Longtime CVS Health executive David Joyner has been appointed as CEO, succeeding Karen Lynch, as the company faces challenges in improving profits and stock performance. This announcement was made by CVS on Friday, effective from Thursday, the day prior to the announcement.
The decision comes amidst a decline in CVS’s shares, which have decreased by nearly 20% this year, with the stock closing about 5% lower on Friday. CVS has been encountering difficulties as rising medical costs impact its insurance unit, Aetna, and the retail pharmacy segment faces weakened consumer spending and reimbursement challenges for prescription drugs. In August, CVS revised its full-year profit guidance downward for the third consecutive quarter and announced plans to cut $2 billion in costs over the next few years.
In a statement released on Friday, CVS projected adjusted earnings between $1.05 and $1.10 per share for the third quarter, anticipating higher medical costs than previously forecasted. The company advised investors not to rely on the previous guidance provided during its second-quarter 2024 earnings call in August.
CVS is scheduled to report its third-quarter earnings on November 6. Last month, Glenview Capital, a major CVS shareholder, made a significant push for changes within the company. In a statement on Friday, Glenview Capital expressed its respect for Lynch’s departure and support for Joyner, urging for a refreshment of CVS’s board of directors to strengthen the company’s culture, governance, and leadership.
Additionally, sources had previously reported that CVS’s board engaged strategic advisors to explore options, including a potential breakup of its insurance and retail businesses. However, CVS will proceed without such a split, as confirmed by a company spokesperson on Friday.
David Joyner, who recently led CVS’s pharmacy services as president of Caremark, returned to CVS in 2023 after retiring in 2019. His career started at Aetna and included a role as executive vice president of sales and marketing at CVS Health. Joyner also previously worked at Caremark before it was acquired by CVS in 2007.
In a statement, Joyner expressed his commitment to contributing to CVS Health, citing his return to the company in 2023 as motivated by the belief that he could further benefit the organization. Chairman Roger Farah expressed confidence in Joyner’s ability to address industry challenges and advance the company’s operational improvements.
Karen Lynch has also stepped down from CVS’s board of directors this week. Joyner will join the board, and Farah will become executive chairman.
As CEO, Joyner will navigate increased scrutiny from the Biden administration and lawmakers on Caremark and other PBMs. The Federal Trade Commission recently sued Caremark and two other large PBMs over practices that allegedly increase profits while inflating insulin costs for patients.
Joyner will also need to address higher medical costs from Medicare Advantage patients, which have risen over the past year as more seniors return to hospitals for delayed procedures due to the Covid-19 pandemic. CVS aims to achieve a margin improvement of 100 to 200 basis points in its Medicare Advantage business next year.
The company anticipates reporting continued elevated medical costs in the third quarter, expecting its insurance unit’s medical benefit ratio to be around 95.2% for the quarter, up from 85.7% in the previous year. A lower ratio generally indicates higher profitability, as it reflects that a company has collected more in premiums than it has paid out in benefits.
— Report by CNBC’s Sara Salinas and Rohan Goswami.
