AP – CVS Health topped second-quarter expectations, but the healthcare giant’s profit sank as pricing pressure hurt its drugstores and a jump in care use hit the insurance side.
The company also booked a USD496 million, pre-tax restructuring charge to cut costs and improve efficiency. Chief Executive Officer Karen Lynch told analysts on Wednesday that charge was tied partly to eliminating about 5,000 jobs that don’t involve dealing with customers.
The Wall Street Journal reported the cuts earlier this week. CVS Health said it employs more than 300,000 people. About 73 per cent are full-time.
CVS Health runs prescription drug plans through one of the nation’s largest pharmacy benefits managers. Its Aetna insurance arm covers more than 25 million people, and the company has nearly 10,000 drugstores.
The cuts make sense because the business has grown complex and unwieldy, said Neil Saunders, who follows CVS Health as Managing Director of GlobalData.
“Our sense is that the business could be leaner and better organised,” Saunders said in an e-mail.
CVS Health also is shifting its focus more to delivering care and managing customer health.
It’s digesting a couple of multibillion-dollar acquisitions geared toward that. The company plans to use its roughly USD10.6 billion acquisition of Oak Street Health to open clinics in some of its stores.
Lynch said on Wednesday the company expects to build 50 to 60 clinics next year. Oak Street specialises in serving people with Medicare Advantage plans. Those are privately run versions of the government’s Medicare programme and a growth focus for CVS Health.
In the second quarter, growth from the CVS Health’s largest business, pharmacy benefits management, softened hits from both the insurance and drugstore segments. Adjusted operating income sank 20 per cent on the health insurance side.
Aetna, like other insurers, has seen a bigger-than-expected jump in care for Medicare Advantage customers.
The drugstore side saw adjusted operating income fall 17 per cent as it dealt with tight reimbursement for prescriptions and a drop in COVID-19 vaccinations and testing.
