The Pharmacy Paradox: From Civic Hero to Distressed Asset

There was a brief season, not very long ago, when the most important public building in many American neighborhoods was not a hospital and not a church, but the pharmacy between the laundromat and the pizzeria. In 2021 the corner drugstore ceased to be a place where one bought shampoo, gum, and a blood-pressure refill, and became instead a civic utility: a vaccination site, a testing site, a source of instruction, reassurance, and, in the fog of that first long emergency, a rare institution that still felt local. By June 2021, nearly three-quarters of pharmacies nationwide were participating in the Federal Retail Pharmacy Program. By early 2024, pharmacies were delivering more than 70 percent of COVID boosters, and CDC later found that retail-pharmacy partners administered 67.7 percent of the nation’s bivalent doses between September 2022 and September 2023.

And then, with almost comic American brutality, the country moved on. Rite Aid entered a second bankruptcy in May 2025 and sold off most of its prescription files and store assets. Walgreens went private under Sycamore Partners in August 2025 after years of losses and announced a sweeping footprint reduction. CVS, which had already closed about 900 stores between 2022 and 2024, said it would close another 271 in 2025. The hero of the emergency became, in scarcely half a decade, a distressed asset class. What collapsed was not only a retail format. It was a national misunderstanding: we had started treating pharmacies as part of the public-health system without ever changing the business model that governed them.

The trouble, importantly, did not begin after COVID. It began earlier, during the long age of exuberant expansion. The chains spent the 1990s, 2000s, and 2010s building for ubiquity, not restraint. Massachusetts health-policy researchers describe a national buildout that culminated in CVS’s acquisition of 1,672 Target pharmacies in 2015 and Walgreens’ acquisition of 1,932 Rite Aid stores in 2018. A 2025 JAMA Health Forum study captures the arc cleanly: chain pharmacies posted net gains from 2010 to 2015, then net losses from 2016 to 2023. In other words, the visible retreat of the present decade is not a mysterious collapse from health into sickness. It is, at least in part, the unwind of an empire that had mistaken density for permanence.

That is why New York can mislead as much as it reveals. Anyone who lived in the city during the high tide of chain retail remembers the absurdity of it: a CVS on one corner, a Duane Reade on the next, a Rite Aid somehow still managing to appear between them. It felt less like access than saturation. Yet New York is not the best emblem of the pharmacy desert. A study of New York City, Los Angeles, Chicago, and Houston found that the share of neighborhoods classified as pharmacy deserts in New York actually declined from 1.6 percent in 2015 to 0.9 percent in 2020, even as deserts remained persistently more common in Black and Latino neighborhoods across all four cities. In New York, what many people are watching is partly the correction of overdevelopment. In poorer urban neighborhoods and rural counties, by contrast, what is disappearing is not redundancy but the last nearby counter.

To understand the core paradox, you have to stop picturing a pharmacy as an ordinary merchant. A pharmacy does not simply buy a product for one price and sell it for another at whatever margin the market will bear. CVS says substantially all of its pharmacy revenues come through PBMs, managed-care organizations, government programs, employers, and other third-party payors. Walgreens says the substantial majority of the prescriptions it fills are reimbursed by third-party payors and warns repeatedly of continuous pressure from PBMs, government, and commercial insurers. Walgreens also notes that its margin mix has shifted toward lower-reimbursement business, including 90-day retail prescriptions and Medicare Part D volume. The retail pharmacist, in other words, often performs the public-facing work while someone else controls the economics. The storefront carries the labor, the rent, the refrigeration, the compliance burden, the staffing headaches, and the patient. The price-setting power lives elsewhere.

This helps explain why COVID did not become the salvation story many people assumed it would. The pandemic did generate a real surge. CVS reported that in 2021 its retail segment administered more than 59 million COVID vaccines and more than 32 million tests, with segment revenue rising 9.8 percent to just over $100 billion. But a surge is not the same thing as a cure. By 2024 the same company was again reporting continued reimbursement pressure, lower front-store volume, and lower contributions from COVID test kits as reasons its pharmacy-and-consumer segment’s adjusted operating income had fallen. The pandemic, then, was not a durable windfall so much as a temporary overlay: an extraordinary public mission laid over an already weakening commercial substrate. The country saw the crowds and assumed there must be money in the building. What there was, more often, was volume without structural repair.

The old internal subsidy also broke down. For decades, the prescription counter drew foot traffic and the front of the store helped pay for the back. But by 2024 CVS reported that front-store same-store sales had fallen 2.1 percent, and front-store revenue had shrunk to 19.1 percent of the segment’s sales, down from 23.1 percent in 2022. In its own filings, CVS lists as competitors not only other chains and independents but Walmart, Amazon, restrictive pharmacy networks, online retailers, and mail-order pharmacies. Meanwhile, the labor model was fraying. Pharmacy staff at CVS and Walgreens staged walkouts in 2023 over understaffing and working conditions, and Walgreens has told investors that difficulty attracting and retaining qualified pharmacists has hurt both service quality and financial performance. The corner drugstore was supposed to become more clinical, more trusted, more indispensable. Instead it became more exhausted and less protected.

This is the point at which the betrayal thesis becomes both persuasive and inadequate. Yes, pharmacies were drafted into public service and then returned to a reimbursement system too brittle to support the role they had assumed. But the chains are not pure innocents in this story. CVS, after all, is not merely squeezed by PBMs; it owns one of the three dominant PBMs, CVS Caremark. The FTC says the top three PBMs — CVS Caremark, Express Scripts, and OptumRx — now manage 79 percent of prescription-drug claims, and that the top six PBMs are vertically integrated downstream into mail-order and specialty pharmacies. The same report says PBMs may use narrow or preferred networks to steer patients toward their own affiliated pharmacies, even when unaffiliated rivals offer comparable or better terms. To say the chains were betrayed is true. To say they also helped build the system that made the betrayal possible is truer.

That also answers the blunt but necessary question people ask when they watch a pharmacy close: Surely somebody, somewhere, is still making money on medicine? Yes. The system is not unprofitable in the aggregate. It is selectively profitable. The FTC’s second interim PBM report found that the affiliated pharmacies of the three largest PBMs generated more than $7.3 billion in dispensing revenue above NADAC — the National Average Drug Acquisition Cost benchmark — on 51 specialty generic drugs between 2017 and 2021. The report also found that pharmacies affiliated with those PBMs now account for nearly 70 percent of all specialty-drug revenue. That is the real migration story. Profit did not vanish from pharmacy; it moved away from the brightly lit storefront and toward the less visible, vertically integrated parts of the machine — the specialty channel, the mail-order channel, the affiliated platform. The neighborhood pharmacist kept the obligation. The margin moved upstairs.

The social consequence is what we now call the pharmacy desert, though the phrase can sound almost too gentle for the thing itself. A 2024 Health Affairs study found that 29.4 percent of the 88,930 retail pharmacies operating during 2010–2020 had closed by 2021, and that the risk of closure was higher in predominantly Black and Latinx neighborhoods than in White ones. A separate 2025 JAMA Network Open study found that 57.1 million Americans live in pharmacy deserts and another 28.9 million rely on a single pharmacy for access, with small rural areas especially exposed. This is the point at which a business story becomes a civic one. When the pharmacy disappears, what vanishes is not only a place to pick up statins or antibiotics. It is the easiest vaccination site, the fastest medication question, the last nearby health professional for people who are elderly, poor, chronically ill, disabled, or simply without a car.

So what is dying here is not “pharmacy,” full stop. It is a particular American arrangement: the convenience store with a clinical burden hidden in the back. The likely phoenix, if there is one, will not look like the old drugstore with its candy aisle, seasonal decorations, and passport-photo machine. The money is flowing toward specialty dispensing, mail order, vertically integrated platforms, and clinical models that are less dependent on selling detergent under fluorescent light. CVS’s own filings describe a market defined by online retailers, restrictive networks, and mail-order competition; the FTC’s describe a sector in which integrated pharmacy platforms already dominate the most lucrative terrain. That suggests the future of pharmacy may be smaller, more clinical, more digitally managed, and less recognizably “retail” than the world we are losing.

But there is still something tragic in that transition, because the old corner pharmacy did something the new model does poorly: it embodied presence. It was there before you knew the language of your illness. It was there when the doctor’s office was closed, when the clinic was full, when the hospital was far away, when the bus was late, when the booster was finally available, when the snowstorm came, when the child had a fever at 9 p.m. The deepest lesson of this story is not that pharmacies were saints, or that they were victims, or even that they were greedy. It is that America made use of them as public-health infrastructure while insisting on paying them as though they were still merely retailers. Once you see that, the paradox dissolves. We treated the corner pharmacy like a civic institution in crisis and a convenience store in peacetime. The surprise is not that so many are failing. The surprise is that they lasted this long.