CVS Makes CEO Change, Pulls Guidance In Light Of ‘Continued Elevated Medical Cost Pressures’
CVS Health Corp. President and Chief Executive Officer Karen Lynch stepped down from her job Oct. 17 to be replaced by the leader of the company’s Caremark pharmacy benefit manager.
In announcing the change at the helm—which comes just a few months after Lynch shuffled some senior leadership roles and took charge of CVS’ Aetna insurance group—Rhode Island-based CVS also said its third-quarter results will come in well below expectations because of higher-than-expected benefit costs, a trend that first surfaced in the company’s numbers late last year.
“The Medical Benefit Ratio for the third quarter is currently expected to be approximately 95.2 percent,” officials said in a release. “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.”
Filling Lynch’s spot as president and CEO is David Joyner, who was an executive vice president at CVS for most of the 2010s and returned as president of its pharmacy services group in early 2023, a role that has a hand in most of CVS’ segments.
“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,” Executive Chairman Roger Farah said in the statement.
Lynch had led CVS since February 2021 and before that was president of Aetna for more than five years. Under her leadership, the company sought to build on the blockbuster $69 billion merger with Aetna in 2018 by adding a range of healthcare services. Last year, the company spent $17 billion to buy Oak Street Health and Signify Health to add Medicare-focused clinics and home health services to their network of MinuteClinic primary care in-store locations.
Some of our past CVS coverage
Oct. 1, 2024 - CVS Launches Layoffs, Reportedly Reviewing Strategic Options
May 2, 2024 - Utilization Spike Stings CVS Profits, Outlook
Dec. 16, 2023 - CVS Execs Set $10B Healthcare Services Target for 2028
Sept. 18, 2023 - CVS Shifts Focus to Integration Over Acquisition
Feb. 9, 2022 - CVS Looks to Sustain Customer Growth Momentum
Executives have said they want to grow that portfolio of healthcare delivery businesses to $10 billion in 2028 from about $6 billion last year. A big question now is whether Joyner and CVS’ board wants to continue down that path or—as rival Walgreens Boots Alliance is doing with plans to sell at least parts of its stake in VillageMD—retreat somewhat from healthcare services and focus primarily on insurance.
In the short term, it’s clear insurance will get the most of management’s attention—and CVS isn’t alone in having to wrestle with rising utilization and claims costs. In the days before Lynch’s exit, UnitedHealth Group Inc.’s leaders lowered their profit growth forecast in the face of higher costs in the third quarter and their peers at Elevance Health slashed their earnings outlook because of Medicaid expense trends.
In addition to the current struggles with insurance finances, CVS, Walgreens and other pharmacy chains also faces structural challenges with the retail side of their business—where they compete with titans Amazon and WalMart—as well as their healthcare services ventures. That led CNBC commentator Jim Cramer to say Oct. 18 that “the clock is ticking for all these guys.”
“These are the companies that I think are in least control of their destiny of any companies in the S&P,” Cramer said. “The hand is a bad one.”
Shares of CVS (Ticker: CVS) were down about 7 percent to $59.29 in midday trading Oct. 18. They have fallen nearly 15 percent over the past six months, which has cut the company’s market capitalization to about $75 billion. Two years ago, that number was more than $125 billion.
