CVS to close 900 stores as part of a major shift in retail strategy

The company announced Thursday that big changes are coming to CVS Health.

Over the next three years, CVS Health plans to close 900 pharmacies and intensify efforts to transform its retail outlets into more comprehensive health care centers. The company, which also operates pharmacy benefit management subsidiaries Aetna and CVS Caremark, announced a related senior management reshuffle.

CVS Health is not leaving the traditional pharmacies behind, although there are fewer of them, the company is expanding the presence of retail clinics, currently led by MinuteClinics. Looking ahead, CVS Health envisions more sites where clients can access health and wellness services both in person and virtually. The store closures would result in impairment losses of between $ 1 billion and $ 1.2 billion, the company said. reported to the Securities and Exchange Commission.

A CVS Health representative will weigh factors such as local market dynamics, population movements and window density when deciding which stores to close. The company will also consider the number of Aetna and CVS Caremark clients in the region.

“We remain focused on the competitive advantage we provide with our presence in thousands of communities across the country, complementing our rapidly expanding digital presence,” said CVS Health President and CEO Karen Lynch. news release

CVS Health is responding to changing consumer needs and behavior, said Suzanne Delbanko, CEO of Catalyst for Payment Reform.

Given the decline in traffic due to online orders and services, Delbanco said CVS Health is likely intent on getting rid of stores that are not performing as profitable and investing resources in changing the atmosphere and offerings elsewhere. “It just reflects a broader understanding of what the American health care consumer wants and expects, especially in the aftermath of the pandemic,” she said.

“This can provide a wide range of services for individual healthcare clients who can get their insurance through Aetna, as well as convenient services through CVS,” Delbanko said. “The ability of CVS and Aetna to share this patient data can improve treatment coordination and effectiveness.”

More broadly, CVS Health’s reorientation of its retail strategy reflects broader trends in the healthcare industry, ”said Matt Wolf, director and senior health analyst at RSM.

While physical location is still important for treatment, many healthcare companies are looking to break down barriers and deploy virtual treatment options to become “Facebook or Amazon in healthcare,” Wolf said. “I did not realize that [CVS is] are leaving the markets so much that they are simply removing some of the more redundant locations and shifting some of their focus and investment from physical to virtual, ”he said.

Several management steps have coincided with CVS Health’s new plans for pharmacies and clinics. The company immediately promoted Prem Shah to the position of Chief Pharmacy Director. On January 1, Shah and Michelle Peluso, currently executive vice president and chief accountant, will become co-presidents of the company’s retail operations.

Neela Montgomery, President of CVS Health Pharmacies, will leave the company at the end of the year.

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