In cities across the U.S., regional supermarkets are shutting down or selling their pharmacy departments, following the same trajectory as small family-owned and independent drugstores. The closures come as consumers increasingly are filling their prescriptions by mail or at drugstore chains like CVS and Walgreens, which tend to be connected to large insurers and negotiate competitive reimbursement rates on drugs.
In the 1980s and 1990s, many grocery stores added pharmacy counters to entice shoppers and increase profits, with these drugstores accounting for about 14% of retail pharmacy prescriptions, according to the National Association of Drug Stores. In 2017, the number of supermarket pharmacies in the U.S. declined for the first time in years, to 9,026 from 9,344 in 2016.
CVS and Walgreens are the industry’s largest contributors, accounting for more than 40% of U.S. prescription revenues in 2018. Their drugstores offer walk-in clinics with services such as blood testing and chronic disease management. Still, the two companies have closed more than 300 underperforming locations as a result of smaller profits in prescription medicines and online shopping.
California-based Raley’s Supermarkets closed about one-third of its 100 pharmacies last year due to low prescription rates and high operating and labor costs. “There is the benefit of having a pharmacy relative to the grocery-sale lift and the convenience factor of having both in the store, but the economics do not work,” said Keith Knopf, CEO of Raley’s.
Lunds & Byerlys, a grocery store chain in Minnesota, also shut down all 14 of its pharmacies last year, transferring its prescription records to Walgreens.