By Neil Owens, PhD

The pharmacy industry is undergoing a seismic shift, with major players like Walgreens, CVS, and Rite Aid announcing significant store closures due to profitability issues. This trend is not just a concern for these large chains but also for independent pharmacies struggling to stay afloat.

The Wave of Pharmacy Closures

Pharmacy closures has been a common trend over the past five years as pharmacies are struggling to stay profitable as sales decline, reimbursements for prescriptions dwindle, and consumer habits continue to evolve.

Walgreens' Announcement

On October 15, 2024 Walgreen’s announced that it will be closing 1,200 of its 8,700 stores over the next three years, with 500 set to be closed in 2025 alone. Despite its widespread presence, Walgreens is grappling with ongoing profitability challenges. This decision will significantly impact smaller towns and areas outside major cities, where pharmacy options are already limited.

CVS Closures Continue

Similarly, CVS announced in 2021 it was planning to close 900 – or 10% of its stores. CVS has closed nearly 600 stores since 2022 and has been working to close the remaining 300 this year. 

Rite Aid and Independent Pharmacies

Rite Aid is also facing similar challenges, having declared the closure of 154 stores as part of its bankruptcy proceedings. Independent pharmacies are not immune to these issues either, with many struggling to maintain a sustainable business model due to low or negative profit margins associated with filling prescriptions.

Why Pharmacies are Struggling

For decades, independent pharmacies have faced immense challenges in staying afloat. Competition from large chains, shrinking reimbursement rates from insurance companies, and the rise of big-box retailers have contributed to their decline. Many have struggled to survive, with thousands closing over the years.

What’s alarming now is that even the major pharmacy chains—once seen as invincible—are beginning to struggle. So what's causing this?

Low Reimbursement Rates

Despite the high cost of medications, the profit margins for pharmacies are smaller than ever. Pharmacy benefit managers (PBMs), who own many of the big chain pharmacies, are responsible for negotiating the price of medications with manufacturers. They're also responsible for deciding what a patients out-of-pocket costs are and how much the pharmacy should be reimbursed. Today, margins and reimbursement rates are very low, and often don’t cover the cost of dispensing medications, creating negative profit margins for pharmacies. This financial strain is a major factor contributing to the difficulties pharmacies are experiencing, making it harder to sustain operations. (See also: the Real Cause of High Drug Prices).

Long Wait Times and Poor Customer Service

Pharmacy staff are facing overwhelming workloads, leading to employee walkouts, increased wait times, and customer dissatisfaction. This creates a challenging environment where both staff and customers are unhappy, compounding the difficulties these businesses face.

Changing Consumer Habits

As consumers increasingly turn to online shopping, big chain pharmacies have seen a drop in sales, especially over-the-counter products. This shift has been further fueled by the rise of online pharmacies, which are steadily capturing market share, particularly for high-margin, high-profit medications that retail chains have traditionally depended on.

Pharmacy Deserts: A Growing Problem

As more big chain pharmacies close, the rise of pharmacy deserts has become a significant issue in the U.S.

Pharmacy deserts refer to areas where access to pharmacies is limited or non-existent, especially in low-income and rural communities. These areas are disproportionately affected when pharmacies shut their doors, leaving residents with few or no options for filling their prescriptions, obtaining medications, or accessing essential health services.

Pharmacy deserts can have severe consequences for those relying on medications for chronic conditions like diabetes or hypertension. In many cases, the nearest pharmacy might be several miles away, requiring long trips that can be costly or difficult for individuals with limited transportation.

The closure of chain pharmacies in these areas, which often affects neighborhoods where many residents are on Medicare or Medicaid, further worsens the problem. As more stores close, the accessibility gap widens, leaving vulnerable populations at greater risk of not receiving timely care​.

Marley Drug: A Viable Solution

As large pharmacy chains continue to close and customers face rising prices and complex insurance claims, we at Marley Drug provide an alternative. In today’s market, where convenience and affordability are key, we aim to fill the gap with a streamlined, customer-focused experience.

Fast Home Delivery and Simple Prescription Filling

In response to these industry challenges, we offer fast home delivery, ensuring our customers avoid long wait times and the frustrations of navigating insurance claims (see our recent customer survey results). Our prescription filling process is straightforward, and our dedicated customer support team is here to cater to your individual needs. We've even won awards for our customer service!

Competitive Pricing Without the Insurance Hassle

We price our medications based on what it costs us to buy them. Our prices are not determined by your insurance. This model cuts out pharmacy middlemen, which contribute to the high cost of medications. Surprisingly, this model of often lower than your insurance co-pay. By eliminating the hassles of insurance, we aim to create a smoother, more satisfying experience for everyone.

Getting Started with Marley Drug

If you haven’t tried our services yet, we invite you to set up an account at marleydrug.com. You’ll find detailed information on how to transfer prescriptions and take advantage of our convenient home delivery service. We're here to make it easy for you to get started.