CVS, Walgreens See Golden Opportunity Slip Away as Vaccines Wane

If CVS Health Corp. and Walgreens Boots Alliance Inc. were hoping Covid-19 vaccinations would provide solutions for their struggling retail pharmacy businesses, the reality leaves them stuck searching for answers.

Each reported that Covid tests and shots helped bring customers into their drugstores, where they were likely to buy other items. The problem, though, is that the pandemic has hammered their retail foot traffic, and there may be few catalysts to revive it.

Nearly three months since a federal program sending shots to pharmacies began, CVS has administered 13 million doses through retail outlets, and Walgreens has done 12 million, executives said. But that was likely the peak of the business, as average daily U.S. doses administered dropped to 173,000 on May 3 from 264,000 on April 8, according to the Bloomberg Vaccine Tracker.

More than half of U.S. adults have been vaccinated, and those who still need a shot might need to be convinced.

CVS, Walgreens See Golden Opportunity Slip Away as Vaccines Wane

“For the most part, the big opportunity is over,” said Jefferies analyst Brian Tanquilut, who originally estimated pharmacies could administer as much as 50% of Covid shots in the U.S. He didn’t anticipate states would play such a big role and that mega-sites would move so many doses.

Underwhelming Contribution

Pharmacy leaders are still pleased they’re participating in the campaign. CVS Chief Executive Officer Karen Lynch said the company will see a return on its investment and that the chain feels confident in the business justification. Rina Shah, Walgreens vice president of pharmacy operations, said it was worth it from a public-health perspective.

But none of that is making drugstores look any more relevant. In-person patronage is falling as more people shop online. Insurers are paying pharmacies less to dispense medications, squeezing profits.

Vaccines have plugged a few holes. CVS on Tuesday said Covid immunizations and testing helped offset weak sales of cough, cold and flu products. But adjusted operating income for the company’s retail unit still slid 27% in the first quarter.

“In a vacuum, vaccines would be a fantastic positive contribution,” said Deutsche Bank analyst George Hill. “In the context of everything, it might be underwhelming compared to what we thought.”

Business Justification


CVS and Walgreens have administered far less than the 25 million shots a month each said they could. The U.S. government determines how many shots states and pharmacy chains receive, mainly based on population. Vaccinations will contribute about 2% of CVS’s overall prescription volume, Chief Financial Officer Eva Boratto said Tuesday on an analyst call, the lower end of an original expectation that ranged as high as 3%.

CVS, Walgreens See Golden Opportunity Slip Away as Vaccines Wane

“We feel confident in the business justification of doing vaccines,” Lynch, the CEO, said in an interview Tuesday. She said the company will see a return on its investment , but declined to disclose how much was spent on things like freezers, building an online scheduling tool and staff.


Pharmacies could still benefit when vaccines gain authorizations for use in adolescents. CVS didn’t factor booster shots into its full-year financial forecast, leaving room for a possible lift, Evercore ISI analyst Elizabeth Anderson wrote in a note to clients Tuesday. In the meantime, pharmacies are encouraging encourage adults to get shots.

“Even though the country has immunized a lot of individuals, there’s still so many that still need to get vaccinated,” Walgreens’s Shah said Monday. “We’re hopeful that we can get everyone vaccinated as quick as possible and are able to get individuals back to their day-to-day lives.”

If drugstores are hoping to introduce themselves to new customers, vaccinations could one way to do it. Woody Mawhinney received his two doses of Pfizer Inc.’s Covid-19 vaccine in the diaper aisle at a CVS pharmacy near his home in Scarsdale, New York. The founder of a pet-insurance navigation startup was impressed with the user experience, from the texts he received after he booked his appointment to the sign showing him where to go when he entered the pharmacy.

“It was a well-oiled machine,” Mawhinney said.

No Amenities

But some haven’t been as satisfied. Leslie Burns, an attorney, received her two Pfizer shots at different CVS locations in the San Diego, California, area.

At the first appointment in upscale La Jolla, an employee offered water to those in line, Burns said. One worker gave her a piece of paper saying what time she was injected and when she could leave. Another person sat in the observation area with a large clock to monitor people and check their paper.

During the second appointment in San Diego’s less affluent North Park neighborhood, there were “none of the amenities,” Burns said. The line stretched to the door, and patrons were inoculated behind screens set up in an aisle stocked with “as-seen-on-TV” products and organic chocolates.

“It was such an obvious example of the wealthy get it better than the poor,” Burns said. “It really was disturbing.”

Vaccinations can differ by location, but the neighborhood plays no role in the quality of service provided, a CVS spokesman said. The company has some of its highest customer satisfaction scores across all communities served, the spokesman said.

©2021 Bloomberg L.P.

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