CVS Health Corp.’s elevation of veteran David Joyner to chief executive officer failed to appease activists who want to see a bigger shift in direction at the health-care company.

Joyner, 60, took over as CEO Thursday from Karen Lynch, according to a Friday release, ending her tumultuous three-year tenure. The change came after CVS repeatedly missed earnings targets, paid top dollar for several acquisitions and cycled through executives, setting off unrest that recently spilled into public view.

The company’s shares fell 5.2%, bringing their year-to-date losses to 24%

Joyner, a long-time CVS executive who’s never led a public company, will manage the turnaround with Roger Farah, a former retail brand executive who’s been on the board since 2018 and was elevated to executive chairman. Joyner aims to announce new leadership appointments, including for the company’s troubled Aetna insurance unit, by the end of the year, he said in an interview.

The moves, which Farah said were part of the company’s long-time succession planning, weren’t enough to appease hedge fund Glenview Capital Management. It began pushing for changes last month as CVS struggled to adapt to widespread industry shifts.

“Shareholders need to play an active role in demanding immediate Board refreshment,” Glenview said in a statement following CVS’ announcement. While supporting the decision to replace Lynch, 62, it said there’s more work to be done.

Joyner appeared acutely aware of the struggle ahead. He pleaded with employees for help in a memo Friday that blamed the company’s situation on cataclysmic changes afoot in the industry, which is fighting with the US government, drugmakers and states over the rising costs of medical care.

“It is no secret that our industry faces significant and dynamic challenges, and that CVS Health must make financial and operational improvements to drive elite execution and maintain our position as a leading health care company,” he said, without laying out specific changes.

His tenure got off to an inauspicious start, with CVS saying it expects third-quarter results to miss Wall Street’s expectations and that it will pull its 2024 earnings guidance because of elevated medical costs.

CVS reported preliminary adjusted earnings of $1.05 to $1.10 a share in the third quarter. The health benefits business expected a medical-loss ratio of 95.2% in the quarter, far worse than analysts anticipated.

The results also reflect a $1.1 billion charge for a premium deficiency reserve to cover excess medical costs. Executives plan to update investors during an earnings call in November.

The company had been reviewing its strategic options for months, including a potential breakup, Bloomberg News has reported, as rising medical costs in its Aetna insurance arm weighed on the health-care conglomerate. On Friday, the company said it was no longer considering a breakup.

Upheaval at CVS

CVS shares had fallen 10% since Lynch became CEO in February 2021. She struggled to create a one-stop shop for medical services amid a government crackdown on spending, increasing health expenses, and post-pandemic pressure on retail stores. The company still operates the largest US retail pharmacy chain, but competition from Amazon.com Inc. and Walmart Inc. has eroded drugstores’ profits. Pharmacies have been shuttering locations and dealing with labor shortages, driving up patient wait times and frustrating customers.

Lynch responded by deepening CVS’s reach into health-care services, purchasing Medicare clinic chain Oak Street Health and home-visits company Signify Health. Those deals aimed to augment Aetna’s large Medicare Advantage insurance business with care delivery, mirroring the strategy of rival UnitedHealth Group Inc.

But they came just as the Biden administration tightened payments to Medicare insurers and curbed tactics they used to boost revenue. The company also lost a huge contract to provide pharmacy benefits for insurer Centene Corp., which awarded the business to Cigna Group.

The Caremark pharmacy benefits management business that Joyner led is under scrutiny from the Federal Trade Commission, which alleged CVS and its rivals drove up insulin prices. Congress is weighing new restrictions on PBM practices that could get a vote after the election. Joyner defended the business in front of a congressional panel earlier this year.

Biggest troubles

The company’s biggest troubles are in the health benefits segment. CVS rapidly grew its Medicare Advantage rolls in 2024 with enticing benefits, but expenses for their care far outpaced projections and it’s poised to lose members next year. Runaway costs in the health benefits business prompted CVS to pull its forecast, already lowered multiple times this year.

Almost two years ago, CVS told investors to expect adjusted earnings to be $9.75 to $9.95 a share in 2024. The company dropped that target over and over again, most recently to a range of $6.40 to $6.55 a share in August, an estimate CVS now says should no longer be relied on.

Analysts were already planning for 2024 earnings-per-share to drop by 25% from last year, according to a Bloomberg survey, estimates that will likely have to drop further.

Executive turnover

The turmoil at CVS has been marked by departures among top executives.

Brian Kane, the former chief financial officer of Humana Inc., joined to lead Aetna in 2023 but was ousted after less than a year. A president of health-care delivery hired from UnitedHealth returned to that company six months later, while long-term legal and Caremark leaders departed in 2023.

The decision to replace Lynch with Joyner was made unanimously by the board, CVS said.

Joyner began his career at Aetna as an employee benefit representative, then worked his way up the ranks at CVS Caremark in various sales positions, including overseeing sales and marketing operations.

After coming out of retirement, which included seeing “remote parts of this country with my wife, dog, and RV,” he lead the pharmacy services business in 2023. He was most recently executive vice president of CVS Health and president of CVS Caremark.

“David has all the skills that we need at this point to succeed at CVS Health,” Farah said.

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