Has anybody looked into acquiring pharmacies or convenience/drug stores?

April 02, 2020

by a searcher from University of Virginia in Los Angeles, CA, USA

I have an interesting opportunity in Southern California, and I'd like to do a little more research on the space to get more comfortable with it. Looking for syndicated data (i.e., Nielsen / IRI) and/or coverage of public companies like CVS and/or Walgreens (preferably an initiating coverage-style report). Let me know if anyone can be helpful.
Thanks for being a great community.

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Reply by a searcher
from University of Virginia in Los Angeles, CA, USA

Thanks everybody for the helpful insights on the consumer Rx market! Clearly not a great place to be. I'm actually wondering about the "front store" retail portion of Walgreens / CVS. For instance - if you look at the CVS 10k, you'll find that they have about 9,000 stores, averaging $10k square feet and $10M per store. Digging deeper, the pharmacy portion of their retail segment does roughly 75% of revenue, leaving $2.5M per store for "front-store" retail items out of, say 7,500 selling square feet. If the retail portion were a standalone business (independent from the Rx side), ~$330 sales per square foot would be abysmal. I'm wondering (1) how they justify such poor performance (is retail a loss leader to drive traffic to Rx, or vice versa?), and (2) why they run that business so poorly. The main & main locations give a clear advantage over both mass retailers (eg walmart) and online retailers (eg amazon)--and advantage is that is convenience. But CVS is really falling down on the retail side. Anybody with knowledge of the category care to chat?

Reply by a searcher
from Harvard University in Cambridge, MA, USA

Hi Trevor, I don't want to discourage you. But a couple of points###-###-#### The pharmacy industry is facing some headwinds, largely due to "reimbursement rate pressure" -- which in layman's terms means that third-party payors (read: insurance companies) are lowering the amount they are willing to pay for prescription drugs benefits. Lowering reimbursements eats out of the profits for pharmacies. Pull up the annual reports for Rite Aid, CVS, Wallgreens, and do a crtl+F for "reimbursement" and you will see###-###-#### There is a lot of opacity in the Industry about how payments flow, the role of PBMs, etc. So definitely do your due diligence and talk to an industry insider so you know what you're getting into. Also (3), read up on PillPak, the Pharmacy start-up acquired by Amazon. They are trying to take market share from CVS, Wallgreens, Rite Aid.

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