Karen Lynch, CEO Of CVS Health, Departs Amidst Tough Year For Druggist Chain
Investors in the drugstore and health insurance mammoth, CVS Health, saw share prices fall by 19% this year and the company expects the trend to continue. CEO Karen Lynch has now stepped aside in the context of this and several other challenges faced by the healthcare behemoth.
Challenging Year For CVS Health
One of the biggest drugstore chains in the U.S. CVS Health also operates a massive pharmacy benefit management business involving prescription drug coverage for employers, insurers, and other big clients in addition to the almost 27 million people covered by CVS’s Aetna insurance arm.
After growing claims from its Medicare Advantage coverage, Lynch took over leadership of the insurance segment.
CVS Health cautioned on Friday that with the latest drop in its share price, third-quarter earnings are also anticipated to disappoint- the third such warning this year. It said investors should not rely on guidance for the quarter provided in August.
A FactSet poll forecast shows per-share earnings of $1.69 while the Woonsocket expects CVS’s adjusted earnings to result in a share price drop of between $1.10 and $1.05. The hedge fund, Glenview Capital Management said the company has been operating far below its potential.
On Friday, the company said it is still battling higher medical costs in the insurance segment. Its privately operated renditions of the government’s mainly 65+ Medicare Advantage plans have also affected the company through pressure from Medicaid coverage and a decline in quality ratings for plans CVS manages in several states.
CEO Karen Lynch Leaves CVS Health
Former Humana executive Brian Kane, Lynch’s predecessor in the insurance segment, left CVS Health about a year after getting there and Lynch is now also leaving. Andrew Mok, a Barclays analyst, said the battling insurance arm will have to address the leadership gap in the short term.
Michael Cherny, Leerink Partners analyst, said that while the leadership change was not expected, he understood the rationale behind it given another quarter of share drops. He said, “It is hard, given the operational and stock underperformance, to say a change at the top is undeserved.”
Veteran CVS Health executive David Joyner is replacing Lynch at the helm of CVS Health and will have to navigate the company through decreasing drug-store sales, rising health insurance costs, and increasing investor pressure.
With growing competition online and beyond, there is a drastically changed environment for CVS and other major druggist chains.
Executive data firm Equilar said that Lynch’s departure also leaves just 45 female CEOs in the S&P 500, representing about 9% of all CEOs.