Drug stores around the United States are struggling. Especially Walgreens.

Walgreens’ stock has plunged more than 80% over the past five years, ranking the company among the worst-performing stocks during that stretch. It’s closing 1,200 stores, roughly 15% of its locations. And now Walgreens is reportedly looking to escape the public market.

Walgreens and private equity firm Sycamore Partners are discussing a deal to take Walgreens private, the Wall Street Journal reported Tuesday. The companies declined to comment to CNN on a potential deal.

Pharmacies aren’t what they used to be

Walgreens’ problem, first and foremost, is that it’s more of a traditional pharmacy than CVS.

Walgreens has slipped behind CVS because it’s smaller than CVS, giving it less scale to negotiate prices with insurers and other health care entities that pay for most of the prescriptions people pick up. Walgreens is also more reliant on filling prescriptions through its pharmacy business and selling snacks and household essentials than CVS, which has made a push into health care services. Both the pharmacy business and the retail business are struggling for different reasons.

Profits from the pharmacy business have dropped in recent years as reimbursement rates for prescription drugs fall. The prices customers pay for drugs and the payments pharmacies receive are largely determined by companies known as pharmacy benefit managers, or PBMs, which negotiate rebates from drug manufacturers to insurers. PBMs have been cutting reimbursement rates to boost their own profits.

The front end of drug stores, which offer snacks and household staples, have become less profitable as shoppers buy more of these items online from Amazon, and at big-box chains such as Walmart and Costco. Walgreens gets 26% of its US retail pharmacy sales from its front-end business, compared to 21% of sales at CVS.

CVS faces these same challenges, but it has expanded further into the more lucrative health care business through mergers with insurer Aetna and its own pharmacy benefit manager Caremark. CVS’ issues with its pharmacy and retail businesses have been offset by its insurance and PBM business.

According to the Federal Trade Commission, nearly 80% of all prescriptions filled are managed by just three companies: Cigna, CVS and UnitedHealth.

To be sure, CVS is struggling too, closing more than 1,000 stores in recent years. It replaced its CEO earlier this year and is considering splitting up the company.

Pharmacy closures a national problem

A new study published in the journal Health Affairs shows that pharmacy closures are a problem across the US and can have serious health consequences.

Nearly 1 in 3 pharmacies closed between 2010 and 2021, the researchers found. About one-third of counties experienced an overall decline in pharmacies, and the risk of closure was higher in predominantly Black and Latino neighborhoods.

Independent pharmacies, which are often excluded from networks by PBMs, were more than twice as likely to close compared to chains.

“Our findings suggest that closures may widen health disparities in access to prescription and other essential pharmacy services, such as vaccinations and pharmacist-prescribed regimens, including contraceptives, medications for HIV prevention, and treatments for opioid use disorder,” said Jenny Guadamuz, assistant professor at the UC Berkeley School of Public Health, who co-authored the study.