CVS Health Corp. named David Joyner as its new chief executive officer, ending a tumultuous tenure for Karen Lynch at the pharmacy giant.
Longtime executive Joyner, 60, took over Thursday, according to a Friday release. The move comes after the company repeatedly missed earnings targets, spurring activist interest and setting off unrest among shareholders that spilled into public view in recent weeks.
CVS said its third-quarter results are expected to miss Wall Street’s expectations and that the company will pull its 2024 earnings guidance, warning investors not to rely on the company’s previous estimates “in light of continued elevated medical cost pressures” in its heath-care benefits segment.
Shares in the company fell as much as 14 percent in premarket trading in New York. They had lost 19 percent this year as of Thursday, compared to a 22 percent increase in the S&P 500. Rival Walgreens Boots Alliance Inc.’s stock also dropped 2 percent before US markets opened.
The company reported preliminary adjusted earnings of $1.05 to $1.10 a share in the third quarter. The health benefits business expected a medical-loss ratio of 95.2 percent in the third quarter, far above Wall Street’s estimate. The results also reflect a $1.1 billion charge for a premium deficiency reserve to cover excess medical costs.
Executives plan to update investors during CVS’s third-quarter earnings call in November.
CVS had been reviewing its strategic options for months, including a potential breakup, Bloomberg News has reported, as rising medical costs in its Aetna insurance arm weighed on the health-care conglomerate.
The entrance of hedge fund Glenview Capital Management, which approached the company about bolstering the business, made the conversation public and increased the pressure on Lynch, 62. Glenview didn’t immediately respond to questions about whether it remained interested in the business following the executive moves.
CVS shares are down 10 percent since Lynch became CEO in February 2021 as she struggled to create a one-stop shop for medical services amid a government crackdown on spending, increasing health expenses in the insurance unit, and ratcheted up post-pandemic pressure on retail stores. Pharmacies have been shuttering locations and dealing with labor shortages, driving up patient wait times and frustrating customers.
In turn, Lynch tried to deepen CVS’s reach into health-care services, purchasing Medicare clinic chain Oak Street Health and home-visits company Signify Health.
Those deals aimed to augment Aetna’s large Medicare Advantage insurance business with care delivery, mirroring the strategy of rival UnitedHealth Group Inc. But they came just as the Biden administration tightened payments to Medicare insurers and curbed tactics they used to boost revenue.
Under Lynch, the company also lost a huge contract to provide pharmacy benefits for insurer Centene Corp., which awarded the business to Cigna Group.
Her tenure was marked by turnover among top executives. Brian Kane, the former chief financial officer of Humana Inc., joined to lead Aetna in 2023 but was ousted after less than a year. A president of health-care delivery hired from UnitedHealth returned to that company six months later.
On Friday, CVS said it was no longer considering a breakup. It said the decision to oust Lynch was made unanimously by the board.
“The board believes this is the right time to make a change,” said Roger Farah, who was named executive chairman as part of the move. “David and his deep understanding of our integrated business can help us more directly address the challenges our industry faces.”
Joyner, who began his career at Aetna as an employee benefit representative, was most recently executive vice president of CVS Health and president of CVS Caremark. He returned to lead the company’s pharmacy services business in 2023 after three years away from the company.
As the head of Caremark, the new CEO has been in the middle of some of the company’s fiercest fights in Washington, where lawmakers and regulators are intensifying scrutiny of the the pharmacy benefits industry. Joyner defended the business in front of a congressional panel this year.
By John Tozzi and Fiona Rutherford
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