CVS CEO Karen Lynch Out As Earnings Dive For Company

As the chief of CVS, a corner drugstore and health insurance giant, Karen Lynch headed the largest Fortune 500 company by sales of any female CEO, and for years was regarded as the most powerful woman in American business, Jessica Chou reported for Fortune. Now, she’s out.

In her first two years after being appointed to the top job in late 2020, Lynch appeared to be on the road to success. I Photo: CVS Health

In her first two years after being appointed to the top job in late 2020, Lynch appeared to be on the road to success.

By late 2022, she had raised CVS’s share price from $70 to around $110. Investors bought into her bold new strategy of making CVS a one-stop shop for basic healthcare services, right in their own neighborhoods.

This was supported by hands-on, data-driven management from their in-house insurer, which reminded customers to refill prescriptions and schedule annual physicals.

Lynch promised to "revolutionize healthcare as we know it" by repurposing thousands of CVS’s more than 9,000 stores into dedicated service centers for diabetic retinopathy and cholesterol screenings, mental health counseling, or hybrid retail and primary care centers called HealthHUBs.

On October 18, CVS revealed that its financial performance was worse than already low expectations.

Major investors, including Glenview Capital, demanded changes in leadership. CVS projected earnings per share (EPS) at $1.05 to $1.10, well below the FactSet consensus of $1.69.

Most of the shortfall came from extremely tight margins in the health benefits business at Aetna, especially in its large Medicare Advantage segment.

CVS disclosed that its cost ratio of premiums to expenses had risen from an estimated 91% to over 95%. "That represents some combination of providing benefits that are too generous and underpricing premiums," said Michael Ha of Robert W. Baird.