Raleys to close pharmacies

[storewanderer]

There are a lot of other factors involved, but this has similarities to Bi-Mart's situation around the Pacific Northwest, where they have announced pharmacy closures at 19 stores now, which is about 1/4 of the chain.

Stater Bros. in SoCal did a similar thing. They closed scattered pharmacies over the years (in very successful stores).

Pharmacy seems like it was a very profitable thing for stores but something has changed in the past 5-10 years that has made it not so profitable. The tight labor market seems like part of it, but as is being pointed out here, there is a flood of new graduates coming which should ease that. The large chains CVS and Walgreens seem to be very stingy on staffing rarely running more than one pharmacist at a time even in very busy stores filling 500+ scripts in a day. Smaller regional grocery chains seem to be having real trouble making pharmacy work.

Pharmacy is one of perhaps few professional industries where new graduates exceeds upcoming retirements. It is really unfortunate, for those new graduates, that the number of job opportunities is falling as more and more pharmacies close. It is also complicated as prescription demand keeps rising. So it seems the business model is simply very broken. You have demand rising, labor pool rising, yet the industry is declining (maybe consolidating is the better word).

[BillyGr]

However, drive thru pharmacies reduce impulse buying. Customers are drawn in to the store to shop by pharmacies. If those people drive thru, they will not buy much of anything. It will reduce sales, and defeat the purpose of having a pharmacy. The reason why Walmart does not like the drive thru is that it kills sales. Often, a customer will use the pharmacy and while waiting for medication, they will fill up an entire shopping cart.

Most likely they offer the drive thru to make it convenient for the customers. If someone is not feeling well, or a parent has to stop to pick up something for a child who is ill, they're not likely to do much shopping anyway but it is much easier to just pull up to a window than to have to unload everyone from the car to go in and pick it up.

It all depends on how many "regular" customers use it (thus not going in and not having the option to buy while there), and if on the other side the store gains customers from those who enjoyed the convenience of the drive thru in a situation like described above and thus returns to that store when they feel better to do other shopping.

[storewanderer]

However, drive thru pharmacies reduce impulse buying. Customers are drawn in to the store to shop by pharmacies. If those people drive thru, they will not buy much of anything. It will reduce sales, and defeat the purpose of having a pharmacy. The reason why Walmart does not like the drive thru is that it kills sales. Often, a customer will use the pharmacy and while waiting for medication, they will fill up an entire shopping cart.

Most likely they offer the drive thru to make it convenient for the customers. If someone is not feeling well, or a parent has to stop to pick up something for a child who is ill, they're not likely to do much shopping anyway but it is much easier to just pull up to a window than to have to unload everyone from the car to go in and pick it up.

It all depends on how many "regular" customers use it (thus not going in and not having the option to buy while there), and if on the other side the store gains customers from those who enjoyed the convenience of the drive thru in a situation like described above and thus returns to that store when they feel better to do other shopping.

I think the drive through pharmacy can be a huge win. It reduces contact with sick people, saves people time who are time pressed, for elderly people who may not move around too easily it saves them the trouble of having to walk to that pharmacy that is always inconveniently placed in some corner of the store most distant from the entrance.

Thinking of Smiths in my area which has 3 stores with drive through pharmacy (no other grocer has it). The other opportunity they have to sell to someone who shows up for the drive through pharmacy is through the gas station in the parking lot. Sure, maybe the customer does not go into the store, but any chance to sell the customer something is a positive. Also, it is not unusual for a customer to ask the drive through pharmacy to grab some OTC item for them which adds an additional sale as well.

[Alpha8472]

Things have changed in the pharmacy business in the past 10 years. It is not one thing, but many little things that have combined together to create disaster.

Greedy drug companies are raising their prices. The costs are rising in the U.S. and no one is stopping it. People think that pharmacies make tons of money charging high prices for drugs. This is untrue for most drugs. In reality, a few drugs make money such as insulin, or a few expensive HIV drugs. Not that many people take HIV drugs. Those types of people are fewer than you think. However, many other drugs barely make a profit and in many cases are a loss. What is worse are Medicare diabetes testing supplies where the pharmacy loses money on test strips. The government has a contract and demands that pharmacies give them out and it is all a loss to the pharmacy.

In the past 5 years, drug discount cards have come out. These shady companies hand out discount cards like candy. It can be a plastic card or on a mobile phone. Pharmacies are obligated to take these cards and give drugs away at rock bottom prices. In many cases, the drugs are sold at a loss. This is like someone coming into a pharmacy and demanding drugs for free. The discount card companies don't pay a dime to the pharmacies. How is this even legal? Chains such as Walgreens and CVS should be up in arms about this. This is a huge drain on profits.

What I have heard is that many independent pharmacies are saying that they don't take these cards. I can see why. These discount card companies charge the pharmacy a fee for each use of the discount card. What good is a discount card to a pharmacy? The discount card companies claim that people would simply not fill those prescriptions and go home. In theory, the discount cards increase prescription counts. What good is that if you are making very little profit or taking a loss on a drug. Most of these customers are scammers who are using discount cards on addictive medications that they sell on the street. People think that pharmacies make money off of Norco or Percocet. The profit on those drugs is quite low. More profit is made on insulin. In fact, Walmart does not give labor hours for filling addictive controlled medications. This is to discourage employees from filling more addictive drugs.

No wonder that pharmacies are firing staff, cutting labor hours, reducing wages, and closing down stores.

Insurance companies are paying less and less reimbursements for drugs. In many cases, the insurance companies slip in many below cost payments where pharmacies lose money on certain drugs, because the insurance companies don't care if the costs of obtaining a drug goes up.

[storewanderer]

How do those pharmacy discount cards work? I assume something in the software of the pharmacy computes the price? Couldn't they just deny to take them?

This entire system of anything to do with medical has gotten too complicated. Almost like things need to go back to a cash system and people pay for basic everyday type services and basic drugs and insurance only comes into play once you have an unusual thing happen. That is almost how it has gotten anyway between co-pays and deductibles but yet without the insurance you get hosed $475 for a nurse practitioner at an urgent care to do a strep throat test. And then you also have retailers who want to be in the "clinic" business, which strikes me as even more tangled up and complicated to get competent qualified NPs, let alone the whole billing and insurance nightmare.

I remember 30 years ago the Osco had pharmacy and you went back to get a prescription and they gave it to you then you took it up front and paid the cashier up front with the rest of your merchandise. There wasn't even a cash register in the pharmacy. They sure couldn't do that anymore given how the value of the drugs has skyrocketed.

[Alpha8472]

These discount card companies sign contracts with pharmacies. The pharmacies agree to take the cards, if the pharmacy refuses there is an 800 number for patients to call. Then a the discount card company has their hitmen call. The have a rep from the discount card company threaten to sue the pharmacy and use high pressure tactics to force the pharmacy to use the discount card. These companies make money off of the fees charged to the pharmacies. It is the most uncomfortable and intimidating thing ever. Some of these discount card companies are pharmacy benefits managers. Which means they can threaten to kick pharmacies out of their insurance networks. If a pharmacy is blacklisted, the pharmacy could lose tons of money.

The entire thing is so corrupt and convoluted. Refusal to fill prescriptions also could end up in complaints and lawsuits. This discount card mess has created an entire generation of entitled customers demanding practically free drugs and led to prescription drug dealers. People come in all the time using these cards for Viagra or other drugs and if you don't take them they threaten to take all of their prescriptions elsewhere. Or they call the discount card companies to report you. In minutes, the hitmen call. They threaten your job, they threaten your pharmacy, it is a such a high pressure extortion racket.

A pharmacy is a place where you deal with professional drug dealers as customers who are intimidating and in some cases are armed. I've had people threaten to bring in guns.

I can see why Raley's just wants to get out of the pharmacy business altogether.

[storewanderer]

I guess if the pharmacy chain agrees to take the discount card then the individual store just has to take the discount card? It seems this is an error at the corporate level in the chain to make the decision to take the discount cards.

It is just more the tangled up mess with insurance and medical in general that has happened. Politicians on both sides talk of fixing the problem every time it is election time, but instead if just gets more and more complicated and that much harder to ever resolve.

I wonder how many of these discount cards are tied to retailer owned PBMs?

[Alpha8472]

Someone in the corporate office approved these discount card agreements, but obviously didn't realize what a money loser it was. The idea is that the other pharmacy chains accept the discount coupons, so if our chain doesn't accept it then the customers will go to another chain.

EnvisionRx is the Rite Aid owned PBM, and they show up on many discount cards. I believe that is why Rite Aid accepts discount cards. Rite Aid gets tons of money processing these discount cards. However, for the individual store they are losing money on these prescriptions that use the discount cards. The corporate office gets profits, but the individual store loses. Then the corporate office closes down the underperforming store and moves on.

[Bagels]

I think you're really underestimating how profitable prescription drugs can be . I use to do the books for a few neighborhood pharmacies. They sold almost exclusively prescription drugs, with a limited inventory of common OTC drugs and a small quantity of snacks and beverages. None topped $1M in revenue, but they all delivered a handsome profit (in the $200K range, sometimes slightly better) to the owners (none of whom worked within the stores).

CVS, Walgreens and Rite Aid struggled because they overextended themselves by building too many and too large stores with too many products and generous hours (there was a time period in which the majority of CVS and Walgreens were 24-hours). All three chains have long predicted that sales of non-prescription drugs would exceed 50% of brick & motor revenues, but that's never come close to happening.

There was a pretty good article in the Pittsburgh newspapers not that long ago. It discussed how legacy Rite Aid focused on placing its stores in low-rent strip malls in highly populated areas, and focused on limited build-outs so that it could offer low prices. But then it started to build new, large stores in high rent areas...but sales were always a bust. The paper speculated that if it stuck it its long-time strategy, it'd be the most profitable chain today.

IMO, CVS, Walgreens and Rite Aid (however long it lasts, that is) will always struggle to attract non-prescription sales. Products are extremely overpriced, and anything that's a deal attracts the extreme coupon crowd... to the point that the rest of us don't bother to shop there for these items, knowing they'll probably be out of stock. Walgreens has tried several times to move away from the extreme couponers, but they're like crack to the chain....

[Alpha8472]

Independent pharmacies are very different from chain pharmacies. The major chain pharmacies such as CVS and Walmart have to deal with tons of low income patients that have Medicaid. The corporate office signed agreements and have to take these money losing insurance plans. On many prescriptions the pharmacy loses tons of money.

Independent pharmacies often do not take these money losing insurance plans. They don't have a corporate office demanding that they take every money losing prescription. The independent pharmacies can choose which insurances to take and they can refuse to fill prescriptions if it is a money losing item. For example a corporate pharmacy has a patient needing one vial of a drug. The only way to get the drug is ordering a 10 pack worth over $30,000. The patient never comes back and the drug expires. The pharmacy loses almost $30,000. This happens over and over again with tons of excess drugs at corporate pharmacies. Or the pharmacy employee forgets to place a box of insulin in the refrigerator. That insulin cost $3000. This happens over and over. There is so much loss at corporate pharmacies.

Then there is understaffing at Walgreens, CVS, Rite Aid, etc. There are so many drug errors and lawsuits. The patients get the wrong drug, the automated filling machine gets filled with the wrong pill, and tons of patients get the wrong drugs. These lawsuits take a huge drain on profits. Independent pharmacies are usually low volume and they are staffed with well paid pharmacists who are not rushed to the point of making serious mistakes.

I would never fill prescriptions at a Walgreens or CVS. Those places are so dangerous. I have had friends who quit because the stress was out of control. They are understaffed and there are so many errors. Some CVS stores use automated filling machines and there are so many errors. Stray pills can get into the wrong bottle. It is a dangerous mess.

The independent pharmacies have it good. They can choose what prescriptions to fill and turn away money losing prescriptions. The pharmacists can take their time and double check their work instead if being timed like at CVS or Walgreens.

Walgreens, CVS, and Rite Aid focus on filling every prescription just to get the numbers up. The employees hours are based on how many prescriptions they fill. The employees don't care if they are money losing prescriptions or if they order too many unused drugs.

Support local pharmacies, it may be the only safe pharmacy to fill at.