Shoppers at Walgreens in San Franciscoâs Castro District make last minute purchases minutes before … [+]
Anadolu Agency via Getty Images
Americans stocking up on their prescription drugs as COVID-19 stricken U.S. communities went on lockdown is hurting Walgreens – at least temporarily.
The nation’s largest drugstore chain earlier this week said its pharmacies are “now seeing declining sales trends, especially in quarantined areas.” The slowing of U.S. sales comes after three robust weeks of strong sales in March across multiple product lines including health, wellness and groceries as the spread of the Coronavirus strain COVID-19 raged across the U.S.
“There were two very distinct periods in March,” Walgreens Boots Alliance executive vice president and global chief financial officer James Kehoe told analysts Thursday.
“We delivered comp sales growth of 26% in the first 21 days of the month,” Kehoe added. “However, post March 21st the comp sales trends turned negative, with the last week of the month running at a mid-teens rate of decline. Obviously, if this trend continues for an extended period it will quickly offset the sales uplift seen in the first 21 days of March.”
It appears health insurance companies and pharmacy benefit managers (PBMs) are to blame for stocking up of prescription drugs, according analysts who follows Walgreens.
“We think the weakness in prescription sales over the past two weeks is a result of insurance companies allowing people to get monthly prescriptions early without penalty, so there was likely stockpiling of drugs in early March,” Mizuho Securities USA analyst Ann Hynes wrote in a report issued after Walgreens second-quarter earnings call.
But the situation could be short-lived.
“We would anticipate these trends to normalize going forward and do not think there is a fundamental change in patient behavior if they are on existing therapies,” Hynes said. “The near-term risk could be new prescriptions not being written given the drop off in medical visits.”
It’s unclear whether other drugstore chains like CVS Health, Rite Aid or Walmart are facing a similar situation. Walgreens is the first major drugstore chain to report earnings since cases of Coronavirus spiked in March.
CVS Health owns the Caremark PBM and Aetna, the nation’s third largest health insurance company so its impact could be offset. CVS reports its first quarter earnings later this month.
But CVS warned earlier this week of “COVID-19’s adverse impact” on the drugstore chain’s businesses.
“We believe COVID-19’s adverse impact on our businesses, operating results, cash flows and/or financial condition primarily will be driven by the severity and duration of the pandemic, the pandemic’s impact on the U.S. and global economies and the timing, scope and effectiveness of federal, state and local governmental responses to the pandemic,” CVS said in a regulatory filing with the Securities and Exchange Commission. “Those primary drivers are beyond our knowledge and control, and as a result, at this time we cannot reasonably estimate the adverse impact COVID-19 will have on our businesses, operating results, cash flows and/or financial condition, but the adverse impact could be material.”