Longtime CVS Health executive David Joyner has succeeded Karen Lynch as CEO, as the corporate struggles to drive higher profits and stock performance, CVS announced Friday.
The move, effective Thursday, the day before the announcement, comes as CVS shares have fallen nearly 20% this 12 months. The stock closed around 5% lower on Friday.
CVS has faced challenges as higher medical costs weigh on its insurance unit, Aetna, and a retail pharmacy business pressured by softer consumer spending and reimbursement headwinds for prescribed drugs. In August, the corporate slashed its full-year profit guidance for the third consecutive quarter and said it might cut $2 billion in costs over the following several years.
In its release Friday, CVS also said it expects adjusted earnings of between $1.05 and $1.10 per share for its third quarter. It anticipates higher medical costs than previously expected.
“In light of continued elevated medical cost pressures within the Health Care Advantages segment, investors should not depend on the Company’s previous guidance provided on its second quarter 2024 earnings call on August 7, 2024,” CVS said in the discharge.
The corporate is ready to report third-quarter earnings on Nov. 6.
Last month, major CVS shareholder Glenview Capital began a big push for changes at the corporate, CNBC previously reported.
In a press release on Friday, Glenview Capital said it respects and supports Lynch’s departure from the corporate and appears forward to engaging with Joyner. The firm called for CVS to refresh its board of directors.
“We consider the Company’s culture, governance and leadership must be strengthened by those with each appropriate industry experience in addition to fresh perspectives and that the Company can be best served through prompt Board evolution,” Glenview said.
CNBC also reported last month that CVS’ board had engaged strategic advisors to weigh its options, including the potential of a breakup of its insurance and retail businesses. But CVS will now move forward intact, an organization spokesperson told CNBC on Friday.
Joyner most recently oversaw the corporate’s pharmacy services business as president of CVS’ major pharmacy advantages manager, Caremark, an identical position to the one Lynch held before she assumed the highest job in February 2021. He retired from CVS in 2019 before returning to helm Caremark initially of last 12 months.
“I got here back to CVS Health in 2023 because I believed I could give more to the corporate, and I take this chance today for a similar reason,” Joyner said in a press release.
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 also had a roughly eight-year stint at Caremark before CVS acquired it in 2007. Caremark is certainly one of the nation’s three largest so-called PBMs, which sit at the middle of the U.S. drug supply chain. PBMs negotiate drug rebates with manufacturers on behalf of insurers, create lists of preferred medications covered by health plans and reimburse pharmacies for prescriptions.Â
“We consider David and his deep understanding of our integrated business may also help us more directly address the challenges our industry faces, more rapidly advance the operational improvements our company requires, and fully realize the worth we are able to uniquely create,” Chairman Roger Farah said in a press release.
Lynch also stepped down from the corporate’s board of directors this week, the corporate said Friday. Joyner will sit on the board, and Farah will assume the role of executive chairman.
As CEO of CVS, Joyner will grapple with the Biden administration and lawmakers’ increased scrutiny of Caremark and other PBMs, which is able to likely proceed no matter which party holds the White House after the U.S. election. The Federal Trade Commission last month sued Caremark and two other large PBMs, arguing that they use practices that boost their profits while inflating insulin costs for patients.
He’ll also must navigate higher medical costs from Medicare Advantage patients, which have jumped during the last 12 months for insurers as more seniors return to hospitals to undergo procedures that they had delayed throughout the Covid-19 pandemic. Medicare Advantage is a privately run medical health insurance plan contracted by Medicare.
The corporate is hoping to realize its goal of 100 to 200 basis points margin improvement in its Medicare Advantage business next 12 months, CVS executives said in August.Â
Next month, CVS will report that medical costs were still elevated within the third quarter.
The corporate expects its insurance unit’s medical profit ratio — a measure of total medical expenses paid relative to premiums collected — to be around 95.2% for the quarter, up from 85.7% throughout the year-earlier period. A lower ratio typically indicates that an organization collected more in premiums than it paid out in advantages, leading to higher profitability.
— CNBC’s Sara Salinas and Rohan Goswami contributed to this report.
