Mail-Order Pharmacy Growth Amid Retail Decline: A Post-Pandemic Investment Opportunity

The post-pandemic healthcare landscape has witnessed a seismic shift in consumer behavior, accelerating the decline of traditional retail pharmacies while propelling mail-order services into the spotlight. As economic pressures, staffing shortages, and digital convenience reshape the industry, investors are increasingly turning their attention to mail-order pharmacies as a resilient and scalable sector. This article examines the forces driving this transformation, evaluates the competitive advantages of mail-order models, and assesses the long-term investment potential in a market poised for sustained growth.

The Collapse of Traditional Retail Chains: A Catalyst for Change

From 2020 to 2025, traditional retail pharmacies faced a perfect storm of challenges. Inflation, rising prescription costs, and the dominance of pharmacy benefit managers (PBMs) eroded consumer trust in brick-and-mortar models. Major chains like CVS Health (CVS), Walgreens (WAG), and Rite Aid (RAD) reported steep losses, with Walgreens considering closing 25% of its 8,600 stores and CVS shuttering 10% of its 9,000 locations. These closures were not merely financial decisions but responses to a fundamental shift in consumer preferences.

The pandemic initially boosted retail pharmacy revenues through vaccine administration and emergency demand, but as these surges faded, so did the reliance on in-person services. By 2024, 28% of Gen Z consumers and 26% of millennials had adopted mail-order or online pharmacy services, driven by convenience, cost savings, and the ability to shop for the lowest prices. This trend has been further amplified by the rise of digital-first competitors like Amazon Pharmacy and Mark Cuban's Cost Plus Drug Company, which offer transparent pricing and home delivery.

Mail-Order Pharmacies: A New Era of Cost Efficiency and Convenience

Mail-order pharmacies have capitalized on the weaknesses of traditional models by offering a streamlined, cost-effective alternative. Key advantages include:

1. Operational Efficiency: Mail-order pharmacies reduce overhead costs by eliminating physical storefronts and leveraging centralized fulfillment centers. For example, Amazon Pharmacy's use of AI-driven logistics and drone-based delivery has cut delivery times and operational costs, enabling competitive pricing.
2. PBM Partnerships: PBMs, which control 79% of the market, often steer patients to mail-order services through formulary incentives. This creates a flywheel effect, where lower generic drug reimbursement rates (via Maximum Allowable Cost schedules) benefit both PBMs and mail-order pharmacies.
3. Consumer-Centric Innovation: Platforms like PillPack (acquired by Amazon in 2018) introduced pre-packaged, daily medication planners, addressing adherence challenges for patients with complex regimens. This innovation has been replicated by competitors, including Walgreens and CVS, which now offer similar home delivery services.

The financial performance of mail-order pharmacies underscores their resilience. The U.S. mail-order market grew from $109.44 billion in 2024 to $127.87 billion in 2025, with a projected compound annual growth rate (CAGR) of 16.8%. By 2032, the sector is expected to reach $818.0 billion, driven by chronic disease management and an aging population.

Competitive Advantages and Long-Term Investment Potential

Mail-order pharmacies are not just surviving—they are redefining healthcare delivery. Their competitive advantages include:

• Scalability: Unlike traditional pharmacies, mail-order models can scale rapidly with minimal incremental costs. For instance, Amazon's expansion into 24-hour drug delivery in 2024 demonstrated the sector's ability to meet surging demand without physical constraints.
• Data-Driven Personalization: AI and telehealth integration allow mail-order pharmacies to offer personalized care, such as medication reminders and virtual consultations, enhancing patient outcomes and loyalty.
• Regulatory Tailwinds: Legislative efforts like the Pharmacy Benefit Manager Transparency Act aim to curb PBM abuses, potentially increasing transparency and affordability in mail-order services.

However, challenges remain. Critics argue that mail-order pharmacies lack the ancillary services of traditional retail outlets, such as in-person pharmacist consultations and health screenings. Additionally, the dominance of PBMs raises concerns about conflicts of interest, as they often prioritize their own mail-order operations over patient needs.

The Future of Pharmacy: A Hybrid Model?

While mail-order pharmacies are thriving, the future may lie in a hybrid model that combines the convenience of digital services with the human touch of retail pharmacies. For example, CVS and Walgreens are investing in specialty pharmacies to serve high-margin, complex conditions like cancer and autoimmune diseases. These units could complement mail-order services by providing in-person care for patients requiring more intensive monitoring.

Investors should also consider the role of biosimilars and transparent pricing models. Biosimilars, which are cheaper alternatives to biologics, are projected to save $250 billion by 2029, directly benefiting mail-order pharmacies. Similarly, Cost Plus Drug Company's direct-to-consumer model, which bypasses PBMs, could disrupt traditional pricing structures and attract cost-conscious consumers.

Investment Advice: Positioning for Growth

For investors, the mail-order pharmacy sector offers a compelling mix of growth and stability. Key opportunities include:

1. Digital-First Platforms: Amazon Pharmacy and Cost Plus Drug Company are well-positioned to capitalize on e-commerce trends. Amazon's stock (AMZN) has shown resilience in healthcare innovation, while Cost Plus's transparent pricing model aligns with regulatory shifts.
2. Traditional Chains with Mail-Order Wings: CVS and Walgreens are adapting by expanding their mail-order capabilities and investing in specialty pharmacies. While their retail segments face headwinds, their integrated models could stabilize long-term earnings.
3. PBMs and Logistics Providers: Companies like UnitedHealth Group (UNH) and Cardinal Health (CAH) benefit from PBM dominance and mail-order growth. However, regulatory scrutiny of PBMs could pose risks.

Conclusion

The decline of traditional retail pharmacies is not a temporary setback but a structural shift driven by consumer behavior, technological innovation, and economic realities. Mail-order pharmacies, with their cost efficiency, scalability, and digital-first approach, are poised to dominate the next phase of the industry. For investors, this represents a golden opportunity to align with a sector that is not only surviving but thriving in the post-pandemic world. As the healthcare landscape continues to evolve, those who bet on mail-order pharmacies will likely reap the rewards of a resilient and transformative market.