The U.S. drugstore is caught in a perfect storm, ditched by customers and squeezed by insurance middlemen (2024)

I’ve spent the last few months looking into the national meltdown of the American drugstore. As I report in a new feature Fortune published today, the industry-wide problems facing retail pharmacies—chains and independents—are hurting all of us.

Big chains are shutting down hundreds of locations; CVS and Walgreens have seen their share prices slump over the past year, while Rite Aid filed for bankruptcy protection in October. Pharmacists citing burnout and overwork are fleeing the industry. For customers, whether we’re trying to buy allergy pills and toothpaste from a locked-up “plexiglass prison” or to fill a basic prescription, many of us are losing access to the front line health care services that pharmacies have long provided.

“Pharmacies are in shambles,” Abdikadir Athur, a Seattle-area pharmacist, told me. “It’s unbelievable what’s happening right now.”

I went out to Seattle in February to see some of these shambles firsthand. The epicenter of the local pharmacy implosion is Bartell’s, a beloved and storied corner drugstore founded in 1890 and family-owned until 2020—when the Bartell family sold it to the long-struggling Rite Aid. Since filing for bankruptcy protection last year, Rite Aid, trying to claw its way out of debt, has closed down more than a third of Bartell’s 67 locations in the Seattle area. “It’s heartbreaking,” several current and former Seattle residents told me.

These closures are contributing to reduced pharmacy access across the city, and the state: Over a period of 13 months ending in early March, 81 pharmacies—more than 8% of all Washington pharmacies—have gone out of business, according to the Washington State Pharmacy Association.

The fate of the state’s pharmacies is a microcosm of a crisis that extends far beyond the Pacific Northwest. American drugstores are caught in a perfect storm of factors, including the wide-ranging retail apocalypse, increased e-commerce competition, and the grim shadow of the opioid crisis.

Meanwhile, profits are being squeezed by the insurance middlemen that decide how much pharmacies actually get paid to fill prescriptions. Those pharmacy benefit managers have been tightening the screws, inexorably reducing reimbursem*nts for prescriptions, say independent pharmacists, big chain executives, analysts and bipartisan lawmakers. (Representatives for these pharmacy benefit managers, however, argue that they’re looking out for customers, and they’re not to blame for pharmacy closures.)

All of these problems have different impacts across large and small pharmacies, but the cumulative result is grim for all of us, and for the American healthcare system. As Athur told me: “If even big chains cannot survive—and even CVS and Walgreens are hurting—what do you expect for the small pharmacies?”

Read my full story here.

More news below.

Maria Aspan
maria.aspan@fortune.com

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This edition of CEO Daily was curated by Nicholas Gordon.