CVS Health (NYSE: CVS) plans to split its retail pharmacy operations from its health insurance and pharmacy benefit management businesses, dismantling a $117 bn healthcare conglomerate built through two decades of acquisitions.
The separation, scheduled for the first half of 2028, will establish two independent companies. CVS Health will retain Aetna insurance, Caremark pharmacy benefit management and its healthcare services operations, while CVS Pharmacy will operate the retail drugstore business.
- CVS Health will separate its retail pharmacy business from Aetna, Caremark and healthcare services in the first half of 2028, reversing two decades of consolidation.
- CVS shares fell 13%, putting nearly $15 bn in market value at risk, despite third-quarter earnings of $2.09 per share, above analysts’ $1.65 estimate.
- The company forecast 2027 adjusted earnings of at least $8.65 per share, exceeding Wall Street expectations, but investors questioned the financial benefits of the restructuring.
The announcement surprised investors despite stronger-than-expected third-quarter earnings. CVS shares fell 13% in afternoon trading Wednesday, putting the company on track to lose nearly $15 bn in market capitalization.
According to Reuters, the company forecast 2027 adjusted earnings of at least $8.65 per share, above analysts’ consensus estimate of $8.53. However, concerns about the restructuring and expectations of slower earnings growth weighed on the stock.
CVS Health and CVS Pharmacy to operate independently
Under the new corporate structure, Joyner will continue leading CVS Health, which will include Aetna, Caremark, specialty pharmacies and healthcare services companies Oak Street Health and Signify Health.
Prem Shah, who currently oversees pharmacy operations, related businesses and healthcare delivery, will become CEO of CVS Pharmacy.
The standalone pharmacy company will include CVS retail drugstores, MinuteClinics, mail-order pharmacy operations and Health100, a consumer platform that helps patients manage their healthcare using information from insurers, providers and pharmacies.
The restructuring will return CVS to a standalone retail pharmacy model for the first time since its 2006 acquisition of Caremark.
CVS subsequently expanded further into insurance and healthcare delivery, most significantly through its $78 bn acquisition of Aetna in 2018.
Regulatory scrutiny increases pressure on healthcare consolidation
The planned breakup comes amid growing criticism of vertical integration in the US healthcare industry.
Regulators and customers have questioned whether combining health insurance, pharmacy benefit management and retail pharmacy operations creates conflicts of interest and contributes to rising healthcare spending.
The United States already has the world’s highest healthcare expenditure, and large integrated healthcare companies face increasing scrutiny over their pricing and business practices.
Morningstar analyst Julie Utterback said CVS has particularly significant exposure to these concerns.
“Vertical integration at the (managed care organizations) has been coming under fire by regulators and customers alike in recent years. CVS has the most exposure to vertical integration in the industry,” Utterback said.
She suggested CVS management may have decided to act before potential regulatory intervention.
Management probably thought that it was a better time to move somewhat preemptively rather than wait for a legal or legislative decision that forced their hand.
The decision follows other major US corporate separations this decade, as companies seek to simplify operations and improve shareholder returns.
Rising medical costs and online competition pressure CVS
CVS’s restructuring comes as insurers and pharmacy operators face persistent financial challenges.
Health insurers have struggled with elevated medical costs across Medicare, Medicaid, Affordable Care Act plans and commercial insurance as patients increased their use of healthcare services following the COVID-19 pandemic.
Higher medical spending has complicated pricing decisions and profitability forecasts, particularly for companies with substantial government-sponsored insurance operations.
Retail pharmacies face different pressures, including prescription reimbursement rates and competition from
Amazon (AMZN) and other online providers.
The growing use of prescription delivery services has reduced customer visits to physical drugstores, limiting additional purchases that traditionally supported pharmacy revenue.
The economic pressures have affected other major pharmacy chains. Walgreens, one of CVS’s principal competitors, sold its Boots pharmacy business and was acquired by private equity firm Sycamore Partners in 2025 following a prolonged sale process.
