As Americans, we often take access to a pharmacy for granted. But for many, accessibility to a pharmacy, particularly in rural areas, can be difficult. In order to meet demands, both Walgreens and CVS recently announced the closure of multiple pharmacy locations in the United States. Here are the facts you need to know about the pharma giants’ decision to close a large number of stores.

Background Behind the Closures

Walgreens and CVS have both experienced difficulties over the past few years as more consumers have turned to online sources to purchase their medications. This shift, combined with lower reimbursement rates from insurance companies, has led to a decline in overall sale. This has, in turn, caused both companies to reevaluate their strategies, leading to the decision to close several stores nationwide.

The pharmacy market has had to adjust to other changes that have taken place, including competing forces from grocery stores and Wal-Mart, which has been increasingly stealing market share, especially in the rural market. According to analysis from Jonathan Rothschild, an analyst at Jefferies LLC, “It’s always been a battle between chain pharmacies and more localized pharmacies. Now, the battle has shifted and it’s primarily focused between the chain pharmacies and Wal-Mart.”

Walgreens is Closing 9.7% of US Pharmacys

As of February 1st, 2019, Walgreens has announced that they will close 200 stores across the United States. Most of these stores are located in rural areas of the country, with a majority located in the midwest. This decision comes as the company seeks to cut costs in order to maximize efficiency and remain profitable. The closures will represent 9.7% of all of the company’s stores in the US.

CVS Closing 13.7% of US Pharmacy

CVS, the nation’s largest pharmacy chain, has similar plans to Walgreens. The company recently announced that it would close 46 stores across the United States, representing 13.7% of its store locations. The majority of these closures will occur in states located in the midwest.

No cause for Panic – There’ll still be a Pharmacy in Your Area

Despite the closures, there’s no need for a panic as there are still plenty of pharmacies nearby for customers to access their medications. In fact, CVS and Walgreens combined still operate over 11,000 stores in total. Further, the companies have announced plans to open over 600 new stores in more efficient locations, other than the closing stores. The new locations will create more efficient store footprints and allow the companies to optimize their store layouts and experiences in more dense, urban areas.

Exploring Alternatives to Store Closings

Rather than close stores, many companies in the industry are exploring alternative solutions. For example, Walgreens is working on ways to reduce dispensary costs, such as its online pill-picking robot, which is aiming to reduce labor costs associated with the filling of prescriptions. Likewise, CVS is expanding into new business opportunities, such as health and wellness services, in an effort to diversify the company’s offerings. Additionally, the company has recently announced the creation of its own health insurance plan.

Analysis of the Impact of Closures

While many will feel the impact of the closures, it’s important to note that not all of the pharmacies will close at once. Rather, each store will be evaluated on a case-by-case basis. For example, a store that is located in an area where there is plenty of competition will be more likely to close than those in more rural areas or markets with fewer pharmacy options.

Furthermore, it’s unlikely that the closures will cause any major disruption in the industry. Rather, the move will likely be a positive in the long-term, as it will allow the companies to improve their efficiency and profitability. However, it is important to note that the closures will have a direct impact on the people who are employed at the companies, as some employees may be impacted by the shutdowns.

Walgreens and CVS have both announced closures of many of its pharmacy locations across the United States. This move is intended to create a more efficient store footprint and help the companies remain competitive in the industry. Although these closures will have an effect on those employed by the companies, it is unlikely that they will cause any major disruption in the industry, as the companies still have numerous store locations.