CVS Executive Shift Puts Company Veteran at Helm of Biggest Unit

(Bloomberg) -- CVS Health Corp. shook up its senior management ranks, putting a company veteran in charge of its pharmacy-benefit management business, less than two years after bringing on a longtime pharmaceutical executive to run it.

The company said in a statement Wednesday that Alan Lotvin had been named president of CVS Caremark, taking the reins from Derica Rice, who will depart CVS. Rice, a former Eli Lilly & Co. executive who joined the company in 2018, will remain through this month to help ensure a smooth transition.

The move puts one of Chief Executive Officer Larry Merlo’s most trusted lieutenants at the helm of CVS’s largest division. Lotvin has been with CVS since 2012, and in recent years had been charged with transforming the company after it acquired Aetna for $67 billion in its largest-ever takeover.

Rice’s departure had been in the works for “some time” before the announcement, Merlo said in an interview. Merlo said the role of CVS’s pharmacy-services business is changing and Lotvin has “deep experience” in the space.

The change reflects “the deep and talented bench that’s resonant within CVS Health,” Merlo said. “Quite frankly, I think that’s the story here, the talent that’s resonant across the organization.”

The Aetna deal was premised in part on the idea that CVS could transform its drugstores into centers where patients could receive basic care and pick up prescriptions, driving down health costs. But CVS shares have languished since the transaction closed in late 2018, with investors wary of the effects of political wrangling over drug prices, as well as the overall growth prospects of the combined company.

Rice’s departure followed news last week that former Aetna CEO Mark Bertolini had stepped down from CVS’s board. Bertolini said he had offered to remain a director past his current term, but wasn’t renominated. And Kevin Hourican, who led CVS’s retail-pharmacy business, left last month to become CEO of food-service company Sysco. Hourican joined CVS in 2012 from Macy’s.

Other notable Aetna alumni have also departed recently, including former Chief Technology Officer Claus Torp Jensen, who left for Memorial Sloan Kettering in October. But some of the insurer’s most visible leaders remain, including Karen Lynch, who is president of the business, and Rick Jelinek, who’s leading the integration. And CVS said Wednesday it promoted Aetna’s Jonathan Mayhew to executive vice president of transformation, a role previously occupied by Lotvin.

“As you look at talent within the organization, the Aetna operating team is largely intact, so there has not been a large exodus of the company,” Merlo said. “I’m very pleased with how the two organizations and the culture of the organizations is coming together.”

Shares of CVS were down 1.2% at $72.94 at 2:10 p.m. in New York.

The company also projected better-than-expected revenue for the year and posted stronger-than-forecast fourth-quarter results. In an investor presentation, CVS said it expects 2020 revenue of $261.97 billion to $265.48 billion, above the average Wall Street forecast of $256.89 billion. The pharmacy-services business is expected to be a critical plank of that growth, with projected 2020 sales of $137.50 billion to $139.45 billion.

To contact the reporter on this story: Angelica LaVito in New York at alavito@bloomberg.net

To contact the editors responsible for this story: Drew Armstrong at darmstrong17@bloomberg.net, Timothy Annett

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