Long-term CVS Health Chief Executive David Joyner has succeeded Karen Lynch as CEO as the corporate struggles to deliver higher profits and stock performance, CVS said announced Friday.
The move takes effect Thursday, the day before the announcement, as CVS shares have fallen nearly 20% this yr. The stock closed about 5% lower on Friday.
CVS has faced challenges as higher medical costs weigh on its Aetna insurance unit and a pharmacy retailer pressured by weaker consumer spending and prescription drug reimbursement headwinds. In August, the corporate cut its full-year profit forecast for the third straight day and said it might cut $2 billion in costs over the subsequent few years.
In its press release Friday, CVS also said it expects third-quarter adjusted earnings to be between $1.05 and $1.10 per share. It expects medical costs to be higher than previously expected.
“Given continued elevated medical cost pressures in the Health Benefits segment, investors should no longer rely on the Company's prior guidance provided in its second quarter 2024 earnings conference call on August 7, 2024,” CVS said in the discharge.
The company is anticipated to report its third-quarter results on November 6.
Last month, major CVS shareholder Glenview Capital launched a major push for changes at the corporate, CNBC previously reported.
In an announcement Friday, Glenview Capital said it respects and supports Lynch's departure from the corporate and appears forward to working with Joyner. The company asked CVS to renew its board.
“We believe that the company's culture, governance and leadership should be strengthened by individuals who have both relevant industry experience and fresh perspectives, and that the company would be best served by a rapid replacement of the board,” Glenview said.
CNBC also reported last month that CVS's board had hired strategic advisers to weigh its options, including the potential of dissolving its insurance and retail businesses. But CVS will now move forward unscathed, an organization spokesman told CNBC on Friday.
Most recently, Joyner led the corporate's pharmacy services business as president of Caremark, CVS's primary pharmacy advantages manager, a position just like Lynch, before taking the highest job in February 2021. He retired from CVS in 2019 before returning to the helm of Caremark early last yr.
“I came back to CVS Health in 2023 because I believed I could give more to the company, and for the same reason I am pursuing this opportunity today,” Joyner said in an announcement.
He began his profession at Aetna in pharmacy profit services and previously held the role of executive vice chairman of sales and marketing at CVS Health.
Joyner had one too about eight years of activity at Caremark before CVS acquired it in 2007. Caremark is one among the country's three largest so-called PBMs, that are at the middle of the U.S. drug supply chain. PBMs negotiate drug discounts with manufacturers on behalf of insurers, create lists of preferred drugs covered by health plans, and reimburse pharmacies for prescriptions.
“We believe David and his deep understanding of our integrated business can help us more directly address the challenges facing our industry, accelerate the operational improvements our business requires, and fully realize the value we can uniquely create,” CEO Roger Farah said in an announcement.
Lynch also resigned from the corporate's board this week, the corporate said Friday. Joyner will sit on the board and Farah will assume the role of chairman.
As CEO of CVS, Joyner will cope with increased scrutiny of Caremark and other PBMs by the Biden administration and lawmakers, which is more likely to proceed no matter which party holds the White House after the US election. Last month, the Federal Trade Commission sued Caremark and two other major PBMs, saying they engage in practices that boost their profits while driving up insulin costs for patients.
He also must contend with higher medical costs for Medicare Advantage patients, which have skyrocketed for insurers over the past yr as more seniors return to hospitals to undergo procedures that they had delay through the Covid-19 pandemic . Medicare Advantage is a privately run medical insurance policy covered by Medicare.
The company hopes to attain its goal of 100 to 200 basis points of margin improvement in its Medicare Advantage business next yr, CVS executives said in August.
Next month, CVS will report that medical costs were still elevated within the third quarter.
The company expects its insurance unit's medical claims ratio – a measure of total medical costs paid relative to premiums collected – to be around 95.2% for the quarter, up from 85.7% within the year-ago period. A lower ratio typically indicates that an organization has collected more in premiums than it has paid out in advantages, resulting in higher profitability.
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