CVS Health said Friday that CEO Karen Lynch has resigned after the pharmacy chain again warned that profits would not meet Wall Street forecasts. Lynch will be replaced by CVS Caremark President David Joyner, who will try to steer the healthcare giant through a worsening climate of rising medical costs.
CVS, which cut its financial guidance for the third time in August, said Friday that third-quarter earnings will fall short of expectations.
Shares fell $6.27, or 9.9%, to $57.40 in pre-market trading, a drop that comes after the stock had already lost 19% this year.
Earlier this month, CVS said it was planning to do so cut 2,900 employees to reduce costs as the company grapples with budget cuts from inflation-weary consumers, with shoppers cutting back on spending on over-the-counter products, and with financial pressure from the pharmacy side of the business.
Joyner, who will also join the company’s board of directors, most recently served as executive vice president of CVS Health and president of CVS Caremark. He led the pharmacy services industry, which provides solutions to employers, health plans and government agencies and serves approximately 90 million members through Caremark, CVS Specialty and other areas. Joyner has 37 years of experience in healthcare and pharmacy benefit management.
CVS Health also announced Friday that chairman Roger Farah will now become executive chairman.
“We believe David and his deep knowledge of our integrated business can help us more directly address the challenges facing our industry, more quickly achieve the operational improvements our business needs and fully realize the value we can uniquely create to achieve,” Farah said in a statement. .
Profit shortfall
The Woonsocket, Rhode Island-based company’s preliminary forecast is for adjusted earnings of $1.05 to $1.10 per share for the third quarter, citing higher-than-expected trends in medical costs. Analysts polled by FactSet forecast earnings of $1.69 per share.
In August, CVS Health changed leadership of its health insurance business as it continued to face rising costs. At the time, the company named Lynch to lead its insurance segment, replacing Executive Vice President Brian Kane, who left the company about a year after his arrival.
Rising claims due to the company’s Medicare Advantage coverage have hurt CVS Health for much of this year and contributed to repeated adjustments to its 2024 outlook. Medicare Advantage plans are private versions of the federal government’s coverage program, primarily for people aged 65 and over.
CVS Health also said in August that it has been hit by a drop in quality ratings for those plans and pressure from Medicaid coverage it administers in several states.
