In the wake of California’s statutory mandate for a higher minimum wage for healthcare workers, multiple financial problems are on the horizon for the industry as a whole, and retail pharmacies are the latest example.

Rite Aid filed for Chapter 11 bankruptcy protection on October 16, 2023. The company had been struggling with falling sales and opioid-related lawsuits. It is the third-largest pharmacy chain in the United States, with over 2,100 stores in 17 states. The company has been losing money for several years, and its stock price has plummeted. It is unclear how long Rite Aid will be in bankruptcy. The company said that it expects to emerge from bankruptcy within the next six to nine months.

In addition to its financial problems, Rite Aid is also facing a number of lawsuits from states and municipalities alleging that the company contributed to the opioid epidemic by overprescribing prescription painkillers.

The Wall Street Journal reports that Rite Aid will will reportedly close roughly 400 to 500 of its approximately 2,200 stores by the end of its bankruptcy.

At the same time CNN reports on walkouts by Walgreens pharmacists and technicians around the country and at CVS stores in Kansas City over low pay and understaffed stores.

The majority of drugstores’ sales comes from filling prescriptions. But their profits from that segment have declined in recent years because of lower reimbursement rates for prescription drugs. The front end of drugstores, where they sell snacks and household staples, also face pressure.

CNN also reports that CVS, Walgreens and Rite Aid are eliminating some locations as they face rising competition for these items from Amazon, big-box stores with pharmacies like Walmart, and Dollar General in rural areas.

Theft has become a problem for drugstores in some locations, and some stores have resorted to locking up products to prevent theft. But this has made the customer experience worse.

Drugstores are trying to pivot into the more lucrative health care industry in recent years and become primary care providers. CVS acquired health insurer Aetna, and Walgreens took a majority stake in primary care network VillageMD. But this strategy requires fewer brick-and-mortar retail stores.

Retail pharmacy chains overexpanded in the past, often pushing out local pharmacies in the process.The number of independent pharmacies decreased by nearly 50% from 1980 to 2022, according to McKinsey.

Rite Aid, CVS and Walgreens have also been shuttering stores for years. CVS, the largest US chain, closed 244 stores between 2018 and 2020. In 2021, it announced plans to close 900 stores by 2024. Walgreens said in 2019 it would close 200 stores and in June announced an additional 150 store closures.

A study published in the Journal of the American Medical Association found that pharmacies at greatest risk for closures are those with a large customer base on public insurance, which have lower reimbursement rates than private plans, as well as independent pharmacies.