CVS Health has unveiled a major restructuring plan that will see the company split into two distinct public entities by the first half of 2028. This landmark decision is poised to be one of the largest corporate splits in history, marking a significant shift in the healthcare landscape.
The move comes as CVS aims to reverse its controversial $78 billion acquisition of Aetna, which was finalized in 2018. By separating its extensive network of approximately 9,000 retail pharmacies from its insurance and pharmacy benefit manager (PBM) operations, CVS is dismantling the vertically integrated healthcare conglomerate it has built over the last two decades.
According to an official announcement, this strategic decision followed a thorough review conducted by CVS's board of directors. The split represents a dramatic turnaround for a company that has long sought to establish itself as a comprehensive health service provider.
CEO David Joyner, who has been at the helm since October 2024, emphasized the company's focus on long-term growth. "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," Joyner stated, outlining the goals of the new corporate structure.
Since Joyner's appointment, CVS's stock has surged approximately 70%, boosting the company’s market capitalization to around $117 billion. The split will result in two publicly traded companies, with Joyner leading the insurance and PBM entity under the CVS Health name.
The second entity, named CVS Pharmacy, will be managed by Prem Shah, the current group president of CVS Health. Details regarding additional leadership roles and board members are expected to be disclosed in the future.
Shareholders of CVS will be granted shares in both companies post-split, representing a significant opportunity for investors as the market adjusts to this structural change.
Financial performance from CVS's different segments reveals that the pharmacy business generated $37.66 billion in sales for 2025, while the insurance division recorded $36.29 billion in revenue. In addition, the healthcare services segment produced $51.24 billion.
As part of this transformation, the company is consolidating its insurer and PBM functions with its primary care business, Oak Street Health, and home-visit provider Signify Health, as well as its specialty drug operations. This integration is anticipated to enhance strategic focus and innovation within the respective sectors.
The split is designed to allow for each company to pursue a more concentrated strategic agenda, which includes improved innovation, technology adoption, and operational efficiency.
Historically, CVS has previously contemplated a division of its business. In late 2024, the company sought advice regarding the potential separation of its retail pharmacy and insurance units, indicating a long-standing recognition of the complexities inherent in its operational structure.
Michael Cherny, an analyst at Leerink Partners, expressed surprise at the announcement of the split, labeling it a "complete shock." However, he acknowledged that the retail pharmacy division has been successfully gaining market share from competitors and stabilizing its gross margins, partially due to the introduction of CostVantage, a new pharmacy reimbursement model implemented last year.
He remarked, "In this context, perhaps the outlook for a standalone retail pharmacy (still with meaningful scale and leverage on its own) is stronger now than before," suggesting optimism for the future of the retail side of the business.
Additionally, Cherny pointed out that the motivation for the split could also stem from increasing state legislative scrutiny regarding the company's vertical integration practices.
The decision to split aligns with broader trends in the healthcare sector, where pharmacy benefit managers (PBMs) have been under bipartisan scrutiny in Washington, D.C. and at the state level. Criticism has centered on issues such as opaque pricing and potential conflicts of interest linked to the ownership structure of PBMs, which negotiate drug prices and manage benefits on behalf of insurers and employers.
In response to these challenges, Congress enacted reforms in February targeting PBM operations, particularly concerning how they are compensated under Medicare Part D. Concurrently, various states have taken measures to restrict the ownership of pharmacies by PBMs.
As CVS moves forward with its split into two companies, the implications for both the retail pharmacy and insurance sectors will be closely monitored by industry analysts and investors alike. The restructuring is seen as an effort to respond to market demands and regulatory pressures while positioning each entity for enhanced performance and growth in their respective markets.
With this split, CVS Health aims to create distinct identities and operational focuses for its pharmacy and insurance businesses, ultimately striving to deliver better healthcare solutions to consumers and to adapt seamlessly to the evolving healthcare landscape.
Frequently Asked Questions
What is CVS's plan for splitting its business?
CVS plans to separate its retail pharmacy operations from its insurance business and PBM, creating two separate public companies by 2028.
Who will lead the new CVS Pharmacy entity?
Prem Shah, the current group president of CVS Health, will lead the newly formed CVS Pharmacy company.
What financial performance did CVS report for its business segments?
In 2025, CVS's pharmacy business reported $37.66 billion in sales, while its insurance unit generated $36.29 billion and the healthcare services segment produced $51.24 billion.
Why is CVS splitting its operations?
The split is intended to enhance strategic focus, innovation, and operational efficiency while addressing regulatory scrutiny regarding its vertical integration practices.
What are the implications for CVS stock?
The split may create distinct investment opportunities, as shareholders will own shares in both new companies, potentially impacting CVS stock performance as the market responds to the changes.
Source: CNBC
Illustration photo: Kleingrothe, C.J. (Kleingrothe, Carl Josef, 1864–1925) / Med / Wikimedia Commons (Public domain)
