CVS Health Profits Drop To $1.9 Billion As Restructuring Costs Take Hold

CVS Health said second quarter profits dropped 37% to $1.9 billion compared to the year-ago period due largely to costs from restructuring and acquisitions made this year.

The drugstore and health insurance giant Wednesday reported net income of $1.9 billion, or $1.48 a share, compared to $3.03 billion, or $2.29 cents, in the second quarter of 2022. CVS sales jumped 10% to $88.9 billion in the company’s second quarter.

“During the second quarter of 2023, the company developed an enterprise-wide restructuring plan intended to streamline and simplify the organization, improve efficiency and reduce costs,” CVS said Wednesday in its second quarter earnings report. “In connection with the development of this plan and the recently completed acquisitions of Signify Health and Oak Street Health, the company also conducted a strategic review of its various transformation initiatives and determined that it would terminate certain initiatives. In connection with the restructuring plan, during the three months ended June 30, 2023, the company recorded a $496 million pre-tax restructuring charge.”

As part of the restructuring, CVS plans to shed 5,000 jobs across the country. CVS, which owns the nation’s third-largest health insurer in Aetna, said in a statement earlier this week that the company and the industry are “evolving to adapt to new consumer health needs and expectations.”

In May, the company completed its $10.6 billion acquisition of Oak Street Health, adding a large network of doctor-staffed clinics primarily used by seniors. CVS reportedly beat out several other suitors for Oak Street. And CVS Health in March of this year closed its $8 billion acquisition of Signify Health, bringing the drugstore giant in-home medical services from a national network of clinicians.

As these new companies are integrated, CVS executives said the company is performing well and making changes to ensure growth into the future.

“Our diversified business model delivered strong results this quarter,” CVS chief executive Karen S. Lynch said. “We continue to execute on our strategy to expand access to health services across our care delivery channels and strengthen our engagement with consumers to improve their health and well-being.”

To be sure, total revenues in CVS’ health care benefits segment jumped 17.6% in the second quarter to $26.7 billion “driven by growth across all product lines,” the company said.

Meanwhile, CVS’ health services segment, which includes the pharmacy benefit management company CVS Caremark, reported $46.22 billion in revenue, a 7.6% increase compared to the year-ago period. And the retail pharmacy business saw similar 7.6% growth, reporting $28.78 billion in sales.