Longtime CVS Health executive David Joyner has succeeded Karen Lynch as CEO, as the company 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 year. 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 prescription drugs. In August, the company slashed its full-year profit guidance for the third consecutive quarter and said it would cut $2 billion in costs over the next 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 in the Health Care Benefits segment, investors should no longer rely on the Company’s previous guidance provided on its second quarter 2024 earnings call on August 7, 2024,” CVS said in the release.
The company is set to report third-quarter earnings on Nov. 6.
Last month, major CVS shareholder Glenview Capital began a significant push for changes at the company, CNBC previously reported.
In a statement on Friday, Glenview Capital said it respects and supports Lynch’s departure from the company and looks forward to engaging with Joyner. The firm called for CVS to refresh its board of directors.
“We believe the Company’s culture, governance and leadership should be strengthened by those with both appropriate industry experience as well as fresh perspectives and that the Company would 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, a company spokesperson told CNBC on Friday.
Joyner most recently oversaw the company’s pharmacy services business as president of CVS’ major pharmacy benefits manager, Caremark, a similar position to the one Lynch held before she assumed the top job in February 2021. He retired from CVS in 2019 before returning to helm Caremark at the beginning of last year.
“I came back to CVS Health in 2023 because I believed I could give more to the company, and I take this opportunity today for the same reason,” Joyner said in a statement.
He began his career at Aetna in pharmacy benefit services and previously held the role of executive vice president 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 one of the nation’s three largest so-called PBMs, which sit at the center 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.
“We believe David and his deep understanding of our integrated business can help us more directly address the challenges our industry faces, more rapidly advance the operational improvements our company requires, and fully realize the value we can uniquely create,” Chairman Roger Farah said in a statement.
Lynch also stepped down from the company’s board of directors this week, the company said Friday. Joyner will take a seat 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 will likely continue regardless of 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 need to navigate higher medical costs from Medicare Advantage patients, which have jumped over the last year for insurers as more seniors return to hospitals to undergo procedures they had delayed during the Covid-19 pandemic. Medicare Advantage is a privately run health insurance plan contracted by Medicare.
The company is hoping to achieve its target of 100 to 200 basis points margin improvement in its Medicare Advantage business next year, CVS executives said in August.
Next month, CVS will report that medical costs were still elevated in the third quarter.
The company expects its insurance unit’s medical benefit ratio — a measure of total medical expenses paid relative to premiums collected — to be around 95.2% for the quarter, up from 85.7% during the year-earlier period. A lower ratio typically indicates that a company collected more in premiums than it paid out in benefits, resulting in higher profitability.
— CNBC’s Sara Salinas and Rohan Goswami contributed to this report.