Wal-Mart pharmacy business suffers under Affordable Care Act

Dive Brief:

Wal-Mart Stores Inc.Tuesday noted that one reason for its reduced Q2 profits stems from more of its customers having health insurance thanks to the Affordable Care Act. This coverage mandates for generic alternatives for prescriptions or reimbursing at lower prices.
Pharmacy sales accounts for some $19 billion in Wal-Mart’s revenue each year, according to Quartz.
Drugstore retailers, notably CVS Health, are investing heavily in boosting their abilities to provide a wide range of health care services.

Dive Insight:

Retailers like drugstores, general merchandise stores, and grocery stores are taking advantage of a new financial picture in healthcare, spurred in part by President Barack Obama’s Affordable Care Act. Customers are starting to see these businesses offer more and more actual medical services in addition to traditional health and beauty products.

The ACA has helped accelerate these efforts, providing many more Americans with more healthcare coverage, lowering the cost of certain services and medications (like vaccines and birth control), and expanding Medicaid, the state-federal program that provides medical coverage for poor people who aren’t working or don’t have access (sometimes for financial reasons) to health coverage through their employers.

CVS has gone far in re-branding itself as part of its effort to capitalize on the new economic picture in health, ending tobacco sales and changing its name to “CVS Health.” The company also acquired pharmaceutical sales company Omnicare, which would greatly expand its pharmacy services and could give it greater clout in its dealings with pharmaceutical companies.

Target, meanwhile, has decided to exit the business rather than expand, selling its pharmacy unit to CVS, which will run pharmacies and clinics within Target stores.

Wal-Mart said this week that it has no plans to leave the space. But the company may have to decide which way to pivot — either increase its medical services and beef up its pharmacy's clout or scale back its pharmacy expectations and operations.