In this article, longtime CVS Health executive David Joyner has taken over from Karen Lynch as CEO, as CVS announced on Friday. The company is facing challenges in boosting profits and stock performance. The transition, effective the day before the announcement, comes amid a nearly 20% decline in CVS shares this year, with the stock closing around 5% lower on Friday.
CVS has encountered difficulties due to higher medical costs affecting its insurance unit, Aetna, and a retail pharmacy business impacted by softer consumer spending and reimbursement challenges for prescription drugs. In August, the company reduced its full-year profit forecast for the third consecutive quarter and announced plans to cut costs by $2 billion over the next few years.
On Friday, CVS also disclosed that it expects adjusted earnings of $1.05 to $1.10 per share for the third quarter, anticipating higher medical costs than previously projected. The company stated that due to ongoing elevated medical cost pressures, investors should not rely on the guidance provided during the second quarter earnings call in August.
CVS is scheduled to release its third-quarter earnings on Nov. 6. Last month, major CVS shareholder Glenview Capital initiated a significant push for changes within the company. In a statement, Glenview Capital expressed support for Lynch’s departure and looks forward to engaging with Joyner, calling for a refresh of CVS’s board of directors.
Despite reports that CVS’s board was considering options such as splitting its insurance and retail businesses, the company confirmed it will remain intact. Joyner, who previously led CVS’ pharmacy benefits manager Caremark, returned to the company in 2021 after retiring in 2019. He expressed his commitment to CVS and its challenges, leveraging his industry experience and fresh perspectives to drive operational improvements.
As CEO, Joyner will face increased scrutiny from the Biden administration and lawmakers regarding Caremark and other pharmacy benefits managers. He will also need to navigate rising medical costs for Medicare Advantage patients and aim to improve margins in the Medicare Advantage business. CVS executives anticipate reporting continued elevated medical costs in the upcoming quarter, with the medical benefit ratio expected to be around 95.2%, up from 85.7% in the same period last year.
