Grocery stores have rarely viewed pharmacies as profit-drivers, but rather as an amenity that will make customers more likely to choose them
The pharmacy business is increasingly consolidated, both in terms of ownership and location. Simply put, the total number of pharmacies is declining, driven largely by a decline in the number of grocery stores with pharmacies.
For the first time in recent memory, the number of grocery pharmacies decreased in 2017, from 9,344 to 9,026.
Numerous factors are driving the decline. An increasing number of customers are getting prescriptions by mail from services such as Amazon's PillPack. Others are simply getting longer-term supplies that don't require them to refill every month.
But perhaps the most important factor is the consolidation of the pharmacy industry. Walgreens and CVS accounted for more than 40 percent of all prescription revenue in 2018, according to data collected by Drug Channels Institute.
The retail giants are able to negotiate better deals with insurers and pharmacy benefit managers. This allows them to offer customers lower prices than neighborhood competitors.
Grocery stores have rarely viewed pharmacies as profit-drivers, but rather as an amenity that will make customers more likely to choose them for groceries. The same is largely true of convenience stores.
However, the numbers have apparently shifted enough that grocers no longer think it's worth it to continue with the pharmacy business. From their perspective, at least they're only losing out to convenience stores, rather than competing grocers.
"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," Keith Knopf, chief executive of Raley's, tells the Wall Street Journal.
Even the giants are consolidating, shedding underperforming pharmacies. The Wall Street Journal reports that Walgreens and CVS have either closed or are in the process of closing 300 stores throughout the country in recent years.
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