By Danielle Kaye
CVS Health abruptly ousted CEO Karen S. Lynch late last week as the pharmacy and health care conglomerate struggled with sluggish growth and faced pressure from investors.
The company appointed David Joyner, the head of CVS Caremark, its successful unit overseeing prescription drug benefits, as the new chief. The management change was accompanied by a dour financial update, with the company scrapping its previous forecasts because of “elevated medical cost pressures.” Shares of CVS ended the day 5.2% lower.
The company’s earnings have disappointed investors in recent quarters, in part because of rising costs at Aetna, the company’s insurance arm. Activist investors have pushed the company for changes, prompting CVS to explore breaking itself up, potentially by separating its pharmacy business from its insurance unit.
CVS employs about 300,000 people. Its sprawling portfolio includes the branded pharmacy chain, with more than 9,000 retail locations; Aetna, which it acquired in 2018, which has nearly 40 million policyholders and other customers; Caremark, the country’s largest pharmacy benefit manager, hired by employers and governments to oversee prescription drug benefits; and Oak Street Health, which runs more than 200 primary care centers for Medicare recipients.
Lynch took over as the group’s CEO in February 2021, after running Aetna. “I don’t want people to think about CVS Health as just that drugstore,” she told The New York Times in 2022. “I want them to think about it being a health care company.”
Roger Farah, the chair of CVS Health, said in a statement Friday that “the board believes this is the right time to make a change.” He added that Joyner’s “deep understanding of our integrated business” would help steer the company through its challenges.
During his tenure at Caremark, which he rejoined in 2023 after a few years away from the company, Joyner faced increased scrutiny of pharmacy benefit managers. He appeared at a congressional hearing this summer, facing questions from lawmakers about the role of pharmacy benefit managers in rising drug costs for millions of Americans.
Julie Utterback, an analyst at Morningstar, said in a note that she was not surprised by the management change, given the company’s financial shortfalls. But investors may have been hoping for a new leader from outside the company, she added.
The shake-up also lowers the likelihood of a breakup, Utterback said, since the restructuring “appeared to lean into the value of the integrated business model that CVS currently operates.”
Last month, CVS said it would cut almost 3,000 jobs, mostly corporate employees. Its rival chains are also under pressure to cut costs: This week, Walgreens said it would close about 1,200 stores over the next three years.
Shares of CVS have fallen more than 25% this year.