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CNN
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Pharmacies in the United States are struggling. Especially Walgreens.
Walgreens shares have plunged more than 80% over the past five years, ranking the company among the worst-performing stocks during that time. It is closing 1,200 stores, or about 15% of its locations. And now Walgreens is reportedly looking to escape the public market.
Walgreens and private equity firm Sycamore Partners are discussing a deal to take Walgreens private, the The Wall Street Journal reported Tuesday. The companies declined to comment to CNN about a potential deal.
The problem with Walgreens, first and foremost, is that it is more of a traditional pharmacy than CVS.
Walgreens has slipped behind CVS because it is smaller than CVS, giving it less room to negotiate prices with insurers and other health care entities that pay for most of the prescriptions people pick up. Walgreens also relies more on filling prescriptions through its pharmacy business and selling snacks and household essentials than CVS, which has branched into health care services. The pharmaceutical sector and retail are struggling for different reasons.
Pharmaceutical sector profits fell in recent years as prescription drug reimbursement rates decline. The prices that customers pay for drugs and the payments that pharmacies receive are largely determined by companies known as pharmacy benefit managers, or PBMs, which negotiate discounts from drugmakers with insurers. PBMs have been reduce reimbursement rates to increase their own profits.
The drugstore front end, which carries snacks and essentials, has become less profitable as shoppers buy more of those items online at Amazon and at big-box chains such as Walmart and Costco. Walgreens generates 26% of its U.S. retail pharmacy sales from its front-end business, compared to 21% of sales at CVS.
CVS faces the same challenges, but it has expanded further into the more lucrative health care sector through mergers. with the insurer Aetna and its own pharmacy benefits manager, Caremark. CVS’s problems with its pharmacy and retail businesses have been offset by its insurance and PBM businesses.
According to the Federal Trade Commission, nearly 80% of all prescriptions filled are handled by just three companies: Cigna, CVS and UnitedHealth.
To be sure, CVS is also struggling, closing more than 1,000 stores in recent years. It replaced its CEO earlier this year and plans separate the company.
A new study published in the journal Health Affairs shows that pharmacy closures are a problem across the United States and can have serious health consequences.
Nearly one in three pharmacies closed between 2010 and 2021, according to researchers. About a third of counties experienced an overall decline in the number of pharmacies, and the risk of closure was higher in predominantly Black and Latino neighborhoods.
Independent pharmacies, which are often excluded from networks by PBMs, were twice as likely to close as chains.
“Our findings suggest that closures may increase health disparities in access to prescription and other essential pharmacy services, such as vaccinations and pharmacist-prescribed medication regimens, including contraceptives, medications for HIV prevention and treatment for opioid use disorder,” said Jenny Guadamuz, assistant. professor at the UC Berkeley School of Public Health, co-author of the study.