CVS Health abruptly fired Chief Executive Karen S. Lynch on Friday, as the pharmacy and health care conglomerate struggles with slowing growth and faces pressure from investors.
The company has appointed David Joyner, head of CVS Caremark, a successful unit that oversees prescription drug benefits, as its new director. The leadership change comes with a grim financial update, with the company reversing its previous forecast, citing “increasing health care cost pressures.” CVS stock ended the day down 5.2%.
The company’s earnings have disappointed investors in recent quarters, due in part to rising costs at its insurance division, Aetna. Activist investors are pushing for change at the company, and CVS is exploring a possible breakup by separating its pharmacy business from its insurance division.
CVS has approximately 300,000 employees. Its expansive portfolio includes a chain of branded pharmacies with more than 9,000 retail locations. Aetna, which was acquired in 2018, has approximately 40 million policyholders and other customers. Caremark is the nation’s largest pharmacy benefit management company, hired by employers and governments to oversee prescription drug benefits. Oak Street Health operates more than 200 primary care centers for Medicare beneficiaries.
Mr Lynch was appointed group chief executive officer in February 2021 after running Aetna. “I don’t want people to think of CVS Health as just a drug store,” she told The New York Times in 2022.
“The board believes now is the right time to make changes,” CVS Health Chairman Roger Farrar said in a statement Friday. He added that Joyner’s “deep understanding of our overall business” will help the company meet its challenges.
During his time at Caremark, which he returned to in 2023 after leaving the company for several years, Joyner faced intense scrutiny of pharmacy benefit managers. He appeared in Congressional hearings this summer where he faced questions from lawmakers about the role of pharmacy benefit managers in soaring drug costs for millions of Americans.
Morningstar analyst Julie Utterback said in a note that she was not surprised by the management change given the company’s lack of cash. But investors may have been hoping for new leadership from outside the company, he added.
Utterback said the restructuring also reduces the likelihood of a breakup because it “appears to lean toward the value of the integrated business model in which CVS currently operates.”
CVS announced this month that it would cut about 3,000 jobs, mainly office workers. Rival chains are also under pressure to cut costs, with Walgreens announcing this week that it will close about 1,200 stores over the next three years.
CVS stock has fallen about 25% this year.
