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Diving overview:
CVS Health replaced CEO Karen Lynch on Thursday as the health care and pharmacy giant's financial challenges deepen. CVS' new CEO is David Joyner, a company veteran who most recently led Caremark, CVS' pharmacy benefits manager. Lynch will hold the top position at CVS starting in 2021 and previously led insurance company Aetna, but has stepped down “by agreement with the company's board of directors,” according to the release. The company also withdrew its earnings guidance from the previous quarter, citing increased medical costs in its Aetna Health Benefits business unit. CVS stock fell more than 7% in early Friday trading on the news.
Dive Insight:
The leadership shakeup comes as CVS faces its lowest stock price since 2021 and recent spikes in medical costs, particularly in Medicare Advantage. The pharmacy giant has lowered its profit outlook three times this year and earlier this month confirmed it would lay off 2,900 employees.
In its second-quarter results in August, CVS removed Aetna division chief Brian Cain from his role due to the division's poor performance, handed oversight to Lynch, and announced $2 billion in costs over the next few years. announced plans to reduce The company recently announced it would discontinue some infusion services offered through its Corum business and close or sell 29 pharmacies in the coming months.
Mr. Joyner has served as the company's executive vice president and president of PBM since January 2023, according to securities filings.
He also served as Caremark's executive vice president of sales and account services from March 2011 to December 2019. According to his LinkedIn, Joyner previously worked for both Aetna and Caremark before they were acquired by CVS.
The change in leadership is not surprising given the challenges at CVS and its insurance arm Aetna, according to a note from Morningstar senior equity analyst Julie Utterback. “However, investors may have been hoping for new blood from outside the organization,” she wrote.
In addition to the leadership changes, the company provided details about its third-quarter results, which were “lower than expected,” Utterback said.
CVS reported a preliminary adjusted profit range of $1.32 billion to $1.39 billion for the third quarter. The company expects its medical loss ratio (a measure of spending on patient care) to be about 95.2% for the quarter, significantly up from 85.7% last year.
CVS also expects to record a $1.1 billion provision for premium shortfalls in the third quarter, primarily related to Medicare and Affordable Care Act exchanges. The company plans to hold an investor briefing regarding earnings on November 6th.
