CVS Health Investing Up to $3 Billion in Tech and Growth, Raises Wages
CVS Health is doubling down on technology and its employees.
The drugstore retailer said it expects to spend up to $3 billion to fund expanded investments in technology and digital, and organic growth initiatives. It will also raise its minimum hourly wage to $15 an hour, as of July 2022, with incremental increases to the hourly rates starting this month.
As part of its new wage structure, the company said some roles — including pharmacy technicians and call center representatives — will also get an increase, even though they already have higher starting rates. CVS said that approximately 65% of its hourly employees already make more than $15 an hour.
In addition to boosting wages, CVS recently eliminated the high school diploma or GED requirement for most entry-level roles. This year, it plans to eliminate the GPA requirement for university recruitment.
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“With millions of visits per day to our nearly 10,000 locations across the country, our retail business plays an important role in how we deliver care,” said CVS Health chief people officer Laurie Havanec. “Our track record on wages aligns with the evolving needs and expectations of CVS Health colleagues in customer-facing roles.”
“This wage increase will boost our competitive edge in a tight retail labor market,” said CVS Health president and CEO Karen Lynch, noting that CVS estimates it creates an incremental $600 million in labor costs over 3 years and around $125 million of that impact will be in the final four months of this year.
“Increasing our minimum wage for hourly employees will help attract and retain the talent needed for our customer-centric business approach,” Lynch said. “Just as critical, it aligns with our values and our purpose, and builds on a history of our investment in our people.”
CVS is also investing in its technology to complement its stores and services.
The retailer regularly serves more than 35 million unique digital customers across its CVS Health assets, Lynch said.
“Our digital customers are important,” she noted. “Digital retail customers spend two-and-a-half times more in our front store, manage one-and-a-half times more scripts, and remain customers longer than other pharmacy patients. And customers who engage with us digitally have lower medical costs related to personalized data insights that guide health behaviors.”
In CVS’ second quarter of 2021, more than 37% of specialty prescriptions initiated digitally from the 85% of its pharmacy specialty members who have opted into the digital program.
“Building these trusted digital relationships with customers generates new growth opportunities across all of our businesses,” she noted.
CVS is also working to simplify operations to benefit both customers and associates.
“Our technology-driven programs are leveraging blockchain, driving cloud migration, and intelligent automation, and streamlining processes, to accelerate results and generate greater impact,” she said. “One example is a specialty pharmacy script automation program that uses artificial intelligence to yield better results more quickly, while eliminating more than 30 manual steps, such as benefit verification and prior authorization.”
CVS’ total revenues increased 11% for the three months ended June 30, 2021, compared to the prior year, driven by growth across all segments. Total revenues in the retail/LTC segment increased 14% for the quarter compared to the prior year, primarily driven by increased prescription volume, COVID-19 vaccinations and diagnostic testing, and higher front store revenues across all product categories.
CVS raised its guidance, including bumping up its cash flow from operations guidance range to $12.5-13 billion from $12-$12.5 billion.
“We delivered another quarter of strong results and once again raised our outlook for the year,” said Lynch. “This quarter was highlighted by broad sales and earnings outperformance, as well as sequential operating margin improvement. We continue to play a critical role in helping America prevail against the pandemic while demonstrating the effectiveness of our unique business model, which is focused on meeting customer needs through innovations that make health care more local, affordable and connected.”
