Why CVS, Walgreens, and Rite Aid Are Shutting Down Thousands of Stores Nationwide

The recent trend of major drugstore chains in America, including CVS, Walgreens, and Rite Aid, closing thousands of their locations nationwide prompts significant inquiry. Is this merely a response to evolving consumer behaviors, or do more profound and concerning factors contribute to this phenomenon? The closures have sparked concerns regarding the potential decline of the conventional pharmacy model, particularly in communities that are already facing challenges related to healthcare access.

As entire neighborhoods risk becoming “pharmacy deserts,” the implications of these corporate decisions raise critical issues surrounding corporate priorities, healthcare equity, and the future landscape of retail pharmacies in the United States.

In recent years, prominent drugstore chains such as CVS, Walgreens, and Rite Aid have been systematically shutting down stores across the country. These closures, impacting thousands of outlets, prompt vital discussions about the future of community pharmacies and the underlying reasons for these shifts. An examination of the motivations behind these corporate retreats reveals significant effects on consumers, particularly in underserved regions.

The surge in online shopping has transformed consumer purchasing patterns. The COVID-19 pandemic has accelerated this shift, with an increasing number of individuals opting for online shopping, curbside pickup, and delivery services like Instacart. In light of these changes, CVS has announced its intention to close 900 stores by the end of 2024, initiating this process in 2022 with an annual reduction of 300 locations. This strategy aligns with the company’s focus on enhancing digital services while scaling back its physical presence.

Despite these closures, CVS retains a substantial presence with approximately 10,000 locations across the nation. To meet evolving consumer demands, CVS plans to modernize its remaining stores, transforming many into HealthHub locations that will provide a broader range of healthcare services beyond traditional pharmacy offerings.

Financial challenges and intensifying competition are also significant factors influencing these developments.
Economic challenges are a significant factor contributing to the closure of numerous pharmacies. For instance, Walgreens has disclosed that approximately 25% of its locations in the United States are operating at a loss. With around 8,600 stores in its portfolio, the company is grappling with issues such as theft, heightened competition, and unsuccessful expansion efforts. In an effort to enhance profitability, Walgreens has announced intentions to shut down a considerable number of its outlets.

Similarly, CVS and Rite Aid are experiencing financial strain, largely due to decreasing reimbursement rates for prescription medications. As pharmacies depend heavily on prescription sales, the reduced payments from pharmacy benefit managers (PBMs) are constricting their profit margins, complicating the sustainability of these chains.

The Role of Pharmacy Benefit Managers (PBMs)
PBMs serve a crucial function within the pharmacy landscape, acting as intermediaries that negotiate drug prices among pharmacies, insurers, and manufacturers. While PBMs assert that they are reducing drug costs, pharmacies contend that the lower reimbursement rates are adversely affecting their profitability.

Elizabeth Anderson, an analyst at Evercore ISI, notes that diminishing reimbursement rates have a direct impact on the financial viability of drugstores, particularly when they are unable to compensate for these losses through alternative revenue sources. This economic strain has compelled numerous pharmacies to close, particularly in regions with lower reimbursement rates, such as those with a high proportion of public insurance beneficiaries.

The Emergence of Pharmacy Deserts and Its Community Impact
A particularly concerning outcome of the widespread pharmacy closures is the rise of “pharmacy deserts,” which are areas where residents have limited or no access to nearby pharmacies. These closures disproportionately impact low-income and minority communities, further exacerbating existing healthcare disparities.
Protests have emerged in Boston following Walgreens’ announcement regarding the closure of stores in areas predominantly inhabited by minority communities. Activists have raised alarms about the potential loss of pharmacies and the consequent effects on access to essential health services within these neighborhoods.

Transitioning to health services.

In order to remain competitive, CVS and Walgreens are increasingly prioritizing health services. CVS intends to transform over 1,000 of its locations into HealthHubs, which will provide offerings such as mental health screenings, yoga classes, and primary care. This initiative is designed to diversify revenue sources and meet the rising demand for comprehensive healthcare solutions. Similarly, Walgreens has made significant investments in healthcare, including a $5.2 billion investment in VillageMD, a primary care network. However, this investment has not yet produced significant returns, prompting Walgreens to close several VillageMD locations to mitigate losses.

The future of retail pharmacies

The closures of CVS, Walgreens, and Rite Aid indicate a significant shift within the retail pharmaceutical sector. As consumer habits increasingly lean towards online shopping and healthcare services continue to evolve, traditional drugstore models must adapt to maintain their relevance. While these closures may enhance the financial health of the companies involved, they also pose challenges for communities that depend on local pharmacies for prescriptions and essential products.

An industry analyst encapsulated the situation by stating, “The current pharmacy model is no longer sustainable.” For numerous communities, the disappearance of a local pharmacy translates to diminished access to healthcare and everyday necessities, underscoring the necessity for a balanced strategy that emphasizes both profitability and accessibility.

An evolving landscape

The decisions made by CVS, Walgreens, and Rite Aid to shutter thousands of stores reflect the cumulative effects of financial challenges, changing consumer preferences, and heightened competition from online retailers like Amazon. While these actions may contribute to stabilizing their operations, the wider implications—especially for underserved populations—remain a significant concern.
As the retail pharmacy sector undergoes significant transformation, it is imperative for companies to navigate the delicate equilibrium between enhancing their financial performance and guaranteeing that all communities have access to the healthcare services they rely upon.

In summary, the recent closures of CVS, Walgreens, NS, and Rite Aid signify a critical juncture for the retail pharmacy sector. These shutdowns, prompted by financial difficulties, shifting consumer behaviors, and heightened competition, underscore the necessity for these organizations to adjust to the swiftly evolving healthcare and retail environments. Although initiatives such as HealthHubs and investments in primary care networks aim to modernize offerings and broaden revenue sources, the repercussions for underserved communities must not be disregarded. As the industry progresses, achieving a balance between profitability and affordability will be crucial to ensure equitable access to healthcare and essential products for everyone.