Drug shops across the United States are struggling. Especially Walgreens.
Walgreens’ inventory has plunged greater than 80% over the previous 5 years, rating the corporate among the many worst-performing shares throughout that stretch. It’s closing 1,200 shops, roughly 15% of its places. And now Walgreens is reportedly seeking to escape the general public market.
Walgreens and personal fairness agency Sycamore Partners are discussing a deal to take Walgreens non-public, the Wall Street Journal reported Tuesday. The corporations declined to remark to CNN on a possible deal.
Walgreens’ downside, before everything, is that it’s extra of a conventional pharmacy than CVS.
Walgreens has slipped behind CVS as a result of it’s smaller than CVS, giving it much less scale to barter costs with insurers and different well being care entities that pay for many of the prescriptions folks decide up. Walgreens can be extra reliant on filling prescriptions by means of its pharmacy enterprise and promoting snacks and family necessities than CVS, which has made a push into well being care companies. Both the pharmacy enterprise and the retail enterprise are struggling for various causes.
Profits from the pharmacy enterprise have dropped lately as reimbursement charges for prescribed drugs fall. The costs clients pay for medicine and the funds pharmacies obtain are largely decided by corporations referred to as pharmacy profit managers, or PBMs, which negotiate rebates from drug producers to insurers. PBMs have been slicing reimbursement charges to spice up their very own earnings.
The entrance finish of drug shops, which provide snacks and family staples, have turn into much less worthwhile as consumers purchase extra of these things on-line from Amazon, and at big-box chains corresponding to Walmart and Costco. Walgreens will get 26% of its US retail pharmacy gross sales from its front-end enterprise, in comparison with 21% of gross sales at CVS.
CVS faces these identical challenges, but it surely has expanded additional into the extra profitable well being care enterprise by means of mergers with insurer Aetna and its personal pharmacy profit supervisor Caremark. CVS’ points with its pharmacy and retail companies have been offset by its insurance coverage and PBM enterprise.
According to the Federal Trade Commission, almost 80% of all prescriptions crammed are managed by simply three corporations: Cigna, CVS and UnitedHealth.
To be certain, CVS is struggling too, closing greater than 1,000 shops lately. It changed its CEO earlier this yr and is contemplating splitting up the corporate.
A brand new research printed within the journal Health Affairs exhibits that pharmacy closures are an issue throughout the US and may have critical well being penalties.
