USA – Unions representing over 7,000 CVS workers in Southern California have reached a tentative agreement on a new contract following a weekend strike.
The workers, demanding improved wages, staffing levels, and affordable healthcare, initiated a walkout that impacted four stores in Los Angeles and three in Orange County.
“Today proves that when workers fight, we win,” stated the United Food and Commercial Workers (UFCW) bargaining committee in a press release.
The committee expressed eagerness to discuss the details of the agreement with union members before proceeding to a voting process.
The strike commenced on Friday morning and lasted through the weekend. The union has accused CVS of employing intimidation tactics and obstructing communication between workers and their union representatives, prompting the filing of unfair labor practice charges against the company.
A bargaining session is scheduled for Wednesday to negotiate specifics of the contract, which had expired in June.
Union members will have the chance to review and vote on the proposed contract, which the bargaining committee unanimously recommends for approval.
Workers have voiced concerns about the affordability of CVS’s healthcare insurance offerings and highlighted that stores are understaffed, especially with the approaching flu season. This staffing shortage is exacerbated by the need to lock up items to prevent theft.
“We’re proud of our long-standing, productive relationship with the UFCW and hope to finalize a new agreement soon,” said CVS spokesperson Amy Thibault in an emailed statement.
Broader labor movements in the pharmaceutical sector
The strike at CVS coincides with escalating labor movements within the pharmaceutical sector.
Last Friday, thousands of Rite Aid workers in the Los Angeles area, also represented by UFCW, voted to authorize a strike after their contract expired two months ago.
Allegations against Rite Aid include unfair labor practices, such as offering incentives to employees not to sign petitions and engaging directly with employees in negotiations.
Moreover, over 2,400 Kaiser mental health workers initiated an open-ended strike on Monday due to heightened workloads and staffing shortages, leading to a “substandard” care system.
Picket lines were established outside Kaiser facilities across various counties, including Los Angeles and San Diego.
Challenges facing major pharmacy chains
As CVS and Walgreens navigate these labor challenges, they are also grappling with a larger crisis.
Walgreens CEO Tim Wentworth recently disclosed that approximately 25% of the chain’s stores operate at a loss, prompting the announcement that 1,200 stores will close over the next three years.
This decision comes just weeks after CVS announced layoffs affecting 2,900 corporate staff members.
Both chains are currently implementing multibillion-dollar cost-saving measures, including the closure of hundreds of locations and significant job cuts.
The difficulties faced by CVS and Walgreens are rooted in a rapid expansion that has left them with too many stores in a landscape where consumer habits are changing.
The companies have accrued fines from government agencies and are experiencing strained relationships with health insurers, contributing to their overall challenges.
Amid this backdrop, CVS faced pressure from an activist investor, leading to the hiring of David Joyner to replace Karen Lynch.
During Lynch’s three-and-a-half-year tenure, CVS’s stock fell nearly 11 percent, prompting the company to cut its 2024 profit forecast three times, primarily due to rising Medicare-related costs.
Understaffing and consumer experience
Both CVS and Walgreens have been criticized for their understaffed stores, leading to poor customer experiences.
Complaints have emerged regarding locked-up products to prevent theft, and the companies’ struggles to attract customers have resulted in declining sales.
Retail analyst Neil Saunders noted, “CVS and Walgreens probably do have too many stores because they overexpanded, but the bigger problem is that the stores that they have are not very good.”
Despite efforts to enhance in-store offerings, neither chain has effectively developed a competitive online presence that caters to customer needs.
Consultant Anshuman Jaiswal remarked on the missed opportunities, saying, “If you go to CVS.com or Walgreens.com, if you are placing an order for cough syrup, why don’t I sell chicken broth as a product recommendation immediately? It’s about reimagining the business model.”
The prescription dilemma
The retail pharmacy sector is at a crossroads, as CVS and Walgreens report difficulty in generating profits from prescriptions.
Over the years, a shift in the power dynamic between pharmacies and health insurers has diminished the influence of drugstores.
Brian Tanquilut, a health care services analyst at Jefferies, emphasized this point: “What that did was to prove that patient loyalty is not to the retail pharmacy, but it actually is whatever my insurance is willing to pay.”
Future prospects and strategic shifts
Faced with intense competition from retail giants like Walmart and Costco, CVS and Walgreens are seeking to redefine their business models.
Walgreens has announced a shift back to its core pharmacy operations, while CVS is reportedly considering breaking up its mergers with Aetna and Caremark to refocus its strategy.
On a hopeful note, Wentworth expressed optimism regarding the future of Walgreens, stating, “I’m very confident that over a two- to three-year period we will have reset the framework for reimbursement discussions. We are in the early stages of a turnaround that will take time.”
