Both Walgreens and CVS Health have recently announced plans to shutter locations and lay off employees, further evidence of the changing landscape in the retail pharmacy space.
The closures come in the wake of Walmart Health's shuttering of all 51 of its health center locations after failing to establish a sustainable business model despite positive patient feedback.
Here's what you need to know:
Walgreens
Walgreens will close 1,200 locations over the next three years, the company said in its Oct. 15 fiscal fourth-quarter earnings report. The closures include 500 in 2025 and 300 of the store closures that had been approved under a previous cost-cutting plan.
Walgreens Boots Alliance CEO Tim Wentworth said the closures will give the company a "healthier store base" and "will enable us to respond to shifts in consumer behavior and buying preferences," according to an Oct. 15 earnings call transcribed by Seeking Alpha.
In June, Walgreens Boots Alliance finalized its turnaround plan to close underperforming stores and reduce its stake in primary care chain VillageMD, which it acquired in 2021 in a $5.2 billion deal.
Walgreens is also considering selling its entire stake in VillageMD, according to an Aug. 7 Securities and Exchange Commission filing. The company is "currently evaluating a variety of options with respect to VillageMD in light of ongoing investments by the company in VillageMD's businesses and VillageMD's substantial ongoing and expected future cash requirement."
VillageMD has also announced plans to pull out of several states in 2024, including Illinois, Indiana, Florida and Nevada. It closed six clinics in Illinois, 40 in Florida, 12 in Indiana and six in Nevada are set to close by the end of the year. Additionally, VillageMD also sold 11 clinics in Rhode Island to Boston-based management company Arches Medical Partners in March.
Walgreens' VillageMD's value-based care model includes a fixed fee per patient, but it requires substantial patient resources, which Walgreens doesn't have, The Wall Street Journal reported July 5. Another roadblock for Walgreens is that it doesn't have an integrated insurance company.
CVS Health
CVS Health's Coram is planning to close or sell 29 regional pharmacies and discontinue its infusion services offerings for antibiotics, inotropic medications, total parenteral nutrition and other acute home infusion therapies.
The company has not planned any layoffs for Coram, the company told Becker's in a statement. Impacted staff will be informed in mid-November and potential reductions will not be occurring until late January.
Additionally, CVS Health CEO and president Karen Lynch has stepped down and will be replaced by David Joyner effective Oct. 17. As part of the leadership transition, CVS issued preliminary guidance for the third quarter, with diluted earnings per share projected at $0.03 to $0.08, and adjusted EPS estimated between $1.05 and $1.10.
"Results for the third quarter include charges to record premium deficiency reserves, primarily related to the company's Medicare and individual exchange businesses inside its healthcare benefits segment, of approximately $1.1 billion, which lowered third quarter 2024 adjusted EPS by $0.63," the company said in a news release. "The PDRs are expected to be substantially released during the fourth quarter of 2024, benefiting results in that period."
The move comes as CVS Health, one of the biggest players in the battle to acquire physicians, faces major financial struggles. CVS Health's board of directors have retained bankers to review the company, possibly leading to a split, according to The Wall Street Journal. The company share price has fallen 24% in 2024 and CVS has cut its earnings guidance multiple times during the year.
At the end of September, CVS announced plans to lay off 2,900 employees, primarily in corporate roles, at the end of September. The company will also lay off 416 employees at Aetna's headquarters in Hartford, Conn., and 632 employees in its corporate headquarters in Woonsocket, R.I.
In February, CVS Health closed 25 of its MinuteClinic locations across Los Angeles to ensure patient and consumer demands align with its healthcare delivery strategy.
CVS closed on its $11.5 billion acquisition of Oak Street Health in May 2023 and has since made efforts to dive into primary care.
According to the Journal, CVS Health was aiming to emulate the success of UnitedHealth Group, which owns Optum, the country's largest employer of physicians. But CVS' earnings have disappointed investors and in May, Bloomberg reported that CVS Health is seeking an investor to fund the expansion of Oak Street. According to the report, clinics like Oak Street tend to lose money in the first few years of operating as they acquire patients for the joint venture.