Amidst the ongoing pandemic, pharma major CVS has announced a major leadership change. Karen Lynch will replace veteran Larry Merlo as the new CEO. Merlo had helmed the company for close to a decade (since 2011). Lynch joined CVS when the firm acquired health insurer Aetna for $69B in 2018, previously serving as president of the Aetna vertical. Will Lynch’s appointment change the direction of CVS in any meaningful way? Only time will tell.
What Does This Move Mean For CVS?
What does this mean for CVS? In the near term, Lynch will have to guide the company in expanding its vaccination drive across all U.S. states and territories. COVID-19 testing capacity also needs to be ramped up to deal with fluctuating case demands.
Alongside this, damage control from CVS’ role in the opioid crisis is another big item on the new CEO’s plate – and one with implications for its bottom-line. This PR focus will be key with the growing public resentment against pharmacy benefit managers.
What CVS Needs To Focus On Going Forward
In the medium term, Lynch and CVS’ focus will be on ensuring the success of the newly launched CVS Health Hubs. The company plans to set up 1,300 such hubs by the end of 2021. These hubs, which will be housed within remodeled CVS stores, will provide integrated health and wellness services. Patients will also be able to avail treatments for chronic diseases like diabetes and other heart diseases.
Alongside other major businesses across industries, CVS has identified that higher margins exist in offering specialized services, instead of simply acting as a retailer of OTC and prescription drugs.
With considerable experience in the health insurance space, she is also well placed to leverage synergies between the CVS pharma vertical and Aetna’s insurance business. She is expected to utilize AI and machine learning to help drive operational efficiencies and better health outcomes for customers.
Leadership transition is difficult even during normal times. During a pandemic, it is doubly so. But by appointing Karen Lynch as the new CEO, CVS is taking a bold step in the right direction. The firm is looking many years ahead into the post-pandemic world where the health insurance and pharmacy verticals will complement each other. Look for CVS hiring to follow suit in this direction.
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