Two companies by 2028
CVS Health said on Wednesday it will separate its retail pharmacy chain from its insurance and pharmacy benefit businesses, reversing a strategy built over a decade of acquisitions. The company expects the split to be completed in the first half of 2028.
David Joyner, the current chief executive, will lead the insurance and benefits company, which keeps the CVS Health name for now. Prem Shah, group president, will become chief executive of the pharmacy company. Shares rose about 1.2% in extended trading after reports of the plan.
Undoing Aetna
The decision unwinds the logic of the $78 billion purchase of Aetna in 2018, which turned CVS into a company that owned drugstores, a pharmacy benefit manager and a health insurer. The combined group reported about $417 billion in revenue this year, with retail pharmacy accounting for roughly a third.
Lawmakers and regulators from both parties have questioned whether owning several parts of the medicine business lets a single company steer patients and pricing. Pharmacy benefit managers have been the subject of congressional hearings, and states have passed laws aimed at their reimbursement methods.
Why break up now
Joyner said the goal is two focused companies that can improve consumer engagement, affordability and care coordination. Analysts said the pharmacy chain has different capital needs and growth prospects from the insurance arm, and that investors have long applied a discount to the combined business.
The split also carries risk. Separating shared systems, contracts and debt will take years and cost money. The roughly 9,000 drugstores face falling reimbursement, competition from online sellers and a wave of closures. The insurer must show it can hold medical costs down without the bargaining power of a large retail network.
For customers, little changes at first. Loyalty programmes, prescriptions and insurance plans stay where they are during the transition. The bigger question is whether two smaller companies compete more openly or simply pass costs to patients.