CVS Health has announced plans for a monumental corporate breakup by the first half of 2028, aiming to split into two separate publicly traded entities. This strategic move will reverse its 2018 acquisition of insurer Aetna, dismantling the vertically integrated healthcare giant by separating its vast retail pharmacy business from its insurance arm and pharmacy benefit manager, Caremark. While shares initially dipped, CEO David Joyner asserts the decision stems from a position of strength following significant turnaround progress, though the split also addresses mounting regulatory scrutiny on PBMs.
In a monumental move set to reshape the healthcare landscape, CVS Health announced plans on Wednesday to split into two distinct publicly traded companies by the first half of 2028. This strategic unbundling would mark one of the largest corporate breakups in history, fundamentally reversing the company's massive $78 billion acquisition of insurer Aetna in 2018 and dismantling the vertically integrated healthcare conglomerate it had meticulously built over the past two decades.
The ambitious plan will see CVS's approximately 9,000 retail pharmacies separated from its formidable insurance business, Aetna, and its pharmacy benefit manager (PBM), Caremark, which stands as one of the nation's three largest PBMs. This decision follows a comprehensive strategic review by CVS Health's board of directors, a disclosure that initially sent CVS shares tumbling roughly 11% on Wednesday.
VIDEO: CVS Health CEO David Joyner discusses the company's decision to split into two companies, stating it's 'out of a position of strength.'
This stunning reversal comes as CEO David Joyner's aggressive turnaround plan, initiated in October 2024, has shown significant progress. Under his leadership, CVS Health has pursued $2 billion in cost reductions, implemented store closures, undertaken leadership shakeups, and worked to control Medicare Advantage costs. Indeed, CVS shares have surged roughly 70% since Joyner took the helm, elevating the company's market value to $117 billion.
Joyner, however, assured CNBC's "Squawk on the Street" that the decision to split is made "out of a position of strength," citing a strong recovery in Aetna's Medicare business and robust performance in the retail pharmacy segment. He emphasized that the underlying strength of the businesses provides the flexibility to make such strategic decisions for the company's future.
A person walks into a CVS pharmacy near George Washington University in Washington, U.S., August 15, 2024. Kaylee Greenlee Beal | Reuters
Following the split, both new entities will be publicly traded. The insurance and PBM operations, along with its primary care business Oak Street Health, home-visit provider Signify Health, and specialty drug business, will retain the "CVS Health" name and continue under the leadership of David Joyner. The retail pharmacy division will be rebranded as "CVS Pharmacy" and led by Prem Shah, currently group president of CVS Health. Further leadership appointments and board members are expected to be announced later. Existing CVS shareholders will receive shares in both new companies.
The Financial Times initially reported on the breakup plans on Tuesday. Financial performance figures from 2025 indicated the pharmacy business generated $37.66 billion in sales, the insurance unit $36.29 billion in revenue, and the healthcare services segment a substantial $51.24 billion.
Coinciding with the breakup announcement, CVS also released its third-quarter 2026 earnings and revenue, which comfortably surpassed Wall Street expectations. Total sales climbed to $108.40 billion, an increase from $102.87 billion in the prior-year period, driven by strong year-over-year growth in its healthcare benefits and health services segments. However, revenue in its pharmacy services business saw a slight decline from the previous year.
How the CVS split would work
CVS leadership stated the split is designed to enable both companies to pursue a more "focused strategic agenda," fostering greater innovation, technology adoption, and increased efficiency. This isn't the first time CVS has considered such a move; in October 2024, the company engaged advisors for a strategic review, exploring a potential breakup of its retail pharmacy and insurance units. However, Joyner noted that at that time, the company was undergoing a "turnaround" and lacked the financial flexibility and business performance to execute a split.
Michael Cherny, an analyst at Leerink Partners, commented that the split underscores the newfound "stability of the pharmacy" business. He highlighted its success in gaining market share and stabilizing gross margins, partly attributed to CostVantage, CVS's new, more transparent pharmacy reimbursement model introduced last year. Cherny observed, "This business is a much different business from the one that's been considered three years ago, five years ago, 10 years ago, where there had been a litany of headwinds that the pharmacy just couldn't overcome."
A key concern for investors is whether the retail pharmacy will lose its competitive edge by being decoupled from a PBM, which plays a crucial role in negotiating drug prices and managing prescription benefits. However, Joyner reassured analysts that the existing synergies between the two businesses "are going to be preserved in commercial agreements between the two organizations," adding that direct operational integration is not necessary.
The rationale behind the split may also extend to the increasing state-level legislative scrutiny over the vertical integration of healthcare companies. Pharmacy benefit managers, in particular, face growing bipartisan criticism in Washington D.C. and various states due to concerns over opaque pricing practices, expanding market power, and potential conflicts of interest arising from co-ownership with insurers and pharmacies. Notably, states like Tennessee and Arkansas have even enacted laws to ban co-ownership of PBMs and pharmacies, though these have been challenged in court by CVS and other industry players.
