CVS Health, the retail pharmacy chain, is slashing 5,000 workers in an effort to decrease expenses as it expands its healthcare services. According to a securities filing, the pharmacy giant employed over 300,000 people in the United States as of the end of last year.
Towards Greater Healthcare Push
A CVS representative confirmed the layoffs, CNBC reported. Although employees are not anticipated to impact customer-facing employees in stores, pharmacies, clinics, or customer services centers. The spokesperson also said that those who are terminated would be offered severance packages that will include outplacement assistance.
"As part of an enterprise initiative to reprioritize our investments around care delivery and technology, we must take difficult steps to reduce expenses ... This, unfortunately, includes the need to eliminate a number of non-customer facing positions across the company," the company representative told the media outlet.
The layoffs were initially reported by the Wall Street Journal on Tuesday, August 1, citing an internal memo to workers. It comes the day before CVS announces its financial results for the second quarter.
CVS, headquartered in Rhode Island, is a national chain that includes over 9,000 pharmacies and 1,100 walk-in clinics. According to CNBC, the corporation controls the largest pharmacy benefit manager in the country, which is responsible for negotiating lower prescription prices with pharmaceutical companies on behalf of health insurance companies.
However, CVS has recently honed in on healthcare, following in the footsteps of competitors like Walgreens and the e-commerce giant Amazon.
With the roughly $8 billion purchase of healthcare provider Signify Health and the $10.6 billion purchase of Oak Street Health, which runs primary care clinics for seniors, the firm expanded into patient care.
Due to the expense of these transactions, CVS lowered its annual profitability outlook in the previous quarter.
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Oak Street Health Joins CVS Health
The cuts occur many months following Oak Street Health's takeover.
Oak Street Health, which operates primary care facilities for low- and middle-income persons with Medicare Advantage plans (a private, for-profit version of the federal government's Medicare program for those aged 65 and above), was acquired by the firm earlier this year in a transaction valued at $10.6 billion.
In a report by USA Today, CVS hopes to use the purchase to benefit from the federal government's drive to reduce Medicare spending while simultaneously enhancing the health of the population it serves.
Oak Street Health CEO Mike Pykosz said at the time of the merger, "This agreement with CVS Health will accelerate our ability to deliver on our mission and continue improving health outcomes, lowering medical costs, and providing a better patient experience while offering significant value to our shareholders."
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