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WOONSOCKET, R.I. — CVS Health said it will eliminate about 600 corporate jobs over the next couple of months.
The job cuts will be made primarily at CVS corporate offices in Rhode Island, Illinois and Arizona, the company said.
In a statement, CVS Health indicated that the job reductions reflect fluctuations in the health care business environment.
“CVS Health continually reviews its operations in all of its markets and facilities across the U.S. to enhance efficiencies and ensure the company remains in the best competitive position to improve the health outcomes of its patients and clients while lowering their overall health costs,” CVS said in the statement. “Following a thorough evaluation process, we have determined that changing market dynamics and the increasingly competitive environment require us to operate as a more lean and efficient organization.
“As a result, we are eliminating a small percentage of positions at CVS Health in November and December 2016 in order to focus roles and resources on driving the greatest value for our business while maintaining customer satisfaction,” the company stated.
CVS, which employs more than 240,000 people nationwide, didn’t specify from which divisions the job cuts would be made. The company said the affected employees will be able to apply for other positions in the company. Those not placed in positions will be eligible to receive a severance package and career assistance.
The CVS layoffs announcement came ahead of CVS Health’s release of its third quarter results, which included sales that were below analyst’s expectations. The company’s revenue in the quarter grew 15% to $44.6 billion, helped by the acquisition of the pharmacy locations inside Target Corp. stores, and the purchase of the nursing home pharmacy Omnicare Inc. But analysts had expected sales of $45.3 billion.
CVS’s third quarter adjusted earnings per share of $1.64 (excluding some items), though, beat expectations. Analysts, on average, projected CVS’ third quarter adjusted EPS at $1.57, with estimates ranging from a low of $1.55 to a high of $1.59, according to Thomson Reuters.
CVS also lowered its profit outlook for the rest of the current fiscal year, and for next year as well.
In a conference call, chief executive officer Larry Merlo noted that CVS will lose about 40 million prescriptions as a result of deals signed recently by rival Walgreens Boots Alliance Inc.
Those deals shut CVS pharmacies out of the networks that serve the U.S. military’s Tricare health insurance program, and also Prime Therapeutics, which handles drug benefits for the Blue Cross and Blue Shield plans in many states.
“Very recent pharmacy network changes in the marketplace are expected to cause some retail prescriptions to begin migrating out of our pharmacies this quarter,” Merlo explained. “In addition, we are currently experiencing slowing prescription growth in the overall market as well as a soft seasonal business. These factors combined are leading us to reduce the midpoint of our guidance for this year by five cents per share.
“The network changes have more significant implications for our 2017 outlook,” Merlo added. “While we expect a healthy increase in PBM operating profit growth in 2017, we expect a decrease in retail operating profit growth.”
