Why your drug store is closing

In the United States, major drug store chains are facing significant challenges, leading to widespread closures. Walgreens plans to shut down 1,200 stores, while CVS and Rite-Aid will close 900 and 500 stores, respectively. The closures are attributed to various factors, including around 25% of Walgreens' stores being unprofitable and rising incidents of shoplifting since the pandemic. The current pharmacy model is deemed unsustainable by industry leaders, with lower reimbursement rates for prescription drugs further straining profitability. The majority of sales for these drugstores come from filling prescriptions, but profits have declined due to falling reimbursement rates and increasing fees imposed by pharmacy benefit managers (PBMs). These entities negotiate drug prices and rebates, which has led to complaints from pharmacies about their excessive control over pricing. As reimbursement rates decrease, drugstores struggle to maintain profitability without alternative growth avenues. Additionally, the front-end sales of snacks and household items have diminished as consumers increasingly turn to online shopping and big-box retailers. In response, drug store chains are attempting to diversify by incorporating primary care services, such as adding doctors' offices. However, Walgreens has recently decided to divest from its investment in VillageMD, a primary care network. While these closures may improve the financial standing of the companies, they are likely to negatively impact healthcare access for patients, particularly those reliant on public insurance, which typically offers lower reimbursement rates than private plans.