Retail pharmacies must reinvent themselves to survive

September 2, 2008

Drug store consolidation leads to increased pressure on retail pharmacies -- and certain drug store chains will not survive

CVS Caremark Corp.’s acquisition of Longs Drug Stores Corp. illustrates the further consolidation of retail pharmacies, believes one industry expert.
“With managed care driving the growth of mail service pharmacy and specialty pharmacy there are fewer prescriptions for retail pharmacies,” Cohen says. “This leads to increased pressure on retail pharmacies, and certain drug store chains will not survive.”

Retail pharmacies are consolidating because of several issues:
• The impact of third-party payers, including Medicare, now on prescription drug reimbursement, which does not allow for chain pharmacies to operate stores that are not profitable.
• The need for retail pharmacists to reinvent themselves to add value in healthcare beyond drug distribution.

“This is a way for CVS to grow its revenue and increase its geographic footprint,” Perry says. “In addition, Longs Drugs is not big enough to go it on its own anymore.”

Megabrand CVS Caremark will buy Longs Drug Stores in a cash deal worth nearly $3 billion. Only the Longs Drugs locations in Hawaii will keep their old branding. Longs has 521 drugstores in California, Hawaii, Nevadaand Arizona and also operates Rx America, a PBM program that services more than 8 million members.