The nation’s big pharmacy chains are struggling, and Michigan isn’t immune to the fallout.
Retail experts point to several factors that are putting increasing financial pressure on CVS Health, Rite Aid and Walgreens, leading them to close hundreds of stores nationwide over the past few years. Among the culprits: overbuilding, falling drug reimbursement rates and changing consumer tastes.
Most recently, Walgreens said it would close up to 25% of its 8,700 U.S. stores over the next three years. That’s on top of 350 closures since 2019. CVS has closed about 600 stores since 2022 and expects to close 300 more in 2024. Rite Aid filed for bankruptcy in October and has said it plans to close 400 to 500 of its 2,200 stores. Last month, the chain said it was closing 12 of its 186 stores in Michigan, followed by reports that it would shut all of its locations in the state. The chain is shutting its distribution center in Waterford Township in mid-August and laying off 191 workers.
Rite Aid has not responded to numerous requests seeking comment.
What one pharmacy expert calls a “cascade effect” of closures is delivering a cascade of consequences for Michigan communities, including job losses, empty storefronts and a scramble by patients to replace trusted sources of medications. Experts say some communities, particularly Detroit neighborhoods and rural parts of the state, are more likely to become so-called pharmacy deserts where residents have to travel farther to obtain prescription drugs, over-the-counter medications and other health care products.
“Some of our research found that these closures will at least affect access to medications and other health services,” said Dima Qato, director of the University of Southern California pharmacy school’s Program on Medicines and Public Health. “People will stop taking their meds, which could have implications on health disparities.”
The business model of the chain pharmacy store is becoming obsolete, said Ken Dalto, a retail and management consultant in Bingham Farms: “You’ve got telehealth, you’ve got mail-in drugs, the whole front part where they sell non-drugs, that’s being cut into by Amazon, Costco, Walmart.
“So the idea of a drugstore being viable between … the big box selling goods, the electronic Amazon and the fact that the prescriptions are no longer just picked up in a brick-and-mortar store. So this is a tidal wave, and it’s probably going to mean the end of overpopulated, overbuilt drug stores.”
Mark Glasper, CEO of the Michigan Pharmacists Association, points to the industry’s struggle with low reimbursement from pharmacy benefit managers and insurance companies.
“(Pharmacy benefit managers) will negotiate the prices with drug manufacturers,” he said. “They’ll determine how much you pay out of pocket and how much the pharmacy gets to dispense the drug. And typically that amount is less than what the pharmacy even paid for the drug to begin with. And so it’s that low reimbursement that is really putting the pinch on pharmacies.”
Widespread impacts
The closures of pharmacies have an impact on a variety of communities, Glasper said, including in small towns where pharmacies can be few and far between: “In some of the rural areas of Michigan, (store closures) can create what we call pharmacy deserts, which is a void of health care services provided by pharmacies.”
Demand for pharmacists was expected to increase 3% through 2032 in certain health care settings such as hospitals and clinics, according to a 2022 U.S. Bureau of Labor Statistics outlook. However, a drop in pharmacist jobs in retail pharmacies and supermarkets was expected because of industry consolidation and as more people fill their prescriptions online or by mail, according to the outlook.
“Nobody likes to see anyone unemployed,” Glasper said. “It’s bad for the individual. They’re losing their livelihood. It’s bad for the economy. So we certainly don’t like to see pharmacists and pharmacy techs losing their positions. Hopefully there’s employment to be gained for them. But it’s a fairly saturated market out there for pharmacists and pharmacy techs, and it could be difficult for them to find jobs.”
Since 2021, CVS has closed 20% of approximately 45 stores in Macomb County.
In addition to the 12 Michigan pharmacies Rite Aid announced would close, workers at several of the chain’s stores in the state say they’ve been told their locations will close.
Among them is Brenda Vazquez, a 52-year-old pharmacy technician at a Rite Aid in Caledonia. Vazquez, who has worked for the chain for 12 years, said she was informed that her store would close Aug. 5.
“We were upset because it’s actually a pretty busy pharmacy,” she said. “It’s a pretty busy store. It’s a smaller store, but we were doing somewhere around 1,200 scripts a week, which is kind of busy for a store our size. We were pretty surprised, pretty upset.”
Vazquez said she expects to collect severance pay, which she’ll receive if she stays until the last day. She said she and her coworkers are waiting for an official two-week notice from the company.
“That doesn’t leave a lot of time for interviews,” she said. “And plus on top of the market being saturated with retail employees, pharmacists.”
When the store closes Vazquez said she will go full-time at her current part-time job as a veterinary tech and look for part-time work elsewhere. In the meantime, Vazquez said she and her colleagues are helping customers prepare to move to other pharmacies.
“What we’d like to do is get our patients as set as possible on their medications to get them by for two or three months because the initial influx of scripts to the area pharmacies is going to be a nightmare,” she said. “And the patients were already upset that they’re having to leave the pharmacy they want, that they trust.”
The upcoming Rite Aid closures come as no surprise to John Cakmakci, president of United Food & Commercial Workers Local 951.
“This company’s been kind of struggling for a while,” he said. “And I think the opioid settlement was kind of a beginning of the end, so to speak. That probably put them over the edge.”
Cakmakci said the union is working to help find employment for Rite Aid clerks and pharmacy techs who will be displaced. Local 951 represents 29,000 workers in Michigan, including Rite Aid clerks and pharmacy techs in southwest Michigan.
While the state’s unemployment rate is low — at 3.9% as of May — the workers’ main concern is keeping their health care benefits, Cakmakci said: “Eventually, it will cease to exist for them, and then they’ll have to find coverage elsewhere. But that’s probably the biggest concern they got, is finding health care.”
A neighborhood’s loss
The loss of a pharmacy is more than access to prescriptions, said Qato, also an associate professor at USC. It’s an inconvenience for customers who lose access to services including vaccinations and non-prescription essentials such as over-the-counter painkillers and contraceptives.
In one eastside Detroit neighborhood, the recent closure of a CVS pharmacy at Van Dyke and East Outer Drive means the loss of retail shopping for residents.
“We are all very concerned about … the loss of the CVS, not only for the pharmacy, but it was like a general store,” Detroit resident Pat Bosch said. “You could go there for candy, over-the-counter medications, Tylenol, allergy pills. Even they carried computer cartridges. And then they added UPS service. And then they had, at one time, they had photo developing where you could get digital prints in less than an hour. So the loss of all those services, not just the pharmacy.”
Bosch, 83, has lived in the Nortown neighborhood on the city’s northeast side for more than 70 years. In that time she’s seen a lot of change in the neighborhood, where she also serves as executive director of Nortown Community Development Corporation.
“Certainly, the loss of the pharmacy at CVS and the closure of the entire store does not help us any for sure because that is a major cross-street corner, and it’s highly visible, and so it’s more than just an empty storefront,” she said. “It becomes a concern, because we are also very uptight about what it could be after now that CVS has closed.”
Bosch figures she’ll drive to a Walgreens that sits about a mile and a half north on Van Dyke at Nine Mile in Warren. That is if that store remains open.
In an email to The Detroit News late last month, Walgreens said 25% of its stores are not contributing to its long-term strategy.
“We’re finalizing an optimization program that we expect will include closing a significant portion of these locations over the next three years,” the statement read. “We are also taking a series of actions and making investments to enhance the customer and patient experience. While we cannot announce any specific closures right now, when we make the decision to close a store, we have processes in place to ease the transition for the communities affected.”
Pharmacy closures tend to occur disproportionally and have a greater impact on Black and Latinx neighborhoods, which tend to have a larger number of patients on Medicaid or Medicare, Qato said.
“For some of these larger chains, some of these stores may not be as profitable because they’re serving a largely Medicare or Medicaid population, and Medicaid reimburses pharmacies less for prescriptions that they dispense than commercial insurance,” she said. “So the profit margins are much smaller for pharmacies serving neighborhoods that are disproportionately Medicaid or Medicare.”
The closure of the CVS on Van Dyke this spring came several months after a Rite Aid store in the same ZIP code closed. Qato noted that CVS has its own PBM, Caremark, with a large market share in Michigan.
“That’s the cycle, a cascade,” Qato said. “That CVS opened, made all the Rite Aid customers go to it because it’s preferred. But now that CVS is closing, so where are people going to go? Two miles, three miles, maybe?”
The closure of the buildings is going to leave empty real estate behind, Dalto said. The average chain pharmacy building is about 13,000 square feet. The buildings are too large for smaller retailers, such as a clothing store, and too small for other such uses as an online fulfillment center or an entertainment venue. And there will be too many vacant sites all at once.
“There’s no quick fix here because there’s too many,” he said. “Other drugstores 15 years ago, 10 years ago, when a CVS went down, a Walgreens would go in. When a Rite Aid went down, a CVS would go in because they were not cutting like this. They were in decent shape. So the problem is that when you cut this many stores, say about at least 70% of them are going to be vacant for a good long time.”
Some previously shuttered pharmacy sites may see reuse sooner than others. For example, one former Rite Aid store on Harper Avenue in St. Clair Shores prominently displays signage that a Clean Express Auto Wash will be “Washing Soon!”
Bosch said she plans to write CVS Health corporate offices to ask them about what they plan to do with their empty store on Van Dyke. She said she’d like to see it become a space for the community, a marketplace.
“I always think in terms of collaboration and community use,” she said. “So something positive. I know we do not want it to be anything to do with cannabis or liquor or hookah shops. And that corner is big enough where we could do something like Six Mile and Livernois where you have outdoor eating when the weather is compatible. That would be a good, positive community element.”
An independent option
In the midst of the chain closures, some independent pharmacies in Michigan have put the word out that they are an option for patients who need a new place to get their prescriptions.
Central Drug Store in Charlevoix posted a message on Facebook for customers to consider their pharmacy in the wake of the upcoming of Rite Aid closures. The pharmacy has been in business in the town along Lake Michigan for 127 years.
“You can really evolve and really get to know the patients, really involve that patient-pharmacist relationship, and I think that’s what sets the independent pharmacy apart,” said Jeff Steffey, who has owned the Central Drug Store since 2018. Steffey and his wife, Michele, also own The Medicine Shoppe Pharmacy, which they opened in Grayling in 1999.
“The real benefit of being an independent pharmacy is that the owner is very closely involved with the operations of the store,” he said. “The owner typically will be the pharmacist on the bench. We enjoy patient care. We get to do what we were trained for. We get to provide patient care.
“There’s some great pharmacists and great pharmacy technicians working for the chains, but they’re put in a situation by chain management or chain ownership that just makes it very difficult for them to be able to practice the way that they would like to,” Steffey said. “The staffing levels just aren’t what’s reasonable.”
Steffey says he understands the challenges of operating a pharmacy with the current state of low reimbursement rates.
“That’s why we’re seeing the chains close is because of reimbursement,” he said. “Reimbursement is just broken right now. It’s just very difficult, and it’s not only difficult for the pharmacies, it’s difficult for the patients because some of the copays are just ridiculous, and it really stands in the way of good patient care.”
Source: The Detroit News
