It has been a rough year for retail pharmacy chains CVS and Walgreens, with their stocks falling sharply while much of the market rallied. And that weakness is continuing today on fears that Amazon is getting ready to eat even more of their lunch. 😨
That’s because Blue Shield of California decided to drop the company’s pharmacy benefit management services. Instead, they’re partnering with Mark Cuban’s Cost Plus Drug Company and Amazon Pharmacy, potentially delivering major savings for its roughly 5 million members. 🤝
While California is a significant market for CVS, the broader implication that health insurers could begin to look beyond traditional pharmacy benefit management systems sent investors running for the pills. Get it? Instead of running for the hills? Anyway…
Losing pharmacy market share adds to the list of troubles these companies have faced recently. 😵💫
On the demand side, they’ve got inflation-pressured consumers spending less on discretionary purchases in their stores. On the supply side, they’ve got increased competition from “newer age” digital pharmacies and rising costs in their health insurance segment. And on the regulatory side, they’ve got the overhang of opioid-related lawsuits and anti-trust pressures.
Add it all up, and you’ve got significant downside pressure on these businesses and their stocks. 👎
$CVS shares fell 8% to nearly three-year lows, and $WBA dipped 4% to 13-year lows. Both are down over 30% over the last year, with investors struggling to find a catalyst for a turnaround anytime soon. 📉