CVS Laying Off Workers While Reportedly Considering a Breakup

Roughly 2,900 CVS Health employees will soon be out of a job. The layoffs will include mostly corporate roles, with many jobs at stores, pharmacies, and distribution centers remaining unaffected.

The layoffs, about 1% of the workforce, are part of a plan to save money. Earlier this year, CVS blamed higher medical costs for a drop in profit.

“We’ve embarked on a multi-year initiative to deliver $2 billion in cost savings by reducing expenses and investing in technologies to enhance how we work,” said a spokesperson, per CNN.

Last year, CVS laid off about 5,000 workers, most of which were also in corporate roles. However, the drugstore giant also closed hundreds of stores in the U.S.

The recent announcement of payoffs plus other cost-saving measures indicates a company facing an uncertain future. In general, drug stores are finding it hard to survive with declining government reimbursement rates for prescriptions as well as increased competitive pressure from big-box chains like Walmart and Costco, which have their own in-house pharmacies.

“Our industry faces continued disruption, regulatory pressures, and evolving consumer needs and expectations,” the CVS spokesperson added.

CVS Health Possibly Breaking Up

Reportedly, CVS Health has been considering a breakup of the company, splitting its retail side from the insurance segment, according to people familiar with the matter. As reported by Reuters, company executives have been discussing different strategies with financial advisers. Part of the discussion includes whether to place the pharmacy benefits manager group under the insurance division or the retail unit. Such a split would potentially create two publicly traded companies.

“CVS’s management team and Board of Directors are continually exploring ways to create shareholder value,” a spokesperson said, per Reuters. “We remain focused on driving performance and delivering high quality healthcare products and services enabled by our unmatched scale and integrated model.”

CVS Health has a market value of $79 billion, with long-term debt of around $58 billion. In August, the company predicted an annual profit between $6.40 and $6.65 per share, which is lower than a previous expectation of $7.00. As a result, shareholders have been pressuring the company to implement actions to turn things around. A potential breakup of CVS would certainly shake things up.