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Axios
12-03-2025
- Business
- Axios
CVS goes small in latest retrenchment move
Retail pharmacies are embracing the idea that less is more as they grapple with online competitors, lagging reimbursement, sluggish consumer demand and employee burnout. Driving the news: CVS Health this week confirmed it's rolling out roughly a dozen downsized stores, testing the theory that getting back to the basics of dispensing drugs will be more sustainable than selling greeting cards and cosmetics. The approach isn't without precedent. Before declaring bankruptcy, Rite Aid tried opening a handful of 3,000-square-foot stores, calling it the " apothecary model," saying it was trying to address pharmacy deserts. The big picture: National retail pharmacies are struggling to find a winning business model in an increasingly challenging environment. They've laid off thousands of employees and closed hundreds of locations, struggling with oversized store footprints in a shifting landscape that's weakened "front of store" sales — once a key driver of profits. CVS Health is shedding 270 stores around the country this year. "There is a lot of concern about how CVS is going to navigate its way out of its own challenges," Peter Bonis, chief medical officer at Wolters Kluwer Health, told Axios. State of play: CVS plans to begin opening 5,000-square-foot stores, which will be about one-half to one-third the size of the current average location. Each will feature a full-service pharmacy with limited over-the-counter products available for purchase, the company said. And each "will be designed to meet the community's specific pharmacy needs," officials told Axios in a statement. CVS officials also plan to open 30 additional locations this year, including inside Target stores. Between the lines: About 80% of CVS Health's store revenue comes from its drug business, the Wall Street Journal reported. Decades ago, a much bigger piece of their revenue was retail, said Douglas Hoey, CEO of the National Community Pharmacists Association, which represents independent pharmacies. "I think the smaller footprint is a recognition that that model is going [away] for them as consumers have migrated for those non-prescription purchases either online or in some of the big box stores," he said. With that in mind, this makes sense as a way to optimize for the higher-margin business while benefiting from less expensive leases and smaller staff needed for a smaller store, Bonis said. "It's about maximizing return on retail square footage," he said. Walmart, Target, Best Buy, Ikea and others have all experimented with smaller format stores, largely in suburban areas or dense urban areas, with varying degrees of success. Reality check: CVS Health continues to explore other business models, including providing primary care to Medicare recipients through its Oak Street partnership, while maintaining significant real estate dedicated to MinuteClinics and HealthHubs. "They try out different models ... you would expect an organization as large as CVS to do things like this," said Evercore ISI analyst Elizabeth Anderson. It may follow other retailers in a hybrid model of stores, Anderson suggested. "But if this is a successful experiment, it probably will be rolled out over the course of at least the next several years." Yes, but: CVS' latest plan for new locations raises concerns that CVS, which owns the pharmacy benefit manager CVS Caremark, will further use its model to steer patients toward buying high-value drugs, including specialty medications, to their stores over independent pharmacies, Hoey said. It also raises questions about whether CVS may wind up investing in higher-density neighborhoods rather than underserved markets, further expanding pharmacy deserts. CVS has not yet said where the smaller-format stores will open but said it intends to address "gaps in care." "The new pharmacies will be introduced in select neighborhoods to help bridge gaps in care and make it easier for patients to access medications, immunizations, and other pharmacist-provided health care services," CVS said in a statement to Axios.
Associated Press
30-01-2025
- Business
- Associated Press
New Analysis Finds the Medicare Drug Price Negotiation Program Threatens Financial Stability of American Pharmacies
Today, the National Community Pharmacists Association released a first-of-its-kind analysis, Unpacking the Financial Impacts of Medicare Drug Price Negotiation, conducted by 3 Axis Advisors. The report concludes that the Inflation Reduction Act's Medicare Drug Price Negotiation Program (MDPNP) exposes small and independent pharmacies to significant financial risk, potentially disrupting seniors' access to essential medications and services. The analysis warns that the implementation of the MDPNP represents a fundamental shift in pharmacy operations and reimbursement practices for many of Medicare's most widely used prescription brand medicines. Under the MDPNP, pharmacies face lost revenue and significant disruption in cash flow — without adequate protection to help absorb these changes. Findings from the analysis further revealed that these policy changes will result in: Payment delays: Pharmacies will face prescription payment settlement delays of at least seven additional days for negotiated drugs, exceeding current Medicare Part D prompt pay requirements. Weekly cash flow shortfalls: Each pharmacy stands to lose nearly $11,000 in weekly cash flow due to delayed payments. Annual revenue losses: Pharmacies could forfeit an average of $43,000 in annual revenue — roughly equivalent to a pharmacy technician's yearly salary. These financial impacts could lead to significant consequences, such as pharmacy closures, reduced medication availability and staffing cuts, ultimately causing disruptions for seniors at the pharmacy counter. The financial disruptions come at a time when community pharmacies are closing at an unprecedented rate. Over 7,000 pharmacies have closed in less than 10 years. Furthermore, as explored in the analysis, 340B covered entities may have less revenue available for charitable care or expanded health care services (i.e., dental care) as a result of the MDPNP. Additionally, while 340B contract pharmacies may receive a fixed amount per 340B prescription, the reduction in revenues may result in reduced dispensing fee payments or carveouts (i.e., removal of MFP drugs from 340B relationships between covered entities and contract pharmacies). 'Like many government programs, the intent is good, but the unintended consequences undermine the goal,' said NCPA CEO B. Douglas Hoey, pharmacist, MBA. 'That's exactly the case here. Everyone wants to reduce drug costs for seniors and taxpayers. But, as our research shows, the program is structured in a way that will force many independent pharmacies out of the Medicare Part D program. Drug costs may come down, but there will be a shortage of pharmacies to dispense medicine. Seniors will be stranded without a pharmacy, and they won't get the benefit of lower drug prices.' The MDPNP was introduced under the Inflation Reduction Act of 2022 with the stated goal of lowering Medicare prescription drug costs. The program grants Medicare the authority to directly negotiate prescription drug costs with drug manufacturers for a select number of high-cost drugs covered under Medicare Part D (outpatient drugs) and, later, Medicare Part B (physician-administered drugs). Medicare has already completed negotiation for the first 10 medications whose prices, known as the Maximum Fair Price (MFP), will take effect Jan. 1, 2026. As established by the Inflation Reduction Act, additional drugs will be subject to negotiation each year. Earlier this month, the Centers for Medicare & Medicaid Services announced the 15 drugs that will be subject to negotiation in 2027. However, expanding the list of MFP drugs is already raising concerns for pharmacies, as a recent NCPA member survey revealed that 93.2 percent of independent pharmacies are either considering not stocking or have already chosen not to stock one or more of the first 10 drugs included in the MDPNP. Unpacking the Financial Impacts of Medicare Drug Price Negotiation emphasizes that pharmacies bear significant financial strain under this policy. The analysis offers several recommendations for pharmacies to mitigate risks, including establishing short-term financing solutions, closely monitoring manufacturer settlement timelines, and proactively adjusting liquidity and financing strategies — none of which address the fundamental flaws in the program's design. With the program set to take effect at the start of 2026, implementation is already underway across all the implicated stakeholders, including pharmacies. Accordingly, NCPA strongly urges the new administration and Congress to immediately freeze implementation until robust safeguards are in place to protect both pharmacies' financial viability and seniors' access to essential medications. About Unpacking the Financial Impacts of Medicare Drug Price Negotiation Unpacking the Financial Impacts of Medicare Drug Price Negotiation was developed by 3 Axis Advisors, with funding from NCPA, to assess the financial and operational impact of the Medicare Drug Price Negotiation Program, as enacted by the Inflation Reduction Act, on pharmacies. The findings highlight the urgent need for reforms that protect pharmacies — especially smaller, community-based businesses — and ensure they can continue to provide critical health care services to seniors. You can read the full analysis here and executive summary here. Founded in 1898, the National Community Pharmacists Association is the voice for the community pharmacist, representing over 18,900 pharmacies that employ more than 205,000 individuals nationwide. Community pharmacies are rooted in the communities where they are located and are among America's most accessible health care providers. To learn more, visit About 3 Axis Advisors 3 Axis Advisors is an elite, highly specialized consultancy that partners with private and government sector organizations to solve complex, systemic problems and propel industry reform through data driven advocacy. With a primary focus on identifying and analyzing U.S. drug supply chain inefficiencies and cost drivers, 3 Axis Advisors offers unparalleled expertise in project design, data aggregation and analysis, investigative research, and public education. 3 Axis Advisors arms clients with independent data analysis needed to spur change and innovation within their respective industries. To learn more about 3 Axis Advisors LLC, visit. Copyright Business Wire 2025. PUB: 01/30/2025 11:25 AM/DISC: 01/30/2025 11:25 AM
