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The third-biggest chain of pharmacies in the United States, Rite Aid, filed for Chapter 11 bankruptcy protection on Sunday. It is expected that the company will liquidate a significant portion of its 2,000 locations.
People will have fewer options on where to fill their prescriptions as a result. That has been the recent pattern in drugstores, and it appears that this trend will continue.
As part of its bankruptcy procedures, Rite Aid may liquidate 400–500 locations, according to a September Wall Street Journal report. (The report has not been verified by the corporation.) Beginning last year and likely to continue into next year, CVS is shutting 300 shops annually. Meanwhile, Walgreens declared in June that it would eliminate roughly 150 U.S. stores by the summer of 2019.
Simultaneously, pharmacists are opening up shops in big box stores and supermarket stores like Walmart and Target, and more individuals are getting their prescription drugs delivered via apps.
The decline of the neighborhood pharmacy
Thus, a customer who reads this news may ask himself, “So what? Nobody enjoys visiting pharmacies.” And that is somewhat the idea.
According to Neil Saunders, managing director of consultancy firm GlobalData, pharmacies have consistently made mistakes. People don’t want to purchase there as a result, which has created several opportunities for competitors.
When you walk into the store, it’s usually poorly lit, kind of depressing, not a lot of excellent customer service, the products are locked most of the time, not enough staff to assist, and the prices are really high compared to other retailers, Saunders said NBC News. “They’re paying the price for all those years of bad choices and underinvestment—they’ve shot themselves in the foot.”
Poor decisions, crushing debt and failed deals
The 60-year-old chain’s bankruptcy filing was expected for a long time due of its terrible financial situation. It has experienced financial losses in each of the last six fiscal years, has begun to close locations in an effort to reduce costs, and was facing a $1 billion charge because of its involvement in the opioid problem.
Similar settlements have been paid by CVS and Walgreens, but Rite Aid had a far tougher time getting one. Despite Rite Aid’s $24 billion in revenues last year, the stock market has valued the company in the tens of millions of dollars in recent years.
One could argue that Rite Aid’s demise stems from its 2007 acquisition of the Brooks and Eckerd businesses. In addition to taking on part of the debt of Brooks and Eckerd’s previous parent firm, the Canadian pharmacy chain Jean Coutu Group, the company borrowed funds to fund the transaction.
Rite Aid had previously consented to be acquired by Walgreens, but the agreement fell through. In the end, Walgreens liquidated nearly 2,000 shops, while Rite Aid made vain attempts to stabilize its operations through other acquisitions.
As of June 3, the corporation owed $3.3 billion in long-term debt.
Rite Aid found it more difficult to make investments in its shops and to enter new markets than its competitors due to its massive debt load. Over the years, CVS has acquired a pharmacy benefits manager and a health insurer, and it currently operates over 1,000 clinics within its retail locations. Both Walgreens and CVS have branched out into various forms of primary care.
However, Saunders claimed that because the healthcare aspects of their businesses have taken precedence over the retail aspects, all three have neglected their storefronts.
They’re not very good merchants. Not one, he declared. “They just haven’t really evolved and changed with the times at all.”
Rite Aid’s continued decline will present chances for all of its competitors to increase their sales. Physical pharmacies will always have a role, according to Saunders.
“We’re still going to have a physical pharmacy retail space, but it’s going to be somewhat smaller than it has been traditionally,” he explained.
