Over the past few years, the retail pharmacy landscape in the United States has seen dramatic changes. Familiar names like CVS, Walgreens, and Rite Aid are closing thousands of stores, leaving many communities wondering what this means for their access to essential healthcare services. Once reliable fixtures in neighborhoods across the country, these pharmacies are now shutting their doors at an unprecedented rate, sparking concern, especially in areas that already face limited access to healthcare.
Behind these closures are multiple, intertwined factors. The rise of online shopping, financial challenges, and the evolving role of pharmacies in healthcare are all contributing to this shift. As major pharmacy chains grapple with these pressures, they’re forced to make tough decisions about how to stay profitable while still serving their customers. The result? Fewer stores and the transformation of many existing locations.
The Digital Shift – Pharmacies Go Online
The COVID-19 pandemic significantly changed the way consumers shop, and the pharmacy industry is no exception. As people adapted to new health protocols, many turned to online shopping for convenience and safety. Delivery services and curbside pickup became more popular, with companies like Instacart stepping in to provide an alternative to in-store shopping. This shift in consumer behavior has made a lasting impact, prompting major pharmacy chains to reconsider their physical presence.
CVS, one of the largest pharmacy chains in the U.S., announced plans to close 900 stores by the end of 2024 as part of a strategy to embrace digital services. The company began shuttering locations in 2022, aiming to close around 300 stores each year. This decision is part of CVS’s broader effort to reduce its brick-and-mortar footprint and focus on modernizing the stores that remain. Many of these locations will be transformed into “HealthHubs,” specialized centers that offer a wider range of healthcare services, including primary care, mental health support, and wellness programs.
While CVS’s physical footprint will shrink, the company remains committed to its digital strategy, ensuring customers can still access essential services like prescription refills, vaccinations, and health consultations online. This move signals a growing trend in the retail pharmacy world: fewer physical stores, but more emphasis on digital and healthcare-related services. The question remains, though: will this shift leave certain communities without easy access to a pharmacy, particularly those who rely on in-person services?
Financial Struggles Behind the Closures
While the rise of online shopping has certainly influenced the decision to close stores, financial pressures are another driving force. Major pharmacy chains like Walgreens, CVS, and Rite Aid are facing intense competition, shrinking profit margins, and challenges that make it difficult to sustain large numbers of retail locations.
Walgreens, for example, revealed that nearly 25% of its U.S. stores are not profitable, a staggering statistic for a company that operates more than 8,600 locations. The chain has been grappling with a combination of theft, poor growth strategies, and fierce competition from both traditional retailers and online giants like Amazon. In response, Walgreens has been forced to make tough choices, including closing a significant number of stores to cut costs and improve profitability.
The financial strain isn’t unique to Walgreens. Rite Aid, which has a smaller footprint compared to its competitors, is also feeling the squeeze, largely due to falling reimbursement rates for prescription drugs. Pharmacies rely heavily on prescriptions for revenue, and when the rates paid to them by insurance companies and pharmacy benefit managers (PBMs) decrease, their profits shrink. CVS has also struggled with this issue, and it’s one of the reasons the chain has decided to scale back its brick-and-mortar presence.
Ultimately, these financial realities are forcing pharmacy chains to rethink their approach. In a highly competitive market, maintaining thousands of physical stores is no longer sustainable. The closures are a way to streamline operations, but they come at a cost, particularly for consumers who lose convenient access to their local pharmacy.
The Role of Pharmacy Benefit Managers (PBMs) in the Crisis
A major factor contributing to the financial struggles of pharmacies is the role played by Pharmacy Benefit Managers (PBMs). These middlemen negotiate drug prices on behalf of insurers and pharmacies, claiming to lower costs for consumers. However, pharmacies argue that PBMs are a significant part of the problem, as they often reduce the reimbursement rates pharmacies receive for dispensing prescription drugs.
PBMs wield a considerable amount of power in the pharmaceutical industry, controlling which drugs are covered by insurance plans and setting the reimbursement rates for pharmacies. For chains like CVS, Walgreens, and Rite Aid, these reduced rates make it difficult to stay profitable, particularly in areas with a high number of public insurance recipients or lower-income neighborhoods. The lower the reimbursement, the harder it becomes for pharmacies to cover their operating costs, which include rent, staffing, and inventory.
Pharmacy experts argue that the influence of PBMs has created an unsustainable business model for many pharmacies. While PBMs maintain they are helping to lower drug costs overall, their practices often leave retail pharmacies struggling to make a profit, especially when they are unable to offset the losses with additional revenue from other services.
As PBMs continue to play a dominant role in the industry, pharmacies are left in a difficult position. They must either find new ways to grow their revenue or face the harsh reality of closing more stores. This ongoing battle between pharmacies and PBMs has contributed significantly to the recent wave of closures and is a key issue in the broader pharmacy landscape.
The Rise of Pharmacy Deserts – What It Means for Communities
One of the most concerning consequences of these widespread pharmacy closures is the emergence of “pharmacy deserts.” A pharmacy desert is an area where residents have limited or no access to a nearby pharmacy, creating significant challenges for individuals who rely on these stores for medications and healthcare services. Unfortunately, these closures are not affecting all communities equally—low-income and minority neighborhoods are being hit the hardest.
Research has shown that pharmacy deserts are particularly prevalent in Black and Latino communities, where residents are already more likely to face healthcare disparities. When a local pharmacy closes in these neighborhoods, it not only limits access to essential medications but also to everyday healthcare services such as flu shots, health consultations, and other wellness resources.
Take, for example, the case of Boston, where Walgreens faced protests after announcing the closure of several stores in predominantly minority neighborhoods. Activists voiced their concern over the loss of pharmacies in these areas, pointing out how vital these stores are to the health and well-being of local residents. For many, the nearest pharmacy is now miles away, making it difficult for those without transportation to access essential care.
These closures are worsening existing healthcare inequalities by creating pharmacy deserts in underserved communities. Residents in these areas are left with fewer options, which can lead to delayed medical treatment, unmanaged chronic conditions, and reduced access to basic healthcare needs. For people who depend on public transportation or have mobility challenges, the absence of a nearby pharmacy can have a profound impact on their quality of life.
Adapting to the Future – How Pharmacies Are Pivoting to Healthcare Services
In response to the financial pressures and changing consumer behavior, major pharmacy chains are pivoting toward offering more comprehensive healthcare services. Rather than focusing solely on dispensing medications, CVS and Walgreens are transforming some of their remaining stores into healthcare hubs designed to meet a broader range of needs. This shift reflects a growing demand for accessible healthcare services, which many believe will help these companies stay competitive in the evolving market.
CVS, for instance, is converting over 1,000 of its stores into HealthHubs. These upgraded locations offer a wide variety of healthcare services, including mental health counseling, chronic disease management, and wellness programs such as yoga classes and nutritional consultations. The goal is to create a space where people can access primary care and preventive services in one convenient location, helping to bridge the gap between retail and healthcare.
Walgreens is making similar moves. The company has invested heavily in healthcare partnerships, including a $5.2 billion stake in VillageMD, a network of primary care providers. While this investment represents a shift away from Walgreens’ traditional pharmacy model, the company hopes that offering more healthcare services will help offset the loss of revenue from shrinking prescription reimbursements. However, not all of these ventures have been successful, and some VillageMD locations have closed as Walgreens continues to fine-tune its approach.
While these changes are promising, the question remains: will they be enough to make up for the lost convenience of traditional pharmacies? As pharmacies become more like healthcare centers, there’s potential to improve access to wellness services, but the loss of local drugstores still leaves gaps in communities that rely on them for essential daily needs.
The Future of Pharmacies – Evolving or Disappearing?
As CVS, Walgreens, and Rite Aid close thousands of stores across the U.S., it’s clear that the pharmacy industry is at a turning point. The shift toward digital services, financial challenges, and the growing influence of Pharmacy Benefit Managers have all contributed to this transformation. While these companies are finding ways to adapt by offering more healthcare services and focusing on digital innovation, the consequences of these closures cannot be overlooked.
For many communities, particularly those in underserved areas, the loss of a local pharmacy means more than just losing a place to fill prescriptions. It means losing access to critical healthcare services, increasing the risk of healthcare inequities. As the pharmacy landscape continues to change, the challenge will be finding a way to balance business needs with the health and well-being of all consumers, ensuring that no one is left behind in the quest for profitability.
