CVS Health Split: Healthcare giant to separate 9,000 stores in one of the industry's biggest-ever breakups
CVS Health, one of the largest health solutions companies in the world, is planning to spin off its retail pharmacy business, in what is set to be one of the largest-ever breakups in the healthcare industry, Bloomberg reported citing a company spokesperson.
In the first half of 2028, the company's pharmacy business will be a separate unit from the Aetna Insurance unit as well as the Caremark pharmacy benefits division, the spokesperson said.
The move will be historic for the company which grew from a single store in Lowell, Massachusetts, into a healthcare powerhouse with a market value of $117 as on Tuesday, 3 November.
While the company has closed hundreds of stories in recent times, it still operates around 9,000 retail pharmacies, with its rivals like Rite Aid and Walgreens struggling to compete.
Once the current plan takes effect, these 9,000 pharmacies would be separated from Aetna and Caremark.
This decision comes after a “comprehensive strategic review” carried out by the board of directors of the company, CVS said in a statement.
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The move comes at a time when its turnaround plan under David Joyner, the CEO, is showing considerable progress. The company is currently looking to bring down costs by $2 billion.
It is also looking to store closures, shaking up leaderships, as well as try and bring down costs of Medicare Advantage.
“From a position of strength, and a focus on the long term, we plan to create two focused companies to improve consumer engagement, affordability, and care coordination," the CEO said in the press release.
The two companies after the split will both be publicly traded.
The CVS Health name will be retained by the insurance and PBM firm while the pharmacy arm will be called CVS Pharmacy. While Joney will continue to operate as the CEO of CVS Health, while Prem Shah, CVS Health's group president, will be leading CVS Pharmacy.
This split will buck the decade-long trend of consolidation of businesses by healthcare conglomerates, in which health insurers were combining with pharmacy benefits firms as well as medical providers. The structure allowed companies to turn some of their expenses like dispersing medications or delivering care, into revenue for other parts of their businesses.
Media reports about a potential breakup surfaced Tuesday afternoon, surprising some analysts. CVS shares had climbed 15% this year, outpacing an 11% gain in the S&P 500 Index.
The company reported its earnings on Wednesday, in which it raised its profit outlook for the year to at least $8.20 a share, which is up from $7.90 to $8.10 per share. The fact the company chose to report its third-quarter profits ahead of the expectations by Wall Street show that it is in a healthy position among large health companies.
With Bloomberg inputs
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