CVS to split into two companies, in major breakup of its $117B healthcare empire

WOONSOCKET, Rhode Island — CVS Health said Wednesday it is splitting into two companies, marking one of the healthcare industry's largest shakeups. It's a major reversal of the mergers that brought together the nation's largest drugstore retailer, health insurance giant Aetna, and pharmacy benefit manager Caremark.

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 it affect what patients pay for prescriptions. The separation is expected to close in early 2028.

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 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.

Shares of CVS Health, up about 15% so far this year, fell 10% in early 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 store employees, the company said during an earnings call Wednesday.

Related topics