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The Unhealthy Power of CVS
States give big pharmacy chains a leg up over independent outlets.
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Coronavirus vaccine distribution is underway across the country, which is great news. But it also reveals some of the problematic ways in which policymakers have built the country’s health care system, leading to chokepoints in distribution that are making things harder than they need to be.
Case in point: CVS.
CVS is one of the main distributors of the vaccine because, as my colleague Olivia Webb explained, it has to be. Public policy choices have allowed CVS and Walgreens to roll up huge swathes of the pharmacy sector, leaving exceedingly few options for patients to obtain drugs. CVS alone makes one-quarter of national prescription revenue and moves about 1 billion prescriptions a year.
“We’re in a situation where we don’t have a public sector that’s able to do something like this,” Jeffrey Levi, former director of the nonprofit Trust for America’s Health, told the Los Angeles Times. “We have to work with the system we have.”
But that doesn’t make CVS good at what it does. Already, Oklahoma, a state where CVS has previously had serious issues, revoked 2,500 vaccine doses because the company wasn’t getting them out to veterans’ centers fast enough. For years, pharmacists have complained about being overworked and understaffed to the point of being dangerous working for the big retail chains, and CVS in particular.
I’m sure readers have their own horror stories of trying to deal with CVS’s customer service systems; I certainly do.
There are a host of ways in which bad policy has promoted chain pharmacies over independent ones, even though customers tend to prefer the latter, which also often offer better prices. One of them, of course, is subsidies.
CVS is one of the most heavily subsidized retailers in the country, trailing only Amazon, Sears, and Bass Pro Shops, and beating out Lowe’s and Walmart. It has collected a total of nearly $240 million in state and local subsidies over the years, that we know of, for everything from its headquarters to expanding its distribution network. (CVS’s main competitor, Walgreen’s, by comparison, has only received $33 million. Get some better lobbyists, guys!)
CVS is a prime beneficiary of the chain-ification of America that touches everything from restaurants to hardware stores. This, of course, gives CVS considerable economic power over the independent pharmacies that don’t receive the same level of support from the state. By giving CVS’ retail outlets a leg up over independent locations, subsidizing the creation and maintenance of its distribution network and warehouses, and allowing other CVS-owned middleman in the pharmaceutical system to squeeze smaller pharmacists, owners of those local locations feel they have no choice but to sell to CVS, at best, or just close at worst.
CVS nearly doubled the number of locations it runs between 2005 and 2019, with many of those new stores smaller pharmacies that were bought out and rebranded. Just look at this list of mergers. For many communities, there is simply no alternative to going to a giant, retail chain pharmacy in order to obtain medication; CVS even bought out Target’s pharmacies, as well as many pharmacies found in grocery stores.
This economic power, in turn, translates into political power. CVS is headquartered in Rhode Island, and when that state back in 2013 proposed cutting back on corporate tax credits — in exchange for a reduction in the state’s corporate tax rate, mind you — CVS threatened layoffs. At the time, the corporation was by far the largest beneficiary of the state’s incentive programs, in some years claiming up to 40 percent of the state’s overall spending on corporate giveaways.
When some of those credits were indeed reduced a few years later, CVS managed to expand its workforce in Rhode Island anyway. Imagine that.
To be clear, subsidies aren’t the chief reason CVS was able to consolidate the pharmacy industry and potentially gum up the works on vaccine distribution. But they’re part of a suite of policies that gave CVS an advantage over smaller, independent pharmacies, irrespective of either’s ability to adequately serve customers or, you know, keep people alive by not making mistakes with their medication.
It’s the same story in many other sectors: Local businesses that provide higher dividends to the community see their major, national competitors subsidized by state and local governments, making an already nigh-impossible task even harder.
In the case of CVS, this is not only economically harmful, but harmful to your health. States should turn off the subsidy spigot, and then use their other powers to rein in CVS’s ability to dominate the entire retail pharmacy sector.
ONE MORE THING: A new bill introduced in the Pennsylvania House by Republican Rep. Dawn Keefer would prevent corporations that receive the state’s film and TV tax credits from selling those credits on to other companies. It’s a smart move. Film tax credits are a scam to begin with, and making them transferable — meaning able to be sold to unrelated third parties — is even worse. Pass the bill, yell cut on the sales.
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— Pat Garofalo