CVS Health to break into two firms by early 2028

CVS Health announced on Wednesday that it will divide into two independent companies by early 2028. The move ends the corporate structure that combined the nation's largest drugstore retailer with the Aetna insurance brand and Caremark pharmacy benefit management services.

The separation reverses a strategic path that started in 2007 when CVS merged with Caremark. In 2018, CVS purchased Aetna for $69 billion, creating a massive entity that included retail, insurance, and prescription benefits. David Joyner, the company's chief executive, described the change in a statement as taking one great company and making it two.

Joyner said the split will not change how customers shop at CVS stores or alter prescription costs for patients. The company did not announce any store closures as part of the transition. The transaction will be tax-free, and current shareholders will receive shares in both new entities.

The division separates the backend negotiation functions from the consumer-facing retail and insurance operations. Caremark negotiates drug prices directly with manufacturers, while CVS drugstores and Aetna operate as distinct units. The company stated that these functions will continue to operate separately after the split.

The breakup responds to pressure from lawmakers and consumer advocates who argue that large healthcare conglomerates exert too much control over the sector. This consolidation has been linked to rising costs for patients. Some members of Congress have previously called for the separation of these entities to increase competition.

The company faces additional pressure from changing consumer habits and industry competition. Michael Cherny, an analyst at Leerink Partners, noted in a client note that CVS's retail business has struggled as customers shift to online channels. He pointed out that CVS lags behind competitors like Amazon in that space. Health insurers also face cost pressure as Americans use more medical services.

CVS shares fell 10 percent in early trading on Wednesday, after rising about 15 percent earlier in the year. The company also reported higher earnings and revenue for the third quarter, driven by its Health Care Benefits segment. CVS operates 9,000 locations in the United States, employs 30,000 pharmacists and 200,000 store employees, and runs 800 MinuteClinics staffed by nurse practitioners and physician assistants.