CVS to Split Businesses Into Two Companies, Targets Completion in First Half of 2028
Key Facts
CVS Health said on November 4 that it plans to separate into two independent publicly traded companies, reshaping a group that combines insurance, pharmacy benefit management and pharmacies under one roof. The company is targeting completion of the split in the first half of 2028, with current shareholders receiving shares in both entities. The official announcement followed a Reuters report on November 3, which cited The Wall Street Journal as saying the group planned to separate its retail pharmacies from its Aetna and Caremark businesses. The company said its board made the decision after a comprehensive strategic review. The announcement marks a shift in the group’s structure, while leaving financial and operational details of the split in focus for investors.
The entity that will temporarily retain the CVS Health name will include insurer Aetna, pharmacy benefit manager CVS Caremark and specialty drug business CVS Specialty, along with Oak Street Health and Signify Health. The company described it as a healthcare solutions entity, reflecting the breadth of its activities beyond insurance and pharmacy claims management. The other entity, which will be called CVS Pharmacy, will include about 9,000 retail pharmacies, as well as the mail-order pharmacy and MinuteClinic, including virtual care, and the Health100 technology business. The split places the pharmacy network and its services in a company separate from insurance and pharmacy benefit management activities. Under the announced ownership structure, shareholders of the current group will hold a stake in each company after the split.
David Joyner, the group’s current chairman and chief executive, will chair the board and lead the healthcare solutions entity. Prem Shah, the current president of CVS, will become chief executive of CVS Pharmacy. Joyner said the plan aims to create “two companies focused on improving consumer engagement, affordability and care coordination.” CVS said each company expects to have a strong investment-grade credit rating and generate strong free cash flow. It added that both companies will have flexibility in capital allocation, with attractive dividends, according to its announcement.
The decision separates businesses CVS brought together through major acquisitions; it bought Caremark about 20 years ago, then acquired Aetna for $78 billion in 2018. Reuters reported that the company studied options including a possible breakup in 2024, as it faced challenges across its businesses. The split comes amid growing scrutiny of pharmacy benefit managers, which act as intermediaries between insurers, pharmacies and drugmakers. The Federal Trade Commission said the three largest managers handled nearly 80% of about 6.6 billion prescriptions dispensed in the United States in 2023, while the six largest managers’ share exceeded 90%. The commission also said pharmacies affiliated with the three largest managers accounted for 68% of specialty drug dispensing revenue in 2023, up from 54% in 2016.
The commission’s data indicate that Caremark and two other large pharmacy benefit managers generated more than $7.3 billion in specialty drug dispensing revenue above estimated acquisition costs during 2017–2022. In July 2026, the commission reached a settlement with Caremark requiring changes aimed at increasing transparency, reducing patients’ out-of-pocket costs and ensuring fair treatment of community pharmacies. At the state level, a Tennessee law barring pharmacy benefit managers from operating retail pharmacies is set to take effect on July 1, 2028. CVS said in a federal lawsuit that it may have to close 136 pharmacies in the state if the law is implemented. The date overlaps with the company’s targeted timeline for the split, but the announcement did not say the law was a reason for the decision.
The stock moved in opposite directions around the announcement: it closed at $91.41 on November 3, compared with $88.51 in the previous session, then fell 12.5% to $79.96 on November 4, shedding about $15 billion in market value. Reuters quoted a UBS analyst as saying the announcement surprised investors and appeared to be a defensive move in response to regulation, while a Barclays analyst said the lack of financial details about the split raised concerns. Reuters recalled that CVS had promised at the time of its Caremark acquisition to achieve at least $500 million in synergies. On the same day it announced the split, the company reported third-quarter adjusted earnings of $2.09 per share, compared with $1.60 a year earlier. The company attributed the improvement mainly to higher adjusted operating income in its health benefits segment, while consolidated adjusted operating income rose 21.2% year over year, driven by increases across all segments.
CVS raised its 2026 revenue outlook to at least $420 billion and its adjusted earnings outlook to at least $8.20 per share, compared with a previous earnings range of $7.90 to $8.10. The company maintained a cautious tone for the rest of the year because cost trends remained elevated and economic headwinds were possible. It also forecast adjusted earnings of at least $8.65 per share in 2027, ahead of the analyst average estimate of $8.53, according to Reuters. The third-quarter results call with analysts and investors was scheduled for November 4 at 8:00 a.m. Eastern time. Completion in the first half of 2028 remains the announced target, and the transaction is expected to be tax-free for the company and its shareholders.