A sign at a CVS branch in Pasadena, California, on May 16, 2023. Photo by The Associated Press
CVS Health Inc. cut its 2024 forecast for the third time this year and changed leadership at its health insurance business, which continues to struggle with rising costs.
The health care giant announced Wednesday that CEO Karen Lynch will lead the insurance division, succeeding executive vice president Brian Cain, who is leaving the company after about a year with the company.
Rising claims from the company's Medicare Advantage plans have hurt CVS Health for much of this year and helped it repeatedly lower its outlook for 2024. Medicare Advantage plans are privately run versions of the federal insurance program that primarily covers people 65 and older.
CVS Health also said Wednesday that those plans have been hurt by declining quality ratings and pressure from the Medicaid insurance it administers in several states.
Adjusted operating profit for the company's health insurance business fell 39 percent in the quarter to $938 million, helping drag down overall profit.
Adjusted operating profit, which excludes capital gains and other factors, also fell 12% at CVS Health's pharmacy business, which operates thousands of drug stores across the U.S. The company processed more prescriptions in the second quarter but has been dealing with tighter reimbursement for those drugs.
Outside of pharmacies, CVS Health said sales at its stores have declined, in part due to customers buying fewer COVID-19 test kits.
Lynch told analysts on Wednesday that the company is planning a multiyear, $2 billion cost-cutting program that he said will include greater use of artificial intelligence and automation and “continued streamlining of our business portfolio.”
CVS Health is on track to complete a three-year plan to close 900 stores in 2024. Lynch said Wednesday that the company has closed 851 stores so far.
CVS Health still operates one of the largest drugstore chains in the United States, and also operates a huge pharmacy benefits management business that handles prescription drug insurance and covers about 27 million people through its Aetna insurance division.
Overall, the company's profits fell more than 7% for the quarter, to $1.77 billion. Adjusted earnings came to $1.83 per share on sales of $91.2 billion.
Analysts had expected earnings of $1.73 per share on sales of $91.41 billion, according to FactSet.
CVS Health now expects adjusted earnings per share to be between $6.40 and $6.65 this year, well below the Wall Street consensus estimate of $6.96 per share.
The company's new forecast is a downward revision from its May prediction of at least $7 a share, after lowering its forecast in February.
CVS Health initially said in December that it expected adjusted earnings per share of at least $8.50 in 2024.
Shares of the Woonsocket, Rhode Island-based company were down 64 cents to $57.70 on Wednesday morning, while the rest of the stock index was up more than 1 percent.
CVS Health shares have already fallen by a quarter this year, even as the Standard & Poor's 500 index has risen about 10%.
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