America’s pharmacies are testing smaller locations and more ways to deliver care as price-sensitive shoppers look elsewhere.
Customers can see Walgreens stores that are a quarter the size of a regular location or CVS Pharmacy with all the major clinics packed inside. If these experiments succeed, the new stores could improve access to care and create a more lasting connection with customers, analysts say.
“Everybody looks at health care and says, ‘Oh yeah, it’s a market that’s ripe for disruption,'” said Neil Saunders, managing director of consulting and data analytics firm GlobalData. “But it’s not easy to screw up.”
Walgreens CEO Tim Wentworth said recently that his company may close a “significant number” of underperforming stores in the coming years. CVS Health is going through a round of closings. Rite Aid has filed for bankruptcy. Thousands of independent pharmacies have closed over the past five years.
Closures can leave gaps: An Associated Press analysis published in June found that urban neighborhoods that are majority black and Latino have fewer pharmacies per capita than neighborhoods that are majority white.
There are still more than 30,000 drugstores scattered across the country, but even Walgreens executives admit the market is overcrowded.
The stores have struggled with increased competition from Amazon and lower-priced options like Walmart or Dollar Tree. They are also dealing with theft, rising costs and thinner prescription reimbursement.
A customer browses the first aid aisle at a Walgreens drug store in Deerfield, Ill., Thursday, July 25, 2024. Credit: AP/Nam Y. Huh
Some are responding with new looks. Walgreens is testing a store in Chicago that has digital kiosks where customers place orders. A separate desk offers pickup of items ordered at kiosks or online.
The company also has opened about 100 mini-pharmacies focused on health and wellness and featuring store-brand merchandise. Walgreens began testing these stores in 2019 and plans to add more this year.
Walgreens spokesman Jim Cohn said shopper preferences are changing and the company aims to “meet them where, when and how they want to shop.”
Saunders notes that these stores are less expensive to operate and allow the company to serve areas without enough people to support a larger store.
A Walgreens pharmacy store is seen in Deerfield, Ill., Thursday, July 25, 2024. Credit: AP/Nam Y. Huh
At one such location in Indianapolis, only four short lines separate the front door and the pharmacy counter in the back. Health foods, vitamins, first aid supplies and the usual mix of antacids and Advil fill her shelves.
But there are no magazines and only a small selection of postcards and beauty products at the store, which is closed on Sundays and is about half a mile from an inexpensive Walgreens.
Customer Leonard King has visited several times. He says his prescriptions are ready on time and the store seems well stocked.
“Being a diabetic, sometimes medicine is hard to get,” said the 67-year-old Indianapolis resident.
But King also said she misses being able to buy things like toiletries that can be found in larger stores.
The selection of retail items is also smaller at some CVS Health stores that include Oak Street Health primary care clinics. The company plans to open about 25 of these combinations this year and 11 more next year, with full-size or smaller in-store clinics.
Clinics may have primary care physicians, social workers, and people to help with insurance coverage. They specialize in treating patients with Medicare Advantage plans, which are privately run versions of the government’s coverage program primarily for people age 65 and older.
CVS Health says it is placing the clinics in areas that need primary care. It is targeting major cities like Chicago, New York and Dallas with its initial rollout.
“If we can invest more upfront in patients who need it, increasing access, improving quality of care, we can keep patients healthier,” said company executive Mike Pykosz.
Making things easier for patients helps build relationships between store staff and customers and can lead to repeat business, noted Arielle Trzcinski, a principal analyst at Forrester who covers healthcare.
Independent pharmacists have also polished their health care reputation. They are expanding immunizations and testing, driven in part by the increase in business they saw during the COVID-19 pandemic, said Kurt Proctor of the National Association of Community Pharmacists.
Some are also adding doctor’s offices or specializing in diabetes care. Proctor said they’re doing what they’ve always done: adapting to the needs of the community.
“There are 19,000 (independent) stores across the country and none of them are exactly the same,” he said.
Immersion in healthcare is not new for pharma. They started adding small clinics more than 20 years ago. CVS Health has been on a health kick since it stopped selling tobacco in 2014.
As many as a quarter of dispensaries could eventually close with large health clinics, especially those located in densely populated areas, said Jeff Jonas, a portfolio manager at Gabelli Funds who follows the industry.
But he cautioned that the idea is still unproven.
Walgreens has closed VillageMD primary care clinics just a few years after launching plans to add hundreds to its stores. Analysts say companies are still learning what makes money and what resonates with customers.
One thing they know for sure: drugstores are no longer “America’s cozy destination” like they used to be, Saunders said.
“That really, over the last 10 to 15 years, has softened,” he said.