Pharmacy Chains in the Crosshairs: Navigating Policy Shifts and Market Realities in 2025

The U.S. retail pharmacy sector is undergoing a seismic transformation as public health policies reshape the industry’s financial and operational landscape. With pharmacy benefit manager (PBM) reforms gaining momentum and evolving consumer preferences driving market shifts, major chains like CVS, Walgreens, and Walmart are recalibrating their strategies to ensure long-term profitability. This article examines how these companies are navigating regulatory pressures, adapting to competitive threats, and leveraging innovation to maintain market resilience in a post-pandemic era.

PBM Reforms: A Double-Edged Sword

Pharmacy benefit managers (PBMs) have long been criticized for opaque pricing practices, including spread pricing and clawback clauses, which have disproportionately burdened independent pharmacies and eroded trust in the system [1]. In 2025, 24 states passed 33 PBM-related bills, with measures like banning spread pricing and mandating rebate transparency becoming increasingly common [2]. These reforms aim to level the playing field but also introduce new challenges for retail chains. For example, CVS’s shift to its “CostVantage” model—transparently pricing prescriptions based on acquisition costs and service quality—has drawn scrutiny for potentially raising patient costs while boosting its own margins [3]. Meanwhile, Walgreens, now under private equity ownership, is poised to benefit from PBM reforms that reduce reliance on rebates, enabling more competitive pricing [4].

Strategic Adaptations: Store Closures, Acquisitions, and Rebranding

The financial strain on retail pharmacies has accelerated store closures and strategic overhauls. Rite Aid’s Chapter 11 bankruptcy filing in 2024 exemplifies the fragility of traditional models, with its assets likely to be absorbed by competitors [5]. CVS, however, has capitalized on this chaos, expanding its small-format stores and acquiring Rite Aid prescriptions to bolster its market share. In contrast, Walgreens’ $10 billion acquisition by Sycamore Partners signals a pivot toward cost rationalization, with plans to close up to 1,200 underperforming stores by 2027 [6]. This restructuring, while risky due to $13.7 billion in debt, positions Walgreens to focus on core operations and healthcare integration, such as optimizing its VillageMD primary care assets [7].

Financial Performance: Resilience Amid Uncertainty

Despite industry-wide challenges, some chains have demonstrated resilience. CVS reported a 12.5% revenue increase in its pharmacy segment during Q2 2025, driven by the CostVantage model and Rite Aid prescription acquisitions [8]. Its adjusted earnings per share guidance was raised to $6.30–$6.40, reflecting confidence in its strategy. Walmart, meanwhile, maintained a strong presence in Medicare Part D networks, leveraging its scale to secure preferred pharmacy status [9]. Walgreens, though facing post-acquisition uncertainty, saw stable visitation trends in 2024, suggesting its brand remains competitive [10].

Market Shifts: The Rise of Alternatives

Consumer dissatisfaction with traditional chain pharmacies has opened the door for alternatives. Supermarkets and mass merchandisers now outperform chains in customer satisfaction metrics, with mail-order and digital pharmacies gaining traction [11]. The J.D. Power 2025 U.S. Pharmacy Study found that 63% of mail-order customers expressed interest in digital platforms, signaling a shift toward convenience and transparency [12]. Retail chains must innovate to retain customers, whether through telepharmacy services or partnerships with digital platforms.

Conclusion: A Sector in Transition

The retail pharmacy industry is at a crossroads. While PBM reforms and regulatory pressures create short-term volatility, they also present opportunities for chains that prioritize transparency, operational efficiency, and customer-centric innovation. CVS and Walgreens, in particular, are leveraging strategic pivots to navigate these challenges, but their long-term success will depend on their ability to adapt to a rapidly evolving market. For investors, the key takeaway is clear: resilience in this sector requires agility, not just scale.

Source:
[1] Five pharmacy actions to expect from state and federal [https://www.cardinalhealth.com/en/services/retail-pharmacy/resources-for-pharmaceutical-distribution/independently-healthy/five-pharmacy-actions-to-expect-in-2025.html]
[2] PBM Reform Takes Off in 2025 [https://www.pharmacytimes.com/view/pbm-reform-takes-off-in-2025]
[3] CVS Pharmacy achieves CVS CostVantage milestone [https://www.cvshealth.com/news/company-news/cvs-pharmacy-achieves-cvs-costvantage-milestone.html]
[4] How PBM Reform Could Help Walgreens And Other E-Commerce Businesses [https://cleverence.com/articles/business-blogs/how-pbm-reform-could-help-walgreens-and-other-e-commerce/]
[5] A New Prescription for US Pharmacy [https://www.bain.com/insights/a-new-prescription-for-us-pharmacy/]
[6] Unlocking Value in Retail-Pharma: Sycamore's Walgreens Acquisition [https://www.ainvest.com/news/unlocking-retail-pharma-sycamore-walgreens-acquisition-power-private-ownership-2508/]
[7] Walgreens' Move to Go Private: 4 Key Takeaways [https://www.aha.org/aha-center-health-innovation-market-scan/2025-03-18-walgreens-move-go-private-4-key-takeaways]
[8] CVS boosts 2025 outlook after strong Q2 [https://www.supermarketnews.com/finance/cvs-boosts-2025-outlook-after-strong-q2]
[9] Large Chains' Position in 2025's Part D Pharmacy Networks [https://www.drugchannels.net/2024/11/large-chains-position-in-2025s-part-d.html]
[10] CVS and Walgreens in 2025 [https://www.placer.ai/anchor/articles/cvs-and-walgreens-in-2025]
[11] Chain Drug Store Closures Create Big Opportunities for Supermarkets, Mass Merchandisers and Online Pharmacies [https://www.businesswire.com/news/home/20250729793015/en/Chain-Drug-Store-Closures-Create-Big-Opportunities-for-Supermarkets-Mass-Merchandisers-and-Online-Pharmacies-J.D.-Power-Finds]
[12] What Can Pharmacy Chains Gain From Rite Aid's Closures? [https://www.placer.ai/anchor/articles/what-can-pharmacy-chains-gain-from-rite-aids-closures]