Mar 18, 2016 11:15 AM EDT

US Drug Distributor McKesson To Implement Big Job Cuts To Reduce Costs

McKeeson Corp., one of the largest pharmaceutical distributors in the country announced on Wednesday that it will slash 1,600 jobs representing 4 percent of its U.S. workforce.

The drug distributor resorted to this move to reduce its operating cost after it lost several major customers.

McKeeson announced in January that the company is reviewing its cost structure and resolved that "reductions to our workforce would be necessary to align our cost structure with our business needs."

The news was first published in Bloomberg on Wednesday and a spokesman for the pharmaceutical distributor confirmed the news in Reuters. McKeeson MCK -0.83% started informing its concerned workers beginning in Mid-March, according to a company statement.

The large drug distributor also said that the company is offering its affected employees severance benefits and outplacement services.

It comes at a time when the medical products distributor has acquired Rexall Health in March.

Previously, the company has announced that it is planning to add 975 jobs in its bid to consolidate its offices in Irving. But it suddenly started a strategic review in January and acquired the belief that slashing jobs is required if the company is to align its operating expenses to its business requirements.

The San Francisco-based company distributes drugs to retailers including CVS Health Corp. It said that its 2017 fiscal revenues would be negatively affected by the current poor generic drug pricing.

McKeeson is also expecting that its operations will be weighed down by the expiration of its contract with Optum, a pharmacy benefit managing system and the changes in it its contracts with Omnicare and Target.

Even with these job cuts, the drug distributor initially has big plans this year. It meant to buy two privately owned cancer care service providers in February for $1.2 billion. It has recently acquired Rexall Health, a Canadian drugstore chain.

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