CVS Health (CVS, Financial), the largest chain of pharmacies in the United States, announced the appointment of David Joyner as the new CEO, replacing Karen Lynch. This leadership change comes as the company faces a challenging year marked by declining stock prices and sluggish growth. Additionally, CVS has withdrawn its 2024 earnings forecast, advising investors not to rely on the full-year guidance provided in August due to mounting healthcare costs. The stock has already fallen by nearly 20% this year, with further declines following the announcement.
The company has faced several hurdles, including rising costs at its insurance unit, Aetna, which led to the resignation of its president in August. Furthermore, the Federal Trade Commission (FTC) targeted CVS subsidiary Caremark for allegedly inflating insulin prices. Analysts have noted CVS's recent execution issues, particularly under Lynch’s leadership at Aetna, suggesting that fresh external leadership might have been expected.
The retail pharmacy sector is experiencing declining prescription drug reimbursement rates, affecting profits and leading to store closures and layoffs among competitors like Walgreens and Rite-Aid. CVS is also trimming its workforce by 2,900 employees as part of its cost-cutting efforts and has closed 244 stores over four years, planning to shut down an additional 900 stores. Walgreens is similarly closing 1,200 stores due to competition from online pharmacies and large retailers.
Speculation about CVS potentially separating its retail pharmacy division from its insurance business has surfaced, especially after activist investor pressure. The board expressed confidence in Joyner’s leadership as the company prepares to announce its third-quarter earnings in early November.
