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Walgreens will close underperforming stores within the next 3 years, struggling to keep up with front-of-store experiences and regulatory and reimbursement challenges.
Based on the broad range of options available for US consumers today when selecting their retail pharmacy experience, pharmacies have been experiencing pressures for some time to provide competitive front-of-store offerings to drive purchases. On the backend, trends on branded medication and increases in regulatory and reimbursement changes have been challenging for pharmacies and negatively impacting pricing, according to the CEO of Walgreens Boots Alliance Inc, Timothy Wentworth, in the Q3 earnings call for the company.1
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“The retail pharmacy experience will be more important to the health care industry in the years ahead, but it will evolve. With widespread demand for convenient health care solutions, including [for] chronic diseases, and nationwide labor shortages, the pharmacy and pharmacists have never been more important,” Wentworth said in the call.1
Approximately 75% of all US stores for Walgreens are contributing to 100% of the companies adjusted operating income. The other 25%, Wentworth stated, are not contributing to the long-term strategy of the company. The company is expected to close a significant proportion of the underperforming 25% of stores within the next 3 years, which has raised concern about the impact in underrepresented areas and the creation of pharmacy deserts, according to CNBC.1
According to a study published in Health Affairs Scholar, approximately 15.8 million—or 4.7%—of people in the US live in pharmacy deserts. Pharmacy deserts are neighborhoods with low access to pharmacists, but can also be neighborhoods where communities are of low income. People in these communities are generally less educated, do not have health insurance, have low literacy in English, have ambulatory disability, and identify as a racial or ethnic minority.2
In the Q3 earnings call, Manmohan Mahajan, global chief financial officer and executive vice president at Walgreens Boots Alliance, reported an increase in sales driven by brand inflation and pharmacy prescription volumes, but a decline in retail sales. Mahajan stated that the decline came from reimbursements, lower COVID-19 testing demand, and generic launches. For retail, the company focused on lowering prices for health and wellness, personal care, and seasonal products, which helped sales, but they found that the gross margin in their retail space declined more than anticipated.1
Likewise, in October 2023, Rite Aid voluntarily initiated a court-supervised process under Chapter 11 of the US Bankruptcy Code, implementing a restructure plan to reduce debt and increase financial flexibility. The Court granted interim approval to access up to $3.45 billion in debtor-in-possession financing.3,4
Further, in a report published by JD Power, the overall satisfaction for mail-order pharmacies have been rising, and community chain drug stores have seen a decline in satisfaction that is below the brick-and-mortar average. The reason for the decrease is seen in long wait times, lower levels of trust in pharmacists, and difficulty in ordering prescriptions. The top mail-order pharmacies included PillPack by Amazon Pharmacy and Amazon Pharmacy, according to the report.5
However, Walgreens found a growth in sales in the health care sector, with VillageMD sales reaching $1.6 billion, driven by full risk capitation and fee-for-service models. The company is also in conversation with pharmacy benefit managers, payers, and supply partners, to help stabilize the pharmacy margins.1
“The value of the pharmacist has always been present, and when we think back, it's really important to have that relationship, and our independent community pharmacies do this extremely well. They have those conversations, they talk with their patients on a day-to-day basis, [and] they have the ability to share with them how they're able to be that destination for their health,” Brittany Hoffmann-Eubanks, PharmD, MBA, senior manager of clinical pharmacy oversight at Health Mart, in Chicago, Illinois, said in an interview with Pharmacy Times.6
There has also been a push for legislation to expand the scope of practice for pharmacists as well as reimbursement expansions. Washington, California, Oregon, Texas, Arkansas, Pennsylvania, North Dakota, and additional states have successfully adopted or will shortly adopt additional opportunities for provider status for pharmacists. However, even with state level progress, the federal government remains reluctant in issuing guidance, mandates, or including Medicare or other federally funded programs.7
“Because we have about 65 million Americans on Medicare as of March of [2022], it's pretty clear that there's about 15 to 20 million Medicare beneficiaries who live in those [health care provider shortage areas],” Ken Perez, MBA, vice chair of the American Society of Health-System Pharmacists Foundation Board, said in an interview with Pharmacy Times. “This is a huge issue across many states, blue states, red states, it doesn't really matter what color the states are. This is a huge issue and the challenge of not having enough access to primary care physicians is a real one.”8
Perez added that there was opposition from the American Medical Association, citing that “Physician groups would say, ‘This is infringing on our turf. Pharmacists don't do this; this is the work we do.’” But Perez added that because there’s evidence of lack of access to primary care physicians, advocacy is essential for pharmacists and provider status.8
“The advocacy tip is to always connect a cause with a societal problem, and this is what pharmacist’s provider [status] has kind of morphed into or adopted. It has really not just been something about self-interest, but actually about the most important thing, which is the delivery of care,” Perez said. “Advocacy has to tap into societal problems, and the needs of our society, and explain how it's altruistic [and] how it brings value ultimately for patients, and that means access to care for our population.”8
