for a long time CVS Health CVS said executive David Joyner replaced Karen Lynch as CEO as the company struggled to improve profits and stock price. announced Friday.
The move took effect Thursday, the day before the announcement, and comes as CVS stock has fallen nearly 20% this year. Shares fell about 11% in premarket trading on Friday.
CVS faces challenges as rising medical costs weigh on its insurance division, Aetna, and its retail pharmacy business, which has been weighed down by weak consumer spending and prescription drug reimbursement headwinds. In August, the company lowered its full-year profit outlook for the third consecutive quarter and announced that it would cut costs by $2 billion over the next few years.
CVS also said in Friday’s release that it expects third-quarter adjusted earnings to be between $1.05 and $1.10 per share. Medical expenses are expected to increase more than previously expected.
“Given the continued rise in medical cost pressures in the healthcare benefits sector, investors are encouraged to take advantage of the “The company’s previous guidance should no longer be relied upon.”
The company is scheduled to announce its third quarter results on November 6th.
CNBC previously reported last month that Glenview Capital, CVS’s majority shareholder, began a major push to transform the company.
CNBC also reported last month that CVS’ board hired a strategic advisor to explore options, including the possibility of separating its insurance and retail businesses. But CVS will move forward unscathed, a company spokesperson told CNBC on Friday.
Mr. Joyner most recently served as president of Caremark, CVS’ leading pharmacy benefits management company, overseeing the company’s pharmacy services business, a position that Mr. Lynch held before taking the top job in February 2021. He held a similar position. He left CVS in 2019 and returned to the helm of Caremark. At the beginning of last year.
“I returned to CVS Health in 2023 because I believed I could contribute even more to the company, and I am taking this opportunity today for the same reason,” Joyner said in a statement.
He began his career in pharmacy benefits services at Aetna and previously held the role of executive vice president of sales and marketing at CVS Health.
Joyner also had Term of approximately 8 years Caremark is one of the nation’s three largest so-called PBM companies, located at the center of the U.S. pharmaceutical supply chain. PBMs negotiate drug rebates with manufacturers on behalf of insurance companies, create a list of priority drugs covered by health plans, and reimburse pharmacies for prescriptions.
“David and his deep understanding of our integrated business will allow us to more directly address the challenges facing our industry, move faster to make the operational improvements we need, and fully realize the value we can uniquely create. I believe we can do it,” said Chairman Roger Farrar. statement.
Lynch also resigned from the company’s board of directors this week, the company announced Friday. Mr. Joyner will serve as a director and Mr. Farrar will assume the role of executive chairman.
As CEO of CVS, Joyner will work to increase the Biden administration’s and lawmakers’ oversight of Caremark and other PBMs, which will depend on which party holds the White House after the U.S. election. It is likely to continue regardless of whether you hold it or not. Last month, the U.S. Federal Trade Commission sued Caremark and two other major PBMs, accusing them of practices that increase profits while increasing the cost of insulin for patients.
He also needs to overcome rising medical costs for Medicare Advantage patients. Medical costs for insurance companies have jumped from last year as more seniors return to hospitals for procedures delayed by the coronavirus pandemic. Medicare Advantage is a private health insurance plan contracted with Medicare.
CVS executives said in August that the company hopes to achieve its goal of improving margins in its Medicare Advantage business by 100 to 200 basis points next year.
Next month, CVS is expected to report that health care costs continued to rise in the third quarter.
The company expects its insurance division’s medical benefit ratio (a measure of total medical expenses paid relative to premiums collected) to be approximately 95.2% for the quarter, up from 85.7% in the year-ago period. . A low ratio usually indicates that the company is collecting more premiums than it is paying out in benefits and is therefore more profitable.
—CNBC’s Sara Salinas and Rohan Goswami contributed to this report.
