March 17, 2016
By Alex Keown, BioSpace.com Breaking News Staff
SAN FRANCISCO – Faced with a need to trim costs, McKesson Corporation will slash 1,600 jobs, about 4 percent of its U.S. workforce, in response to a loss of some key customers, Reuters reported this morning.
In January, McKesson conducted a “strategic review” of its cost structure following the loss of its customers and said “reductions to our workforce would be necessary to align our cost structure with our business needs,” Reuters reported. McKesson began to notify workers of the pink slips this month, Reuters said. Those employees faced with termination will receive severance packages, according to reports. McKesson, which provides medications to drugstore chains like CVS and Target, employs about 70,400 full-time employees, Reuters noted, citing a recent regulatory filing.
Bloomberg said McKesson’s business has been negatively impacted due to expiration of a contract with Optum, a division of UnitedHealth Group Inc., as well as changes in contracts with Omnicare Corp., a business that provides pharmaceuticals to assisted living facilities and nursing homes. Another factor in the company’s declining business was a slowdown of price increases on generic drugs, which shut operating costs of McKesson, Bloomberg said.
McKesson’s stock dropped slightly from its closing price of $155.98 per share in after-hours trading. Since a May 2015 high of $242.75 per share, McKesson stock has dropped about 30 percent.
While McKesson is slashing some employees, the company has been flexing its M&A muscle to spur some growth. In February, the company snapped up Vantage Oncology, LLC, a national provider of radiation oncology, medical oncology and integrated cancer care. At the same time, McKesson acquired Biologics, Inc., an oncology pharmacy services company. The acquisitions came at a cost of about $1.2 billion, the company said.
“These investments will broaden McKesson’s practice management services and solutions that allow oncologists to focus on providing excellent patient care and provide additional support solutions that enhance care delivery for patients. We will also be able to offer additional value-added services to our manufacturer partners, expand our reach and pharmaceutical distribution scale, and provide care management and care coordination for payers as the industry moves towards value-based reimbursement models,” John Hammergren, chairman and chief executive officer of McKesson Corporation, sad in a statement.
Earlier this month, McKesson struck a $3 billion deal to acquire Rexall Health, a drugstore chain, to strengthen McKesson’s position in Canada’s pharmaceutical supply chain, the company said.
In addition to M&A activity, McKesson has also been developing technology to track drug purchase trends. McKesson’s Drug Spend Intelligence Web-based tool provides the information needed to identify purchase trends, evaluate the impact of price fluctuations, and implement and track clinical initiatives, the company said. McKesson said this tool will help pharmacies reduce “drug spend and administration time.”
