As with every other industry, the US retail pharmacy sector has been deeply impacted by changing consumer trends. By definition, “retail pharmacy” is defined as pharmacies that dispense prescriptions, but to have a clear understanding of these changes we must break this extremely broad group down into four types: national retail chains, regional outlets that we might find in the mass retail and grocery outlets, independent pharmacies, and mail-order/online pharmacies.
With about 1/3 of the market share, retail chains represent the major component of the retail pharmacy group, dispensing approximately 138,000 annual prescriptions. Coming in second with 50 percent less of those sales is the mass retail/grocer model. That said, some of the national giants are announcing plans to improve operating margins by reducing their footprint. For example, Walgreens undertook an ambitious strategy to close 200 US stores, and in 2021 CVS followed suit with a plan to close 900 locations by 2024.
This density reduction in national chains is now putting pressure on the next largest retail pharmacy group – the regional pharmacies – by stimulating sales at that level. And when dividing this regional group into its two subgroups – grocers (supermarkets with pharmacies) and mass retail (large consumer goods with pharmacies), clear data emerges. Over recent years, the grocers’ category has generated inconsistent performance while mass retail pharmacies have grown – and even experienced economies of scale due to sheer size and recognizable brand names. They have also been able to increase store traffic through value-added propositions like health plans and pharmacy benefit managers (PBMs).
Our third group – independent pharmacies – have, on the other hand, suffered a 50% decrease since 1980. Currently sitting at about 20,000 pharmacies throughout the US, these outlets fill approximately 48,000 prescriptions per pharmacy per year. The key to their viability tends to be linked to robust relationships with other independents and wholesalers and group-purchasing scenarios.
The fourth type of pharmacy – mail-order and online – represented less than 10% of overall US prescriptions in 2021. That said, with digital sales within all sectors ramping up, we expect to see an increase in the mail-order and online retail pharmacy industry. In addition to these alternative models experiencing sales growth, we will see the other retail pharmacy players engaging more and more in digital retail prescription fulfillment.
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