By Danielle Kaye
CVS Health unexpectedly terminated CEO Karen S. Lynch late last week as the pharmacy and healthcare conglomerate dealt with slow growth and increasing pressure from investors.
The firm appointed David Joyner, who leads CVS Caremark, the successful division managing prescription drug benefits, as its new chief executive. This leadership change was announced alongside a grim financial update, with the company withdrawing its previous forecasts due to “elevated medical cost pressures.” CVS shares closed the day down 5.2%.
Earnings reports from the company have fallen short of investor expectations in recent quarters, partly due to rising expenses at Aetna, its insurance division. Activist shareholders have urged the firm to pursue changes, leading CVS to contemplate a potential breakup, possibly by divesting its pharmacy operations from its insurance division.
CVS employs approximately 300,000 individuals. The extensive portfolio comprises the branded pharmacy chain, which features over 9,000 retail locations; Aetna, acquired in 2018 with nearly 40 million policyholders and other clients; Caremark, the largest pharmacy benefit manager in the U.S., employed by businesses and governments to manage prescription drug benefits; and Oak Street Health, operating more than 200 primary care centers for Medicare beneficiaries.
Lynch assumed the role of CEO in February 2021, following her leadership at Aetna. “I want people to view CVS Health not just as a pharmacy,” she expressed to The New York Times in 2022. “I aspire for it to be recognized as a healthcare entity.”
Roger Farah, chair of CVS Health, stated in a release on Friday that “the board believes this is the appropriate moment for a change.” He mentioned that Joyner’s “comprehensive insight into our integrated business” would assist in navigating the company’s challenges.
During his time at Caremark, which he returned to in 2023 after a brief absence, Joyner encountered heightened examination of pharmacy benefit managers. He attended a congressional hearing this summer, responding to inquiries from legislators about the role of pharmacy benefit managers in escalating drug prices for millions of Americans.
Julie Utterback, an analyst at Morningstar, noted in a comment that she was not surprised by the leadership transition, given the company’s financial issues. However, she indicated that investors might have anticipated an outsider for the new leadership role.
Utterback also indicated that this shake-up reduces the chances of a company split, as the restructuring seemed to emphasize the value of the integrated business model that CVS currently utilizes.
Last month, CVS announced plans to eliminate nearly 3,000 positions, predominantly among corporate staff. Competitor chains are similarly pressured to minimize expenses: This week, Walgreens announced it would shutter around 1,200 stores within the next three years.
CVS shares have plummeted over 25% this year.
