CVS to save $3B over five-year period with streamlining initiative

NEW YORK — CVS Health will embark on a three-step streamlining initiative with a goal of saving approximately $3 billion from 2017-2021. Two-thirds of the savings will be seen in CVS’s retail/long-term care segment, with the remaining one-third of savings seen in the pharmacy benefits manager category.

These changes will include the company closing 70 stores in 2017, but Dave Denton, CVS EVP and CFO, stated during Thursday’s CVS Analyst Day here that the Woonsocket, R.I.-based retailer will “continue to provide convenient local access to the millions of patients we serve on a daily basis.”

The store closings should provide a $265 million benefit to CVS, mostly in 2017, and will help CVS deliver higher returns for shareholders over the long-term,” Denton added.

The second step of this process is enhancing efficiency of corporate shared service, which involves consolidating similar activities across business units. CVS has already begun this process, with Denton announcing early promising results, including 15% to 20% reductions in labor costs for relocated activities.

The final step of the process, expected to save CVS between $700 million and $750 million per year, is to optimize the pharmacy platform. This involves seamlessly redistributing various aspects of pharmacy workload to better maximize script fulfillment capacity through use of process redesign and technology.

Denton also announced during his CVS Analyst Day speech that the company approved a dividend increase of 18 percent for 2017. Hence, CVS will pay out $2 per share in dividends, per year, next year.