Drugstores have been having some issues lately, and now three major chains are closing multiple stores. CVS, Walgreens, and Rite Aid are collectively closing thousands of stores across the country. Rite Aid alone will be closing 400-500 stores out of their 2,200 total. The company has also filed for bankruptcy. They have been undercut by larger stores but have also faced some legal obstacles for their alleged role in the opioid epidemic.
We have seen strikes from various industries this year as employees are fighting back, and the drugstore industry is no different. Walgreens workers around the United States, as well as CVS workers in Kansas City, have staged walkouts to protest pay and staffing shortages. Aside from the employment aspect, these stores have been facing a lot of challenges as the scope of the healthcare and retail industries is rapidly and constantly changing.
Brick-and-mortar retail stores have been facing problems since the rise of Amazon. However, many have brought up the problem of theft to try and explain a lot of their issues. You may have seen more products behind glass cases now. And I am sure you all have seen the countless videos circulating online of people just ransacking stores, and stealing with little pushback. That is, of course, not okay, but is that really to blame? Walgreens was one of the first stores to start speaking out about theft. And there’s been a pattern of chains claiming that this has contributed to their reduced margins. In fact, earlier this year, The Week did a piece highlighting Walgreens specifically.
In 2021, Walgreens closed at least five stores in the San Francisco area. They largely blamed shoplifting for these closures. However, the CFO of Walgreens admitted in a statement that they may have put too much emphasis on shoplifting. It was also believed that inventory losses due to theft or damage (known as shrinkage) had stabilized and actually decreased from 2020. This is important because, according to The New York Times, how companies talk about theft can impact Americans’ overall views of crimes. With the San Francisco Walgreens closures, data from the police department did not support the theft claims. Fear-mongering contributes to Republican rhetoric about increasing police presence, expenditures to the police and other law enforcement agencies, and the overall negativity surrounding America’s cities.
One real problem facing drugstores is their pharmaceutical sales. According to CNN, the majority of their sales are from customers filling prescriptions. These profits, though, have declined in recent years due to lower reimbursement rates for prescription drugs. But this isn’t the only real-world issue they are having to deal with. What they call the “front end” is also dwindling in sales. This is where you would find things like snacks and paper towels. Amazon and other big box retailers have provided extreme competition. Even huge chains like Costco and Walmart are now go-to places for household items and medicine.
The pandemic also didn’t help drugstores the way some may assume. While vaccine rollouts brought a lot of people into stores, they weren’t doing a lot of extra shopping while getting vaccinated. It is also reported that prescription sales overall declined because people were getting fewer elective procedures.
Closures hurt the elderly and lower-income folks, as it can be harder to find pharmaceutical options for them and they can have higher needs. Because big drugstores like these 3 companies overexpanded, many local pharmacies closed. Independent shops for medicine decreased by roughly 50% from 1980 to 2022. Now these three are closing many stores which will leave a key void for many people. CVS has closed 244 stores from 2018-2020 and said they will close 900 more by 2024. Walgreens already had plans to close 200 stores back in 2019. In June of this year, they said they would close 150 more. Insurance discrepancies still provide issues for customers and businesses. We know that those on public insurance may already struggle to have their needs met. This is still, however, better than no insurance. Those on public insurance programs can provide problems for these drugstores because they have lower reimbursement rates, which I discussed earlier.
Undoubtedly, needs will still have to be met. I hope that these businesses can be saved or altered in some substantial ways. It would also be nice to see a rise in local pharmacies. I do not know the full solution but I hope customers and consumers can still have their needs met.
(featured image: Joe Raedle/Getty Images)
