CVS Health CEO Karen Lynch resigns as drugstore chain struggles to find right path: NPR

Earlier this year, CVS Health lowered its 2024 profit forecast due to an increase in Medicare-related costs.

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CVS Health CEO Karen Lynch has resigned as the company's shares have fallen 19% this year and the healthcare giant struggles on multiple fronts.

The company's shares plunged again on Friday after CVS Health also warned of disappointing third-quarter earnings and said investors should not rely on forecasts for this quarter it gave in August.

Lynch will be replaced by veteran CVS Health executive David Joyner, who will try to steer the company despite rising costs for its health insurance business, declining drugstore sales and growing investor pressure. All major pharmacy chains are trying to navigate a drastically changed landscape and face competition online and elsewhere.

Michael Cherny, an analyst at Leerink Partners, said the leadership change was unexpected, although he understood the reasons behind it “after another quarter of poor performance.”

“Given the operational and equity underperformance, it is difficult to say that a change at the top is undeserved,” he said in a research note.

With Lynch's departure, there are now 45 female CEOs in the S&P 500, or about 9% of all CEOs, according to executive data firm Equilar.

CVS Health operates one of the country's largest drugstore chains and a massive pharmacy benefit management company that provides prescription drug coverage for employers, insurers and other large customers. Additionally, the company covers nearly 27 million people through its Aetna insurance arm.

The company lowered its financial expectations in August for the third time this year, hurt by rising Medicare Advantage claims, and Lynch said at the time that she would take over as head of the insurance segment.

Her insurance predecessor, former Humana executive Brian Kane, left the company about a year after he arrived.

Barclays analyst Andrew Mok said on Friday that the struggling insurance division now has a leadership gap that the company will need to fill in the near future.

CVS Health said Friday that it is still struggling with higher medical costs in this segment.

The company has been “performing significantly below its potential and has fallen behind in its investment and actuarial approach in recent years,” Glenview Capital Management said earlier this month.

The hedge fund, which owns a stake in CVS Health, said it was offering “proposals to improve CVS Health's governance, culture, efficiency, sustainability and growth.”

Rising claims from the company's Medicare Advantage plan have hurt CVS Health for much of this year and contributed to its repeated forecast cuts. Medicare Advantage plans are privately run versions of the federal government's insurance program, primarily for people age 65 and older.

CVS Health also said in August that the company was hurt by a decline in quality ratings for those plans and pressure from Medicaid insurance, which the company administers in several states.

The Woonsocket, Rhode Island, company said Friday that it expects third-quarter adjusted earnings to fall between $1.05 and $1.10 per share. Analysts polled by FactSet forecast earnings of $1.69 per share.