Pharmacy Pandemonium

As pharmacies around the country close and pharmacists strike for better working conditions, industry experts are analyzing the implications for consumers. 

It wasn’t so long ago that major drugstore chains were committed to expansion, with the intention to be on every corner making health services widely accessible — this approach proved successful during the COVID-19 pandemic. However, the strategy is now going downhill with many major retailers announcing closures. 

In October, Rite Aid filed for Chapter 11 bankruptcy. Meanwhile, earlier this year, in June, Walgreens announced it would close 150 doors, following 200 store closures in 2019. In 2021, CVS said it would close 900 doors over the next three years. Experts attribute these closures to the sheer amount of pharmacies, the lack of pharmacists, and theft and shrinkage caused by organized crime. 

“We’re coming to the end of an era of the buildout of United States pharmacy,” said Matthew Hamory, managing director at global consulting firm AlixPartners. 

According to Hamory, the end of COVID-19 has placed pressure on pharmacies, as consumer traffic and demand for vaccines and medications has slowed. Furthermore, drugstore chains are also dealing with pharmacist shortages and walkouts, which has led to additional closures. 

With these increased closures and consolidations, consumers may struggle to access services; brands may face sales plateaus, and pharmacies will need to rethink the customer experience. At the same time, certain telehealth companies may experience growth. 

“There is certainly a risk of pharmacy deserts forming,” said Hamory, calling out areas where organized crime is common, such as San Francisco, as potential places where increased closures may occur. “That could create pharmacy deserts not because they don’t want to be in the area or they couldn’t fill scripts but because they have safety issues.”

“Unfortunately, a lot of the pharmacies that are being closed or face the potential for closure are the ones in the communities that don’t have a lot of access,” agreed Kate Maheu, associate partner in the health care and life sciences practice of Kearney.

Therefore, chains will need to respond with solutions. 

“As these closures start to work their way through the system, they [the big pharmacy players] will be asked, ‘How are you compensating for the closures if you’re impacting the access for a single community,’” said Maheu.

She pointed to expanded services and offerings, such as different delivery options or windows, as a way to satisfy demand, as single locations become responsible for larger and more diverse communities. 

Similarly, store closures hurt beauty and personal care brands, as their footprint inherently decreases as well. Experts say retailers should consider new strategies for customer experiences and brands that rely on pharmacies for exposure should expand their e-commerce approach. 

“Retailers have to evolve their proposition to be more digital…whether it’s through an app or the website to experience the store more,” said Hamory. 

According to McKinsey partner Anna Pione, online retail channels are becoming increasingly popular among consumers shopping for vitamins, minerals and supplements, while over-the-counter drugs, like painkillers or cold and flu medicine, remain popular in-store staples, due to the immediate need often associated with these. 

“We are seeing the rise of retail e-commerce, as well as direct-to-consumer channels, across the consumer health space,” Pione said. “In the vitamin space, there are intrinsic dynamics that make direct-to-consumer economics worth it. You have a very predictable, repetitive consumption. Products don’t tend to expire very quickly and the price-to-weight ratio makes sense.” 

With access decreasing, experts say telehealth companies could see a spike, namely those providing prescriptions a consumer uses on a regular basis. However, for as-needed medications for conditions like the flu or COVID-19, pharmacies are still the main supplier. 

“The challenge in those [telehealth] models today is that they either serve niche or specific needs, or they haven’t found a way to do the full end-to-end services or offerings of the brick-and-mortar pharmacy,” said Maheu.

For companies like Musely, an online platform for prescription skin care products, and Wisp, a sexual and reproductive health telemedicine site, drugs can easily be delivered to the user’s door, removing the need for the physical store. 

“We use [a] compounding pharmacy… There’s a fundamental difference in terms of work,” said Musely founder and chief executive officer Jack Jia. He explained since pharmacists are making medications live, it makes for a more dynamic and enjoyable work environment. Plus, this model significantly brings down the price for consumers, which has driven the company’s growth. 

Continued growth in the telemedicine sector could also “exacerbate some of the physical store closures,” according to Hamory. 

CVS declined to comment for this story. Walgreens did not reply at the time of publishing. Rite Aid shared the following statement: “Rite Aid regularly assesses its retail footprint to ensure we are operating efficiently while meeting the needs of our customers, communities, associates and overall business. In connection with the court-supervised process, we notified the Court of certain underperforming stores we are closing to further reduce rent expense and strengthen overall financial performance.” 

While mass closures inherently sound negative, experts say there may be some positive changes to look forward to. 

“You could see improvements in service levels and customer satisfaction around pharmacy,” Hamory said, noting service is one of the biggest qualms for consumers when visiting a drugstore. “If we close one and redistribute resources to the other that makes it somewhat better.”

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