Pharmacies seek to renew their image

U.S. pharmacies have been testing smaller locations and more ways to deliver care as price-conscious customers look elsewhere.

Customers could find Walgreens pharmacies a quarter of the size of the average store, or CVS pharmacies, with full primary care clinics inside.

If these experiments are successful, the new pharmacies could improve access to health care and create longer-lasting relationships with customers, analysts say.

“Everyone looks at health care and says, ‘Oh yeah, that’s a market that’s ripe for disruption,’” said Neil Saunders, managing director of data analytics and consulting firm GlobalData. “But it’s not easy to disrupt.”

Walgreens CEO Tim Wentworth recently said his company could close “a significant portion” of underperforming stores in the coming years.

CVS Health is currently undergoing a series of closures. Rite Aid has filed for bankruptcy. Thousands of independent pharmacies have closed in the past five years.

The closures have left gaps: An Associated Press analysis published in June found that majority-black and Hispanic neighborhoods have fewer pharmacies per capita than majority-white ones.

There are still more than 30,000 pharmacies nationwide, but even Walgreens executives admit the market is oversized.

Stores have struggled with increased competition from Amazon and cheaper options such as Walmart and Dollar Tree. They also face theft, rising costs and lower prescription reimbursements.

Some chains are responding with a new look. Walgreens has tested a Chicago location that features digital kiosks where customers can place orders. A separate table offers pickup of items ordered at the kiosks or online.

The company has also opened nearly 100 health- and wellness-focused convenience stores that sell private-label merchandise. Walgreens began testing these locations in 2019 and plans to add several more this year.

Walgreens spokesman Jim Cohn said consumer preferences are changing and the company aims to “address them where, when and how they want to shop.”

Saunders says these locations are less expensive to run and allow the company to serve areas where there aren’t enough people to justify a larger location.

At one such location in Indianapolis, only four short aisles separate the front door from the pharmacy counter in the back. Healthy snacks, vitamins, first aid supplies and the usual mix of antacids and Advil fill the shelves.

But there are no magazines, just a small selection of greeting cards and beauty products at the store, which is closed on Sundays and is 0.5 miles from an empty Walgreens.

Leonard King has visited her several times. He says her prescriptions are filled on time and the pharmacy appears to have adequate supplies.

“Because I’m diabetic, it’s sometimes difficult for me to get my medicines,” said the 67-year-old Indianapolis resident.

But King also says she misses being able to buy things like toiletries, which can be found in larger stores.

The retail selection is also smaller at some CVS Health locations, including Oak Street Health primary care clinics. The company plans to open 25 of these combinations this year and 11 more next year, with full or smaller clinics at the locations.

Clinics may include primary care physicians, social workers and people who help with insurance coverage. They specialize in treating patients with Medicare Advantage plans, which are private versions of the government-run coverage program, primarily for people age 65 and older.

CVS Health says its clinics will be located in areas where primary care is needed. In its initial launch, it will target large cities such as Chicago, New York and Dallas.

“If we can invest more up front for patients in need, by increasing access and improving quality of care, we can keep patients healthier,” said Mike Pykosz, a company executive.

Making things easy for patients helps build relationships between store staff and customers and can lead to repeat customers, said Arielle Trzcinski, a senior analyst at Forrester who covers health care.

Independent pharmacies have also been improving their reputation for health care. They are expanding vaccinations and testing, driven in part by the surge in business that occurred during the Covid-19 pandemic, said Kurt Proctor of the National Community Pharmacists Association.

Some of them also include medical offices or specialize in diabetes care. Proctor said they are doing what they have always done: adapting to the needs of the community.— AP

“There are 19,000 (independent) pharmacies across the country, and no two are exactly alike,” he said.

Getting involved in health care is nothing new for pharmacies. They began adding small clinics more than 20 years ago. CVS Health has been involved in health issues since it stopped selling tobacco in 2014.

As many as a quarter of pharmacies could end up having large health clinics, especially those in densely populated areas, said Jeff Jonas, a portfolio manager at Gabelli Funds, which tracks the industry.

However, he cautioned that the idea is not yet proven.

Walgreens closed VillageMD primary care clinics just a few years ago after putting plans in place to add hundreds of them to its locations. Analysts say companies are still learning what makes money and resonates with their customers.

One thing they know for sure: Drugstores are no longer “America’s convenience destination” as they used to be, Saunders said.

“This has actually been brewing for the last 15 years,” he said.