Drug Stores & Pharmacies
Industry Profile Report
Dive Deep into the industry with a 25+ page industry report (pdf format) including the following chapters
Industry Overview Current Conditions, Industry Structure, How Firms Operate, Industry Trends, Credit Underwriting & Risks, and Industry Forecast.
Call Preparation Call Prep Questions, Industry Terms, and Weblinks.
Financial Insights Working Capital, Capital Financing, Business Valuation, and Financial Benchmarks.
Industry Profile Excerpts
Industry Overview
The 19,300 drug store and pharmacy firms in the US are the primary channel for selling prescription drugs. Mail order pharmacies typically sell only prescription drugs, while retail drug stores usually market a large number of other drug and non-drug products, and may offer several healthcare-related services. Both retail drug stores and mail order pharmacies may act as Prescription Benefit Managers (PBMs), designing and administering prescription drug benefit plans on behalf of private employers, unions, insurance companies and other benefit plan providers.
Reduction in Prescription Drug Reimbursement
Sales of prescription drugs reimbursed by third party payers, including the Medicare Part D plans and state sponsored Medicaid agencies, typically represent over 95% of drug store and pharmacy prescription revenues.
Increased Government Regulation
Prescription drug pharmacies are subject to rapidly changing and increasingly complex government regulations at the federal, state and local levels.
Industry size & Structure
The average drug store and pharmacy employs 16-17 workers and generates $15-16 million in annual revenue.
- The drug store and pharmacy industry is comprised of about 19,300 retail or mail order pharmacy firms that operate over 44,000 stores, generating $301 billion in revenue, and employing 725,000 people.
- About 39% of stores have less than 20 employees, and 29% have fewer than 10 employees.
- Three large chains dominate the retail drug store segment (CVS Caremark, Walgreens, and RiteAid).
- Express Scripts dominates the mail order segment.
Industry Forecast
Drug Stores & Pharmacies Industry Growth
Recent Developments
Jul 13, 2024 - Sales Decrease Year-over-year
- Drug store and pharmacy sales decreased 1.7% year over year in March 2024 but increased 3.7% month over month, according to the US Census Bureau. The prices that drug stores and pharmacies charge for their products decreased slightly during the first five months of 2024, according to the US Bureau of Labor Statistics (BLS). Personal consumption expenditures, an indicator of expenditures at drug stores and pharmacies, increased slightly during the first quarter of 2024, according to the US Bureau of Economic Analysis. Drug store and pharmacy employment decreased slightly during the first five months of 2024 while wages for nonsupervisory employees increased slightly, according to the BLS.
- Strong pre-pandemic store growth is reversing as the industry faces headwinds like falling prescription reimbursement, persistent theft, and changing shopping habits, according to the Associated Press (AP). A pattern to who has access to pharmacies has emerged, with gaps existing in urban and rural neighborhoods. Residents of neighborhoods that are largely Black and Latino have fewer pharmacies per capita than people who live in mostly white neighborhoods, according to an AP analysis of licensing data from 44 states, data from the National Council for Prescription Drug Programs, and the American Community Survey. Drug stores and pharmacies routinely close because they aren’t doing well financially or because of decreasing population in a service area, according to the AP. More than 7,000 US pharmacies have closed since 2019, according to data from University of Pittsburgh researcher Lucas Berenbrok, who considers that estimate conservative. About 54% of the closures were independent drugstores, an AP analysis of Berenbrok’s data found.
- Reimbursement cuts that are forcing drugstores to fill many prescriptions at a loss are a key cause of many pharmacy closures, according to some store owners. The three big pharmacy benefit managers that dominate the wholesale drug market are forcing drugstores to pay more for drugs than stores are paid to fill the prescription, Chris Antypas, president of Asti’s South Hills Pharmacy in Castle Shannon, PA, told members of the Pennsylvania Senate Democratic Policy Committee. Losses from filling prescriptions such as the new class of diabetes and weight-loss drugs Wegovy and Ozempic can mean having to cover $150 of the cost, causing more stores to shut down, he said. The Pennsylvania hearing came as the National Community Pharmacists Association industry trade group called for revisions to supplier contract terms that the group described as draconian for pharmacists.
- Patients are having difficulty obtaining drugs to treat conditions including anxiety, attention deficit hyperactivity disorder, and addiction, according to the New York Times. Some experts say that a 2022 opioid settlement which imposed new requirements on distributors that provide medications to pharmacies may be a key contributor to lack of access. The $21 billion settlement, which was brokered between the three largest American pharmaceutical distributors and the attorneys general of 46 states, was designed in part to correct practices that had flooded the country with prescription painkillers which intensified the nation’s opioid crisis. Distributors are placing stricter limits on drug supplies to individual pharmacies and heavily scrutinizing their dispensing activity. Oversight is not limited to opioids, however. It applies to some potentially addictive or habit-forming controlled substances like muscle relaxants or medications like Xanax, which is used to treat anxiety and panic disorders.
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