Why are America’s top drugstore chains—CVS, Walgreens, and Rite Aid—suddenly closing thousands of stores across the country?
Is this just a reaction to changing consumer trends, or are there deeper, more disturbing forces at play? These closings have left many wondering if we are witnessing the slow demise of the traditional pharmacy model and what that means for communities already struggling with limited access to health care.
With entire neighborhoods at risk of becoming “pharmacy deserts,” the ripple effect of these decisions raises pressing questions about corporate priorities, healthcare equity, and the future of retail pharmacies in America.
In recent years, major drugstore chains such as CVS, Walgreens, and Rite Aid have been closing stores across the United States. These closings, which affect thousands of locations, raise important questions about the future of community pharmacies and the factors driving these changes. Here’s a detailed look at why these companies are backing down and how it’s affecting consumers, especially in underserved areas.
The rise of online shopping
The COVID-19 pandemic has drastically changed shopping habits, and more and more consumers are turning to online shopping, curbside pickup, and delivery services like Instacart. In response to these changes, CVS announced plans to close 900 stores by the end of 2024, starting in 2022 with 300 closings per year. The move is in line with the company’s strategy to focus on digital services while reducing its physical presence.
Despite these closings, CVS continues to maintain a significant footprint with roughly 10,000 locations nationwide. To adapt to changing demands, CVS plans to modernize its remaining stores, converting many to HealthHub. These redesigned locations will offer expanded healthcare services beyond traditional pharmacy functions.
Financial problems and increasing competition
Economic pressures are a major driver of these closures. Walgreens, for example, revealed that about 25% of its US stores are unprofitable. The company operates approximately 8,600 branches and faces challenges such as theft, increased competition, and failed expansion strategies. To boost profitability, Walgreens has announced plans to close a significant number of stores.
CVS and Rite Aid are also feeling financial pressure, in large part due to declining prescription drug reimbursement rates. Pharmacies rely heavily on prescription sales, but lower payments from pharmacy benefit managers (PBMs) are squeezing their margins, making it harder for these chains to stay afloat.
Role of Pharmacy Benefit Managers (PBMs)
PBMs play a key role in the pharmacy ecosystem, acting as middlemen who negotiate drug prices between pharmacies, insurers,r,s, and manufacturers. While PBMs claim they are driving down drug costs, pharmacies say their reduced reimbursement rates are driving down profits.
Elizabeth Anderson, an analyst at Evercore ISI, explains that declining reimbursement rates directly affect drugstore profitability, especially when they can’t offset those losses with other revenue streams. This economic pressure has forced many pharmacies to close, especially in areas with lower reimbursement rates, such as communities with a high percentage of public insurance recipients.
The rise of pharmacy deserts and the impact on the community
One of the most troubling consequences of widespread closures is the emergence of “pharmacy deserts” — areas where residents have little or no access to nearby pharmacies. These closures disproportionately affect low-income and minority neighborhoods and exacerbate healthcare disparities.
Protests erupted in Boston, for example, when Walgreens announced plans to close stores in predominantly minority neighborhoods. Activists have expressed concern about the loss of pharmacies and the resulting impact on access to basic health services in these communities.
Shift to health services.
To stay competitive, CVS and Walgreens are focusing on health services. CVS plans to convert more than 1,000 stores into HealthHubs that will offer services such as mental health screenings, yoga classes,s and primary care. This strategy aims to diversify revenue streams and address the growing demand for comprehensive healthcare services.
Walgreens has similarly invested in healthcare, including a $5.2 billion stake in VillageMD, a primary care network that investment has yet to yield substantial returns, leading Walgreens to close some VillageMD locations to cut losses.
The future of retail pharmacies
The closings of CVS, Walgreens, and Rite Aid signal a major transformation in the retail pharmaceutical industry. As consumer behavior shifts toward online shopping and healthcare services evolve, traditional drugstore models must adapt to remain viable. While these closures can improve the financial stability of companies, they also present challenges for communities, especially those that rely on local pharmacies for prescriptions and essential goods.
One industry analyst summed up the situation: “The current pharmacy model is no longer sustainable.” For many communities, the loss of a local pharmacy means fewer options for health care and everyday needs, highlighting the need for a balanced approach that prioritizes both profitability and accessibility.
A changing landscape
Decisions by CVS, Walgreens, and Rite Aid to close thousands of stores reflect the combined impact of financial pressures, evolving consumer preferences, and increasing competition from online retailers such as Amazon. While these measures may help stabilize their businesses, the broader implications—particularly for underserved populations—cannot be overlooked.
As the retail pharmacy landscape continues to change, companies must find ways to strike a balance between improving their bottom line and ensuring that all communities have access to the healthcare services they depend on.
In conclusion, the widespread closings of CVS, Walgree, NS, and Rite Aid represent a tipping point for the retail pharmacy industry. These closures, driven by financial challenges, changing consumer preferences, and increased competition, highlight the need for these companies to adapt to the rapidly changing healthcare and retail landscape. While initiatives like HealthHubs and investments in primary care networks focus on modernizing services and diversifying revenue streams, the implications for underserved communities cannot be overlooked. As the industry evolves, striking a balance between profitability and affordability will be essential to ensure equal access to healthcare and essential goods for all.