CVS to split into two companies, in major breakup of its $117 billion healthcare empire
By Chris Isidore, Tami Luhby, CNN
(CNN) — CVS Health said Wednesday it is splitting into two companies, marking one of the largest shakeups in the healthcare industry. It’s a major reversal of the mergers that brought together the nation’s largest drugstore retailer along with health insurance giant Aetna and pharmacy benefit manager Caremark.
One company, which would house CVS’s 9,000 retail pharmacies, mail order pharmacy, specialty drug business and MinuteClinic, will be named CVS Pharmacy.
The other, comprising of Aetna, Caremark and two companies that CVS acquired that provide primary care and in-home health evaluations to senior citizens, will be called CVS Health in the interim.
The separation is expected to close in early 2028.
The breakup unwinds a strategy that began in 2007, when CVS merged with Caremark, which handles prescription benefits available to people with health insurance. In 2018, CVS acquired Aetna for $69 billion.
“We’re basically taking what I believe is one great company and making it two,” said CVS CEO David Joyner in a statement Wednesday.
The company split will have little impact on the way people shop at CVS – the company didn’t announce any closures as part of the news – nor will affect what patients pay for prescriptions.
Pharmacy benefit management businesses work on the backend, negotiating directly with drugmakers on the cost of prescription drugs. But CVS’s drugstores and Caremark insurance operate separately. Splitting into two companies won’t change how they function.
The split does, however, mark a major step back from the widespread trend to integrate various parts of the healthcare industry – including insurers, pharmacy benefit managers and providers – into massive conglomerates. That consolidation has come under attack from consumer advocates and state and federal lawmakers for wielding too much control of the sector, leading to higher costs for patients. Some members of Congress have called for breaking up the companies.
Also, health insurers have come under cost pressure because Americans are using more healthcare services. Meanwhile, lawmakers and regulators are seeking to reform the pharmacy benefit manager industry just as it contends with new players looking to chip away at the dominance of Caremark and other major PBMs.
Meanwhile, CVS’ retail business has been hampered by consumers shifting to online channels, where the company still lags leaders like Amazon, Michael Cherny, an analyst with Leerink Partners, wrote in a client note on Tuesday evening after reports of the split surfaced.
Cherny, who called the news “a complete shock,” wrote that CVS’ pharmacy business has been performing well so “perhaps the outlook for a standalone retail pharmacy (still with meaningful scale and leverage on its own) is stronger now than before.”
Joyner, who will lead the new CVS Health company, took over as CEO in 2024 in the wake of layoffs, store closings and poor stock performance.
Shares of CVS Health, which have risen since Joyner’s appointment, fell 12% in midday trading after initially ticking up in premarket trading. Shareholders will get shares of both companies in a tax-free transaction, according to the company.
CVS also reported higher third-quarter earnings and revenue Wednesday, due primarily to better results from its Health Care Benefits segment. The company also raised its earnings guidance for the rest of this year.
CVS has 9,000 locations across the United States, 800 of which operate “MinuteClinics” staffed by nurse practitioners and physician assistants. It has 30,000 pharmacists and 200,000 employees in its stores, the company said during an earnings call Wednesday.
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