CVS Health CEO Karen Lynch resigns amid struggles and stock decline

CVS Health CEO Karen Lynch has resigned as the company faces major challenges this year and a 19 percent decline in stock value.

Lynch, who took over in 2021, will be replaced by David Joyner, a veteran executive who previously led CVS Caremark, the company's Pharmacy Benefits Management (PBM) division.

The leadership change follows a series of financial setbacks for CVS, including missed profit targets and rising medical costs, particularly in its Medicare Advantage plans.

CVS had already cut its profit forecasts three times this year.

On Friday, the company warned that third-quarter earnings would fall well short of expectations, causing shares to fall another 9.9 percent to $57.40.

CVS, one of the largest drugstore chains in the U.S., is struggling to balance its expanding business, which includes its Aetna insurance division, which covers 27 million people.

Increased costs due to Medicare Advantage claims have significantly impacted the Company's bottom line. Analysts had forecast third-quarter earnings of $1.69 per share, but CVS now expects between $1.05 and $1.10 per share.

Those financial pressures have been exacerbated by a decline in quality ratings for its Medicare Advantage plans as well as ongoing challenges administering Medicaid coverage in several states.

CVS also faced increasing competition from online retailers and other health services, putting additional strain on its retail business.

The company has also faced pressure from Glenview Capital Management, a hedge fund that has a stake in CVS.

Glenview has called for improvements in CVS's governance and efficiency and pushed for changes to strengthen the company's investment strategy and operational performance.

David Joyner, with 37 years of experience in healthcare and pharmacy benefits, will lead CVS through this turbulent time.

Joyner's previous role as head of CVS Caremark gives him deep insight into the company's PBM business, which serves approximately 90 million members. Roger Farah, who was named board chairman, said the board believes Joyner is well-suited to address CVS's current challenges.

Lynch's tenure began during the pandemic, when CVS's sales soared due to COVID-19 vaccinations.

She led efforts to push the company further into health care services, including CVS's $8 billion acquisition of home health provider Signify Health and a $10.6 billion deal to acquire Oak Street Health, a Medicare-focused clinic network.

Despite these moves, CVS's financial difficulties persisted, with rising costs at its Aetna insurance division and declining customer traffic at its retail stores fueling investor concerns.

CVS shares have fallen steadily since Lynch took over as CEO, down about 10 percent.

As Joyner assumes the role of CEO, his priority will be to stabilize CVS's financial performance and address rising costs in the insurance and retail sectors.

CVS' third-quarter earnings report, expected November 6, will provide further insight into the company's future direction as it navigates a changing healthcare landscape.

With hedge funds and analysts watching closely, Joyner must address the issues that have contributed to CVS's repeated profit cuts and rising medical costs.

With Lynch's departure, the number of female CEOs in the S&P 500 drops to 45, making up just 9 percent of all top executives, according to data firm Equilar.

This article contains reporting from The Associated Press