CVS Health Corp. announced on Thursday that it will be closing some of its pharmacies located within Target Corp. stores in an effort to streamline its operations and focus more on providing health services. The closures are expected to occur from February to April, although the company has not disclosed the exact number or locations of the affected pharmacies.
According to The Wall Street Journal, dozens of pharmacies will be closed as part of this initiative. However, CVS Health has assured that patient prescriptions will be transferred to nearby CVS pharmacies prior to the closures. Employees who are impacted by the closures will be offered comparable roles within the company.
The decision to close these pharmacies is part of CVS Health’s strategy to realign its national retail footprint and reduce store and pharmacy density. This move is based on their evaluation of changes in population, consumer-buying patterns, and future health needs. By ensuring that they have the right pharmacy format in the right locations for patients, CVS Health aims to better serve its customers.
Target, the host of these CVS pharmacies, declined to comment on the matter. CVS currently operates nearly 1,800 pharmacies within Target stores nationwide.
Following the announcement, shares of CVS Health saw a slight increase after hours, recovering from a 0.4% decrease during regular trading. Target shares remained unchanged after hours, following a 1.4% decline in the regular session.
The Changing Landscape of Pharmacies
As the COVID-19 vaccine demand wanes and prescription-related payments from insurers and benefit managers decrease, pharmacies have been struggling to maintain profitability. Notably, pharmacies have also faced challenges such as understaffing and a higher risk of mistakes.
CVS, one of the leading pharmacy chains, has been proactive in adapting to these changes. In 2018, CVS acquired Aetna, a health-insurance provider, in an effort to expand into health services. Additionally, CVS has established health clinics and introduced a new pharmacy reimbursement model. However, in July of this year, it was reported that CVS planned to cut around 5,000 jobs. Furthermore, CVS recently announced its decision to close approximately 300 stores per year for the next three years.
Similarly, Walgreens has been facing financial challenges and has taken steps to address them. In an effort to conserve cash, Walgreens recently slashed its dividend. During the chain’s quarterly earnings call, Chief Executive Tim Wentworth acknowledged that customers were actively seeking value and recognized the “structural headwinds” in their core pharmacy business. Wentworth emphasized the importance of taking immediate action to optimize costs and increase cash flow throughout the company. He expressed confidence in achieving $1 billion in cost savings this year.
In conclusion, the pharmacy industry is undergoing significant changes as they adapt to evolving market conditions. By implementing strategies such as expanding into health services and streamlining operations, pharmacies like CVS and Walgreens aim to overcome these challenges and ensure their long-term success.
