Big changes are coming for CVS Health, the company announced Thursday.
Over the next three years, CVS Health plans to shutter 900 pharmacies and intensify its efforts to reconceive its retail locations as sites for more comprehensive healthcare services. The company, which also operates Aetna health insurance and CVS Caremark pharmacy benefit management subsidiaries, announced a related senior executive leadership shakeup.
CVS Health isn't leaving traditional pharmacies behind, even though there will be fewer, but the company is expanding the retail clinic presence currently led by its MinuteClinics. Looking ahead, CVS Health envisions more sites where customers can access health and wellness services, both in person and virtually. The store closures will result in $1 billion to $1.2 billion in impairment charges, the company reported to the Securities and Exchange Commission.
CVS Health will weigh factors such as local market dynamics, population shifts and local storefront density when deciding what stores to close, a spokesperson said. The company also will consider the number of Aetna and CVS Caremark customers in an area.
"We remain focused on the competitive advantage provided by our presence in thousands of communities across the country, which complements our rapidly expanding digital presence," CVS Health President and CEO Karen Lynch said in a news release.
CVS Health is responding to changing consumer demands and behavior, said Suzanne Delbanco, executive director of Catalyst for Payment Reform.
With foot traffic decreasing due to online orders and services, CVS Health likely intends to get rid of stores that are not operating as profitably and invest resources in changing the atmosphere and offerings at its other locations, Delbanco said. "It just reflects a broader understanding of what the American healthcare consumer wants and expects, especially post-pandemic," she said.
"This has the potential to provide a broad array of services to an individual healthcare customer who might be getting their insurance through Aetna, and convenient services through CVS," Delbanco said. "The ability of CVS and Aetna to share data about that patient could lead to better care coordination and efficiency."
More broadly, the reorientation of CVS Health's retail strategy reflects larger trends in the healthcare industry, said Matt Wolf, director and healthcare senior analyst at RSM.
Although physical locations are still important for treatment, many healthcare companies are racing to cross barriers and deploy virtual care options to become the "Facebook or Amazon of healthcare," Wolf said. "I didn't get the sense that [CVS is] exiting markets so much as they're just removing some of the more redundant locations and shifting some of their attention and investment from physical presence to virtual presence," he said.
Several executive moves went along with CVS Health's new plans for its pharmacies and clinics. The company elevated Prem Shah to chief pharmacy officer effective immediately. On Jan. 1, Shah and Michelle Peluso, currently executive vice president and chief customer officer, will become co-presidents of the company's retail operations.
Neela Montgomery, president of CVS Health's pharmacies, will depart the company at year's end.