CVS Closing Stores

[HCal]

Interesting, at some point these pharmacies are going to have to quit accepting these programs that do not reimburse adequately. This will force the politicians to properly fund those programs rather than bleeding out the pharmacies to fund various other pet projects.

Or maybe it will force the manufacturers to charge reasonable prices for these medications.

This isn't a competitive market, so if insurance (government or private) pays more, they will just raise the price accordingly.

[HCal]

Costco runs a 5% or less markup, so there's no way even a $300 basket could offset a big prescription. And furthermore they cannot legally exclude non members from using the pharmacy, at least not in California nor can they charge them more. So they must have something worked out where they're going to be reimbursed at a reasonable rate otherwise there is zero reason to take on this business.

Costco is an extremely profitable company. They can easily run the entire pharmacy operation as a loss leader and be just fine. I think their food courts and gas stations are also seen as more of a member service, with the main benefit being to encourage membership renewals.

I don't think it would be legal (never mind ethical) to lie about stock. If a Medicaid patient is told that X is out of stock and a patient with fancy insurance is then sold X, it would be very easy to detect and lead to a huge PR disaster.

[buckguy]

Costco runs a 5% or less markup, so there's no way even a $300 basket could offset a big prescription. And furthermore they cannot legally exclude non members from using the pharmacy, at least not in California nor can they charge them more. So they must have something worked out where they're going to be reimbursed at a reasonable rate otherwise there is zero reason to take on this business.

Costco is an extremely profitable company. They can easily run the entire pharmacy operation as a loss leader and be just fine. I think their food courts and gas stations are also seen as more of a member service, with the main benefit being to encourage membership renewals.

I don't think it would be legal (never mind ethical) to lie about stock. If a Medicaid patient is told that X is out of stock and a patient with fancy insurance is then sold X, it would be very easy to detect and lead to a huge PR disaster.

The average Costco customer doesn't use the pharmacy, so it's impact on profit is probably negligible, overall. The couple times I went to a Costco for a prescription, there were no customers around at all and I rarely see prescription customers when I'm in the HBA section of their stores.

[Alpha8472]

There is very little impact on Costco's profit from pharmacy losses. It is a loss leader just like the Food Court.

Other chains really mismanaged their pharmacy operations such as Target. The losses were huge and they got rid of their pharmacies.

CVS doesn't seem to want to open new pharmacies inside of new Target stores.

Save Mart got rid of their pharmacies because they were losing money. However, Save Mart saw a huge drop in customer traffic as people moved to other supermarkets with pharmacies. That really backfired.

Pharmacies bring in customer traffic and increase sales in other parts of the store.

Walgreens doesn't seem to want to open up pharmacies inside of Bimart stores.

[storewanderer]

Interesting, at some point these pharmacies are going to have to quit accepting these programs that do not reimburse adequately. This will force the politicians to properly fund those programs rather than bleeding out the pharmacies to fund various other pet projects.

Or maybe it will force the manufacturers to charge reasonable prices for these medications.

This isn't a competitive market, so if insurance (government or private) pays more, they will just raise the price accordingly.

It would be nice if something was done so these drug manufacturers charged similar prices in the US as they do in other countries for these products. Of course politicians on both sides talk about it and nothing ever changes. Been waiting for the current cast of characters to do something about it. Still nothing. Again. Just like the last cast of characters. Same old song and dance.

This needs to become a competitive market. But the more pharmacies that close, the more insurances that merge, the less competitive it gets.

These manufacturers will never on their own decide to charge reasonable prices. My politics are pretty obvious from my posts but there are businesses like these who need to be heavily regulated, need price controls set, who are taking major advantage of various parties in the US and in many cases screwing people multiple times like the user who pays the bloated drug price, who is also a taxpayer who pays taxes which go toward government programs that also buy these drugs at bloated prices. Making a reasonable profit is one thing but what this industry (and various others in the medical industry and insurance industry) do is unreal.

[veteran+]

SPOT ON!!!!!

[ClownLoach]

Costco runs a 5% or less markup, so there's no way even a $300 basket could offset a big prescription. And furthermore they cannot legally exclude non members from using the pharmacy, at least not in California nor can they charge them more. So they must have something worked out where they're going to be reimbursed at a reasonable rate otherwise there is zero reason to take on this business.

Costco is an extremely profitable company. They can easily run the entire pharmacy operation as a loss leader and be just fine. I think their food courts and gas stations are also seen as more of a member service, with the main benefit being to encourage membership renewals.

I don't think it would be legal (never mind ethical) to lie about stock. If a Medicaid patient is told that X is out of stock and a patient with fancy insurance is then sold X, it would be very easy to detect and lead to a huge PR disaster.

The average Costco customer doesn't use the pharmacy, so it's impact on profit is probably negligible, overall. The couple times I went to a Costco for a prescription, there were no customers around at all and I rarely see prescription customers when I'm in the HBA section of their stores.

Depends on the area.

I have a diabetic relative who didn't have insurance (I have since helped them get insured) and they went to Costco pharmacy because the cash prices on their medications were 90% less than Rite Aid, Walgreens and CVS. This amounted to thousands of dollars for insulin savings alone. Every time we had to wait in a long prescription line and the store had run out of room to expand their prescription storage so they had reduced hold time to 7 days from 14 at this busy Signal Hill location. Since we have moved to Riverside County and her prescriptions were amongst the first at a brand new location which is also now adding additional racking for storage and more pharmacists and technicians; there are usually 6 to 8 people inside the pharmacy itself. They are far busier than any CVS or Walgreens I've been in except for a location on the opposite corner from 2 hospitals in OC. They also have a massive mail order operation and do the same work of moving most prescriptions to 90 day mail order. Since the addition of Medi-CAL acceptance they have been much busier. I do not agree with the idea that this is not a busy part of the business for Costco, it is in fact a very large sector for them and my understanding is that they're working on testing their version of "Minute Clinics" as part of a larger Healthcare expansion. The new warehouse prototype moves optical and pharmacy together to a corner butted up against each other to make this "Healthcare corner" and all of the related merchandise is together.

For Costco, the Food Court specifically the infamous hot dog is a member service where they break even or lose a little money, although with the conversion to all kiosk ordering they've reduced staffing a bit and now it's chaotic like the Sam's Cafe over there. Outdoor kiosk stores added membership scanners. The gas station is a specific revenue boosting program and Costco is still working aggressively to add stations to every store even if it means moves as drastic as tearing down the entire building and moving around on the lot (they were going to do exactly that in Tustin and had deferred store updates like LED light retrofit and even floor polishing, before finally reaching an agreement with local residents who were complaining about the proposed station). So gas stations are a very big deal for Costco. I think pharmacy is somewhere in the middle on their priorities.

One store that does not appear to do any business in pharmacy is Sam's Club despite promoting cheap 90 day supplies of many medications for Plus members, if I recall there is a long list where they give a 90 day fill in store or mail order for $5, very similar to the promotions we used to see in grocery stores. I don't see them doing any work besides the Plus member deal to drive traffic to this area and they do not merchandise it well either as they break up categories outside of that corner and merchandise elsewhere.

As far as pharmacy stock goes, I wouldn't be the least bit surprised if these stores "accidentally" allocated inventory to locations based on revenue.

[buckguy]

Costco is an extremely profitable company. They can easily run the entire pharmacy operation as a loss leader and be just fine. I think their food courts and gas stations are also seen as more of a member service, with the main benefit being to encourage membership renewals.

I don't think it would be legal (never mind ethical) to lie about stock. If a Medicaid patient is told that X is out of stock and a patient with fancy insurance is then sold X, it would be very easy to detect and lead to a huge PR disaster.

The average Costco customer doesn't use the pharmacy, so it's impact on profit is probably negligible, overall. The couple times I went to a Costco for a prescription, there were no customers around at all and I rarely see prescription customers when I'm in the HBA section of their stores.

Depends on the area.

I have a diabetic relative who didn't have insurance (I have since helped them get insured) and they went to Costco pharmacy because the cash prices on their medications were 90% less than Rite Aid, Walgreens and CVS. This amounted to thousands of dollars for insulin savings alone. Every time we had to wait in a long prescription line and the store had run out of room to expand their prescription storage so they had reduced hold time to 7 days from 14 at this busy Signal Hill location. Since we have moved to Riverside County and her prescriptions were amongst the first at a brand new location which is also now adding additional racking for storage and more pharmacists and technicians; there are usually 6 to 8 people inside the pharmacy itself. They are far busier than any CVS or Walgreens I've been in except for a location on the opposite corner from 2 hospitals in OC. They also have a massive mail order operation and do the same work of moving most prescriptions to 90 day mail order. Since the addition of Medi-CAL acceptance they have been much busier. I do not agree with the idea that this is not a busy part of the business for Costco, it is in fact a very large sector for them and my understanding is that they're working on testing their version of "Minute Clinics" as part of a larger Healthcare expansion. The new warehouse prototype moves optical and pharmacy together to a corner butted up against each other to make this "Healthcare corner" and all of the related merchandise is together.

For Costco, the Food Court specifically the infamous hot dog is a member service where they break even or lose a little money, although with the conversion to all kiosk ordering they've reduced staffing a bit and now it's chaotic like the Sam's Cafe over there. Outdoor kiosk stores added membership scanners. The gas station is a specific revenue boosting program and Costco is still working aggressively to add stations to every store even if it means moves as drastic as tearing down the entire building and moving around on the lot (they were going to do exactly that in Tustin and had deferred store updates like LED light retrofit and even floor polishing, before finally reaching an agreement with local residents who were complaining about the proposed station). So gas stations are a very big deal for Costco. I think pharmacy is somewhere in the middle on their priorities.

One store that does not appear to do any business in pharmacy is Sam's Club despite promoting cheap 90 day supplies of many medications for Plus members, if I recall there is a long list where they give a 90 day fill in store or mail order for $5, very similar to the promotions we used to see in grocery stores. I don't see them doing any work besides the Plus member deal to drive traffic to this area and they do not merchandise it well either as they break up categories outside of that corner and merchandise elsewhere.

As far as pharmacy stock goes, I wouldn't be the least bit surprised if these stores "accidentally" allocated inventory to locations based on revenue.

I can see your point, but I've been to quite a few Costcos in the past couple years in very different places-DC area, Ohio, Upstate NY, different parts of PA, and the pharmacies have never been hives of activity.

[buckguy]

Sadly Medicaid and Medi-Cal don't go through the CVS/Caremark network so CVS loses tons of money on pharmacies that have a lot of low income Medi-Cal patients.

So CVS will continue to close these pharmacies in low income areas. CVS will only focus on pharmacies in richer areas with profitable customers with better paying insurance.

Caremark insurance is pressuring customers to use mail order. This means that the customers with good insurance are using mail order and the pharmacies are stuck with low income customers who cause the pharmacy to lose money. This will cause even more CVS pharmacies to close. It is a vicious cycle. Caremark's push to mail order is killing off their own brick and mortar pharmacies.

You're always making these generalizations.......I've had Caremark for along time and I'm responsible for a family member who had Caremark until very recently. There's never been "pressure" on me to use mail order from Caremark or on my family member and these were two different insurance plans. My family member has multiple recurring meds, which would seem to be a target for this "pressure".

CVS has made no secret of their plans to close a large number of stores over 2022-24, although it's not exactly a huge fraction of their store count overall and the media coverage usually neglects that or neglects the multi-year planning. If anything I'm surprised they haven't closed more stores where they have market saturation. None of the ones near me have trouble generating front end volume--maybe that happens where you are but I haven't seen it here or anyplace I've travelled. If CVS has problems with Medicaid, they seem to involve inflating reimbursement charges to Medicaid managed care programs. This is just one of a large number of articles i've come across regarding this: https://ohiocapitaljournal.com/2023/05/ ... -loophole/

[Alpha8472]

Only some Caremark plans have the requirement to use mail order after the first 2 or 3 fills at a retail pharmacy.

Other Caremark plans allow pickup at brick and mortar pharmacies and do not encourage mail order. However, I have had many customers at my pharmacy complain about their Caremark plans requiring mail order. It really depends on the plan. In California, where pharmacy operations cost more, many customers are encouraged to use mail order because the mail order pharmacies are based outside of California where labor is much cheaper.

Pharmacists make 6 figures in California. In other states, it is significantly less.

I was just saying if insurance companies try to switch more customers to mail order it could lead to more closures of brick and mortar pharmacies. Fewer prescriptions that are filled lead to lower sales numbers at stores.

CVS has metrics for their stores about prescriptions filled, profit and loss, etc. If the store doesn't meet sales numbers it is going to be a Target for closure. CVS seems to be closing pharmacies instead of opening new ones. I don't know if they are even planning any new stores.

The issue is that at CVS the pharmacy employees work hours are based on number of prescriptions filled. So employees are trying to fill as many prescriptions as possible to get more employee work hours. This could lead to filling many prescriptions without regard as to whether these prescriptions are at a loss.

The corporate office would love to not fill money losing prescriptions and have fewer employee work hours. It saves the company money. Meanwhile the store employees are scrambling to encourage filling as many prescriptions just to increase their allotted work hours.