Plans by several national retail pharmacy chains to expand primary care services and even some clinical laboratory test offerings may be delayed because of financial woes
Times are tough for the nation’s retail pharmacy chains. Rite Aid Corporation, headquartered in Philadelphia, closed 25 stores this year and has now filed for bankruptcy. In a press release, the retail pharmacy company announced it has “initiated a voluntary-court supervised process under Chapter 11 of the US Bankruptcy Code,” and that it plans to “significantly reduce the company’s debt” and “resolve litigation claims in an equitable manner.”
Rite Aid may eventually close 400 to 500 of its 2,100 stores, Forbes reported.
Meanwhile, other retail pharmacy chains are struggling as well. CVS Health, headquartered in Woonsocket, Rhode Island, and Walgreens Boots Alliance of Deerfield, Illinois, are each closing hundreds of stores, according to the Daily Mail.
They are each experiencing problems with labor costs, theft, being disintermediated for prescriptions by pharmacy benefit managers (PBMs), and probably building too many stores in most markets.
This is a significant development, in the sense that Walgreens, CVS, and Walmart are each working to open and operate primary care clinics in their stores. This is a way to offset the loss of filling prescriptions, which has migrated to PBMs. Primary care clinics are important to the revenue of local clinical laboratories, but retail pharmacy chains do not yet operate enough primary care clinics in their retail pharmacies to be a major influence on the lab testing marketplace.
“With the support of our lenders, we look forward to strengthening our financial foundation, advancing our transformation initiatives, and accelerating the execution of our turnaround strategy,” said Jeffrey Stein (above), Rite Aid’s CEO/Chief Restructuring Officer, in a press release. Clinical laboratory leaders may want to closely monitor the activities of the retail pharmacies in their areas. (Photo copyright: Rite Aid.)
Multiple Pharmacy Companies at Financial Risk
Rite Aid Corporation (NYSE: RAD) confirmed it continues to operate its retail and online platforms and has received from lenders $3.45 billion in financing to support the company through the bankruptcy process.
However, according to the Associated Press (AP), Rite Aid has experienced “annual losses for several years” and “faces financial risk from lawsuits over opioid prescriptions,” adding that the company reported total debts of $8.6 billion.
Additionally, the US Department of Justice (DOJ) filed a complaint “alleging that Rite Aid knowingly filled unlawful prescriptions for controlled substances,” explained a DOJ press release.
Rite Aid is not the only retail pharmacy brand dealing with unwelcome developments. Fortune reported last year that Walgreens and CVS paid a combined $10 billion to 12 states for “involvement in the opioid epidemic.”
Walgreens intends to close 150 US and 300 United Kingdom locations, its former Chief Financial Officer James Kehoe shared in a third quarter 2023 earnings call transcribed by Motley Fool.
And in a news release, CVS announced plans to close 900 stores between 2022 and 2024.
Pharmacy Companies’ Investment in Primary Care
Though they are experiencing difficulties on the retail side, Walgreens and CVS have significantly invested in primary care.
In that same ebrief, we reported on CVS’ acquisition of Oak Street Health, a Chicago-based primary care company, for $10.6 billion. CVS plans to have more than 300 healthcare centers by 2026.
“We looked at our business, and we said, ‘We’re seeing an aging population.’ We know people don’t have access to primary care. We know that value-based care is where it’s going. We know that there’s been a renaissance in home (care). So that’s kind of how we approached our acquisitions,” Karen Lynch, CVS Chief Executive Officer told Fortune.
Other Challenges to Retail Pharmacies
It could be that these major pharmacy chains are hoping entry into primary care will offset the loss of sales from prescriptions that have migrated to PBM organizations.
In addition to reimbursement challenges, retail pharmacies are reportedly experiencing:
High labor costs,
Competition from online, bricks-and-mortar, and grocery businesses, and
Effects from the work-at-home trend, among other struggles.
“I think there’s a number of challenges which are coming to a head. One, you have ongoing reimbursement pressure. The reimbursement level for drugs continues to decrease, so profit margin on the core part of the business is under pressure,” Rodey Wing, a partner in the health and retail practices of global strategy and management consulting firm Kearney, told Drug Store News.
Additionally, the pharmacy’s drug sales need to be high enough to retain pharmacists, who are difficult to recruit in a post-pandemic market, Drug Store News explained.
And in the retail space where products are displayed, some pharmacies struggle to compete with Amazon on convenience and with “dollar” stores on price. And with more people working from home, retail pharmacies are seeing less foot traffic, Drug Store News noted.
Retail pharmacy companies also have competition from pharmacies conveniently situated in grocery and big-box stores, Forbes reported. These include:
Walmart, for its part, reduced operating hours of pharmacies at more than 4,500 sites, Daily Mail reported.
Thus, medical laboratory leaders would be wise to keep an eye on market changes in their local retail pharmacies. Some locations are equipped with clinical laboratory services and a closure could give local labs an opportunity to reach out to patients and physicians who need access to a new testing provider.
Because air travel volumes are low, experts believe it is timely to develop COVID-19 testing systems and gain insight on which protocols are most effective
As the COVID-19 pandemic surges on, several international airlines now require customers to complete at-home COVID-19 testing before they can travel. This is triggering unusual business practices. For example, one airline allows its passengers to use frequent flier miles to purchase mail-in COVID-19 test kits.
Frequent Flyer Miles for COVID-19 Testing
Across the United States, Hawaii has one of the lowest rates of infection, partly thanks to the state’s strict quarantine regulations. In a state, however, that depends on tourism for its economic health, the pandemic has caused serious financial difficulties. In an effort to prevent spread of the coronavirus while also encouraging tourism, Hawaiian Airlines now offers “Pre-travel COVID-19 Test Options” on its website.
To be allowed to skip the state’s mandatory 14-day self-quarantine before arriving on the islands, flyers can take a pre-travel coronavirus test with the following conditions:
The test must be from a state-approved testing provider.
The test must be administered no more than 72 hours prior to the scheduled departure time of the final leg to Hawaii.
For trans-pacific travel, test results must be received prior to flight departure.
Additionally, the airline accepts frequent flyer miles to pay for mail-in COVID-19 tests. In exchange for 14,000 HawaiianMiles, a passenger receives a test kit in the mail. The kit features a video call during which a healthcare professional guides the consumer on taking a saliva sample. The user then ships the sample to a qualified clinical laboratory. Results are returned electronically within 24 hours of the lab receiving the sample.
Hawaii’s COVID-19 portal states, “The state of Hawaii will ONLY accept Nucleic Acid Amplification Test (NAAT) from a certified Clinical Laboratory Improvement Amendment (CLIA) lab test results from Trusted Testing and Travel Partners” that are participating in the state’s pre-travel testing program. Honolulu and Maui are the only two arrival airports allowed. A negative result must have come from a test performed within 72 hours prior to the final leg of the passenger’s trip to Hawaii, according to the portal.
“A negative pre-travel test is an alternative to two weeks in self-isolation for arrivals to the archipelago,” the UK’s Independent reported.
JetBlue and Vault Health Partner to Offer COVID Testing to Airline Passengers
In another instance of an airline getting involved in at-home testing, JetBlue (NASDAQ:JBLU) is partnering with Vault Health to offer at-home testing. The process is similar to the Hawaiian Airlines program. However, rather than purchasing the test with frequent flyer miles, JetBlue offers polymerase chain reaction (PCR) tests at a discount.
Business Travel News reported that passengers must provide a confirmation code while ordering the $119 test from Vault Health’s webpage. “Vault provides a kit for an at-home saliva test, and users administrate it while on a video chat supervised by Vault to ensure the test is done properly. The user sends it overnight to a clinical laboratory and the results are provided within 72 hours,” Business Travel News stated.
“We continue to hear from health officials that [COVID-19] testing is incredibly important in the fight against the coronavirus, and we want to make sure our customers have options for testing, especially prior to travel,” said Joanna Geraghty, President and Chief Operating Officer, JetBlue, in a press release. “As more and more regions reopen, many are requiring test results to enter. Now with easier testing options, those safety requirements may not be a deterrent for travel, but rather provide greater public health and peace of mind with little inconvenience.” (Photo copyright: Spectrum News NY1.)
In addition to airlines such as Hawaii Airlines and JetBlue instituting programs for coronavirus testing, some airports are as well. Tampa International Airport, for example, test-piloted a voluntary testing program for all arriving and departing passengers from October 1st to October 31st. The airport partnered with BayCare, a 15-hospital Tampa area healthcare network, to provide both rapid antigen and PCR tests.
“Testing services will be offered on a walk-in basis … seven days a week from 8 a.m. until 2 p.m. The pilot will be open to all ticketed passengers who are flying or have flown within three days and can show proof of travel. The PCR COVID-19 test costs $125 and the antigen test costs $57,” a press release stated.
Tampa Airport CEO Joe Lopano told the Washington Post, “This could be—especially if adopted by other airports—another way to instill confidence.”
COVID-19 Testing by Retailers Expanding as Well
Travelers aren’t the only people who need testing. Some employers also are requiring negative tests before employees can return to work.
As with all at-home kits, the consumer collects their own specimen and sends it off to a qualified clinical laboratory for processing. AZOVA, a telehealth company, supplies the kits to Costco for resale and provides a smartphone app where customers can check and display the test results.
P23 Labs’ TaqPath SARS-CoV-2 assay is the test being used, which, according to P23, “has a 98% sensitivity and 99% specificity,” Business Insider reported.
The researchers found that “All seven SARS-CoV-2 genomes were genetically identical, with the exception of a single mutation in one case, and all genomes had five signature mutations seen in only six other genomes from the >155,000 genomes sequenced globally. Four of these six related genome sequences were from Switzerland, the country of origin of the suspected index case.”
They added, “By combining information on disease progression, travel dynamics, and genomic analysis, we conclude that at least four in-flight transmission events of SARS-CoV-2 likely took place.”
At-home test kits for COVID-19 are here to stay. That large businesses in multiple industries are now partnering with COVID-19 test developers and clinical laboratory companies to accomplish testing of customers and employees means independent labs that process coronavirus testing can look forward to increasing COVID-19 testing business.
“We need to be using the time now, when [travel] volumes are relatively low, to test the systems and gain insight on which protocols are most effective,” Mara Aspinall, biomedical diagnostics professor at Arizona State University, President and CEO of the Health Catalysts Group, an investment and advisory firm, and former President/CEO of Ventana Medical Systems (now Roche Tissue Diagnostics), a billion-dollar division of Swiss pharmaceutical and diagnostics manufacturer Roche, told the Washington Post.
