CVS Health plans to split into two public companies by the first half of 2028, separating its retail pharmacies from its insurance and pharmacy benefit manager businesses. Shares closed more than 12% lower on the day of the announcement.
CVS Health plans to split into two separate public companies by the first half of 2028, in what would be one of the largest corporate breakups in history, the company announced Wednesday. Shares closed more than 12% lower the same day.
The plan would reverse the company's $78 billion acquisition of insurer Aetna and dismantle the conglomerate it created in 2018. It would separate CVS' roughly 9,000 retail pharmacies from its insurance business and from Caremark, one of the nation's three largest pharmacy benefit managers.
How the two companies would be organized
The insurer and PBM company would keep the CVS Health name and be run by CEO David Joyner. The other company would be called CVS Pharmacy and be led by Prem Shah, currently group president of CVS Health. Existing shareholders would own stock in both companies after the split.
CVS would also put primary care business Oak Street Health, home visit provider Signify Health and the specialty drug business with the insurer. The decision follows a strategic review by the board, according to CVS.
According to CNBC, Joyner said the split comes "out of a position of strength". He pointed to recovery in Aetna's Medicare business and solid performance in the retail pharmacy.
Earnings and the scrutiny facing PBMs
CVS also posted third-quarter earnings and revenue that topped Wall Street expectations. Total sales climbed to $108.40 billion, from $102.87 billion in the prior-year period. Meanwhile, revenue in its pharmacy services business slid from the previous year.
One potential concern for investors is whether the retail pharmacy will lose its competitive advantage of being directly linked with a PBM. Joyner told analysts the synergy between the two businesses will be preserved in commercial agreements between the two organizations.
The breakup also comes as PBMs face mounting bipartisan scrutiny in Washington, D.C., and across states. Republicans in Tennessee and Arkansas have passed laws that would ban co-ownership of PBMs and pharmacies, and CVS and other companies have challenged those laws in court.
Source: CNBC
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