CVS Health to Split Off Drugstores, Unwinding Its Aetna-Era Model
CVS Health plans to separate its roughly 9,000 pharmacies from Aetna and Caremark by 2028, reversing the strategy behind its $78 billion Aetna deal.
CVS Health, one of the largest health care companies in the United States, said on Wednesday that it plans to split into two separate publicly traded companies, putting its roughly 9,000 retail drugstores into a standalone business and keeping its insurance and pharmacy benefit operations together. The separation, which the company expects to complete in the first half of 2028, would undo much of the integrated model CVS built when it bought the insurer Aetna for about $78 billion in 2018.
The plan came out on the same day CVS reported third-quarter results that topped Wall Street forecasts and raised its full-year profit outlook. The Financial Times first reported the breakup plans on Tuesday, according to CNBC.
What happened
In a statement, CVS said its board chose the split after a “comprehensive strategic review.” Under the plan, the healthcare solutions company, which will keep the CVS Health name for now, would hold Aetna, the pharmacy benefit manager CVS Caremark, the CVS Specialty drug business, the primary care chain Oak Street Health and the home-visit provider Signify Health. A pharmacy benefit manager, or PBM, is a middleman that negotiates drug prices and manages prescription coverage for employers and health plans. Caremark serves about 87 million plan members and is one of the three largest PBMs in the country, the company and CNBC said.
The second company, to be called CVS Pharmacy, would include the retail stores, the mail-order pharmacy, the MinuteClinic walk-in and virtual care service, and a technology services unit called Health100.
- Leadership: David Joyner, chairman and chief executive of CVS Health, would lead the healthcare solutions company. Prem Shah, currently the company’s group president, would become CEO of CVS Pharmacy. Other executives and board members will be named later.
- Shareholders: Existing CVS investors would own shares in both companies, and the transaction is intended to be tax-free for U.S. federal income tax purposes.
- Conditions: The deal still needs final board approval, an effective Form 10 registration statement with the Securities and Exchange Commission and confirmation of its tax-free status.
Joyner said the company was acting “from a position of strength,” Reuters reported, and that the aim was to create two focused companies to improve consumer engagement, affordability and care coordination. CVS said both businesses are expected to carry investment-grade credit ratings and pay dividends.
Why it matters
The move reverses a strategy CVS pursued for roughly two decades: becoming a one-stop health destination that sold insurance, managed drug benefits and filled prescriptions under one roof. That kind of vertical integration has drawn bipartisan criticism. Lawmakers and regulators in Washington and in many states have questioned PBMs over opaque pricing, market power and possible conflicts of interest when they are owned by insurers or pharmacies, CNBC reported. Congress passed PBM reforms in February, including changes to how PBMs are paid under Medicare Part D, the federal prescription drug program for older Americans, and several states have moved to limit PBM ownership of pharmacies.
Michael Cherny, an analyst at Leerink Partners, told CNBC the announcement “feels like a complete shock.” He said separating the businesses could help CVS avoid “relentless state legislative scrutiny” of its structure. He added that the drugstore unit has been gaining market share and stabilizing its margins, helped partly by CostVantage, a pharmacy reimbursement model CVS introduced last year, which may give a standalone pharmacy company a stronger outlook.
Julie Utterback, an analyst at Morningstar, told Reuters that improving financial results “probably helped with the timing of the move.”
The numbers
CVS reported third-quarter revenue of $108.4 billion, up 5.4% from a year earlier. Adjusted earnings came to $2.09 a share, compared with $1.60 a year ago and well above the $1.65 analysts expected, according to LSEG data cited by Reuters. The company posted net income of about $2.17 billion after a loss of nearly $4 billion a year earlier, when it took a $5.7 billion goodwill impairment.
Its insurance business drove much of the improvement. The medical benefit ratio, the share of premiums spent on patient care, fell to 91.3% from 92.8%. The retail pharmacy segment’s revenue slipped 2%, while the health services segment, which includes Caremark, grew 9.5%.
CVS raised its 2026 adjusted earnings forecast to at least $8.20 a share, up from a range of $7.90 to $8.10, and lifted its operating cash flow outlook to at least $15.5 billion. It still struck a cautious tone for the rest of the year, pointing to elevated medical costs and broader economic risks.
What comes next
Investors’ first reaction was muted. CVS shares fell 2.1% in premarket trading, Reuters reported, a dip Cherny linked partly to uncertainty around the deal and to swings in health care stocks after Tuesday’s midterm elections. The stock had risen about 70% since Joyner took over as CEO in October 2024, giving the company a market value of about $117 billion, according to CNBC. His turnaround effort has included $2 billion in cost cuts, store closures and work to rein in costs in Medicare Advantage, the private alternative to traditional Medicare.
The standalone drugstore chain will face a tough market. Reuters noted that pharmacies are competing with Amazon and with a shift toward prescription delivery that has cut store visits. CVS’s main rival, Walgreens, sold its Boots business and was acquired by the private equity firm Sycamore Partners last year.
