CVS Health said Friday CEO Karen Lynch has stepped down after the pharmacy chain once again warned its earnings will fall short of Wall Street’s forecasts. Lynch will be replaced by CVS Caremark president David Joyner, who will attempt to steer the health care giant through a worsening environment of rising medical costs.
CVS, which had cut its financial expectations for the third time in August, said Friday that its third-quarter earnings will fall short of expectations.
Shares fell $6.27, or 9.9%, to $57.40 in pre-market trading, a decline that comes after the stock had already shed 19% this year.
Earlier this month, CVS said it planned to cut 2,900 workers to reduce costs as it struggles with cutbacks from inflation-weary consumers, with shoppers paring their spending on non-prescription items, as well as financial pressures from the pharmacy side of its business.
Joyner, who will also join the company’s board, most recently served as executive vice president of CVS Health, and president of CVS Caremark. He led the pharmacy services business, which provides solutions to employers, health plans and government entities and serves approximately 90 million members through Caremark, CVS Specialty, and other areas. Joyner has 37 years of health care and pharmacy benefit management experience.
CVS Health also announced on Friday that Chairman Roger Farah will now be executive chairman.
“We believe David and his deep understanding of our integrated business can help us more directly address the challenges our industry faces, more rapidly advance the operational improvements our company requires, and fully realize the value we can uniquely create,” Farah said in a statement.
Earnings shortfall
The Woonsocket, Rhode Island company’s preliminary forecast is for third-quarter adjusted earnings of $1.05 to $1.10 per share, citing higher-than-expected medical cost trends. Analysts polled by FactSet predict earnings of $1.69 per share.
Back in August CVS Health changed the leadership of its health insurance business as it continued to deal with escalating costs. At the time, the company named Lynch to lead its insurance segment, replacing Executive Vice President Brian Kane, who is left the company about a year after arriving.
Rising claims from the company’s Medicare Advantage coverage have hurt CVS Health for much of this year and contributed to repeated trimmings of its outlook for 2024. Medicare Advantage plans are privately run versions of the federal government’s coverage program mainly for people age 65 and older.
CVS Health also said in August that it has been hurt by a drop in quality ratings for those plans and pressure from Medicaid coverage it manages in several states.
Read More: CVS Health CEO Karen Lynch steps down, replaced by David Joyner, after 19% stock plunge