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Shift to health services shows signs of success for big pharmacy chains

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A CVS drugstore storefront.

Pharmacies like CVS have seen varied buying patterns during the pandemic, but providing COVID testing and vaccinations has brought more consumers into the stores. Mario Tama/Getty Images

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Pharmacy chain CVS reported strong fourth-quarter earnings Wednesday, helped along by the COVID vaccinations and testing it’s been doing. CVS said it administered 20 million COVID shots and 8 million tests during the quarter — both up significantly from the previous period. That shift to health care delivery is in full swing.

CVS and Walgreens were moving toward health care services before the pandemic. But in the early days of COVID, they weren’t doing well, “mostly because, you know, foot traffic cratered,” according to Matthew Hamory, a retail expert with AlixPartners.

​He said these businesses have relied on their back-of-the-store pharmacies to bring us in. While people are waiting for their prescriptions to be filled, they might pick up some toothpaste or a bag of chips.

“And so people staying home was a big negative impact on those businesses,” he said.

To avoid infection risk, people turned to e-commerce, ordering everything from prescription medication to toiletries online.

But when COVID vaccines arrived, pharmacy chains played a big part in rolling them out, and that turned things around, according to Amanda Starc, with Northwestern’s Kellogg School of Management.

​”Now you have retail pharmacies offering some sort of higher-level services that perhaps folks aren’t used to getting at their local pharmacy,” she said.

For example, Starc used to get her annual flu shot at her doctor’s office. ​”You know, now I feel very comfortable going to get a shot at CVS, and I don’t think I’m alone,” she said.  

​This shift has cushioned pharmacy chains from retail challenges, according to George Hill, a health care services analyst with Deutsche Bank.

​”The retail pharmacies, to some degree, are trying to reinvent themselves and be thought more of as being participating in the health care system, as opposed to being a convenience retail location,” Hill said.

​One question for pharmacies, though, is whether that reboot will stick once demand for COVID vaccines and tests slows down. 

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