drugstore chains have attempted to diversify their services and cut costs. Walgreens, for example, plans to pump up its loyalty program and continue its cost-cutting measures to reach its $1 billion savings goal. Additionally, Walgreens has reduced its stake in primary-care provider VillageMD, which has not been profitable for the company.

Despite these efforts, the traditional pharmacy model faces sustainability issues. The industry must adapt by finding new ways to generate revenue and maintain customer loyalty. This might involve leveraging technology to enhance customer experiences, improving operational efficiencies, and exploring new healthcare services that can complement their retail offerings.

Thru Jeremiah's Eyes

The closure of Walgreens and other retail pharmacies is a sign of the significant changes occurring within the industry. While these closures might help companies like Walgreens stabilize financially in the short term, the long-term impact on community health and access to care is concerning. So, I believe that leaders in the pharmacy industry must balance financial sustainability with their role in providing essential healthcare services. By embracing innovation and exploring new business models, pharmacies can adapt to the evolving landscape while continuing to serve their communities effectively.

Thank you.

~ Jeremiah A. Pouncy