CVS to close pharmacies in dozens of Target stores

CVS Health is shuttering dozens of pharmacies inside Target stores over the next few months as pharmacy chains continue to cut costs.

CVS said the closings will begin next month and be completed by the end of April.

They are among the 900 locations CVS said in 2021 it would close over the next three years. It has shuttered 600 pharmacies since then and plans to close another 300 this year, including fewer than 100 inside Target stores.

Rite Aid, which filed for bankruptcy last year, has also been closing locations, as has Walgreens, which said last year it would close another 150 pharmacies.

The closures have worried public health experts who note that low-income neighborhoods tend to feel the brunt of the cuts.

John Hoeschen, owner of St. Paul Corner Drug, thinks many more pharmacy closures are on the way.

"You're going to see a whole lot more," he said. "Hopefully, we're not one of them."

He pointed the finger at under-reimbursement for filling prescriptions.

"About 60% of our prescriptions we dispense are well below our costs," he said. "How long can we do that?"

Every pharmacy that closes puts more stress and pressure on those that are left, he added. And pharmacists are already stressed and overworked.

Sales for retail pharmacies have become sluggish and their profits are under pressure partly because there are more generic drugs on the market and the margins for them aren't as good, said Neil Saunders, managing director of GlobalData, who follows the retail industry.

At the same time, many of the big chains over-expanded and are now pulling the plug on some locations that receive lower foot traffic because of duplication in some markets.

"So you might have a Target pharmacy down the road from a traditional CVS," Saunders said. "What they want to do is take out weak-performing locations and locations where there's overlap just so they can be more efficient."

In addition, he noted that some people are getting more of their prescriptions online, which reduces the needs for as many physical locations.

Many pharmacy chains, including CVS, are also wanting to focus more on other aspects of health care.

"They are not as interested in pharmacy as they once were," said Saunders. "So that's why they're sort of cutting out some of the fat on the pharmacy side and investing more on the health care side."

A CVS spokeswoman said the company is trying to reduce store and pharmacy density, and the decision to close some Target locations is "based on our evaluation of changes in population, consumer buying patterns and future health needs".

It is unclear whether any pharmacy services will remain in Target stores that lose a CVS.

A Target spokeswoman referred questions to CVS, noting that the pharmacy chain owns and operates the pharmacies inside its stores.

Minneapolis-based Target sold its in-store pharmacies to CVS in 2015 for $1.9 billion, one of several big moves CEO Brian Cornell made after taking control the previous year.

Executives said at the time the Target-run pharmacies were not profitable and they hoped that having a bigger pharmacy player — CVS — run them would help drive more traffic to their stores. The deal grew CVS' footprint by 20% and gave it access to some new markets without having to build new locations.

Today, CVS has about 1,800 pharmacies inside of Target's 1,950 stores.

Overall, CVS has more than 9,000 locations.

For Target, CVS pulling out of some of its stores is a blow because CVS became an integral part of the Target visit, Saunders said.

"CVS closing those locations leaves a gap in Target," he said. "And OK, they may not be the most frequented locations. But unless Target replaces them, it will be annoying for customers who want to shop there. It will be a slight deterioration of the service that Target offers."

And it might mean that some customers come to those Target stores less often, he added.

CVS said prescriptions will be transferred to a nearby CVS pharmacy before locations are closed and affected employees will be offered comparable roles in the company.