Walgreens, CVS, and Rite Aid: Rejoinding to Consumer Trust in a Retail Pharmacy-Led Company
The pharmacy chain Walgreens intends to close 1,200 stores over the next three years. It is part of the plan for a turnaround as it faces retail competition and lower prescription payouts.
On Tuesday, Walgreens CEO Wentworth said his chain is “reorienting to its legacy strength as a retail pharmacy-led company.” The merger of Caremark and Aetna is thought to be the cause for the break-up of the company.
The differences are notable between Walgreens and CVS. Walgreens is more focused on its pharmacy business than on its other businesses. Through mergers with an insurer and a pharmacy benefit manager, the company expanded into health care. Two companies made similar mistakes.
Walgreens isn’t the only big pharmacy chain attempting a turnaround. Last month, pharmacy benefit management company Rite Aid emerged from Chapter 11 and the drugstore chainCVS also closed stores, but is weighing a break-up of its business deals.
“Historically, there was a view that there was a lot of customer loyalty to their specific retail pharmacy … and that patients, or consumers, would be all up in arms if they were forced to move their prescriptions,” says Brian Tanquilut, health care services analyst at the investment bank Jefferies.
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“I’m very confident that over a two- to three-year period we will have reset the framework for reimbursement discussions,” Wentworth told investors on Tuesday. We are in the early stages of a project that will take time to complete.
He said 1,200 of those stores will close in three years. The layoffs of 2,900 corporate staff by rivalCVS were announced two weeks ago. Both chains are on a multi-billion-dollar cost-saving spree – closing hundreds of locations, cutting thousands of jobs and, really, reconsidering their role in Americans’ lives.
Stores that are chronically under staffed and products that are locked up to stop theft are what shoppers complain about. The shelves of snacks, makeup, greeting cards and cleaning products were meant to boost profits. Sales have fallen over the years due to a battle withAmazon,Walmart,Costco and dollar stores.
The chains have failed to add new incentives for shoppers, beyond printing photos or dropping off shopping returns, says Anshuman Jaiswal, a longtime consultant to retailers and pharmacies. And neither chain has built a meaningful online presence designed to give customers what they need.
If you go to either of those places and place an order for cough syrup, why don’t I sell chicken fat as a product recommendation? Jaiswal says. It’s about changing the business model.
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CVS, Walgreens and ExpressScripts: Amenable Alternatives to Primary-Care Clinics? The Case for New Structures
Walgreens got into a public fight with Express Scripts that worked with major health insurers, testing this theory over a decade ago.
Over the years, CVS and Walgreens attempted to reframe themselves as health care hubs, expanding primary-care clinics. But these operations cost time and money.
The companies are hoping that new structures for how they are paid to fill prescriptions will be the big shot in the arm they need.