Media reports say CVS Health plans to spin off its retail pharmacy operation from its insurance and pharmacy benefits arms. The Financial Times first reported the move on Tuesday, citing people familiar with the matter, and the Wall Street Journal later said the company expects the separation in the first half of 2028. CVS did not respond to requests for comment.
The retail chain would be split from the Aetna insurance segment and the Caremark pharmacy benefit manager. Per the Journal, the insurer-side company would keep certain care-delivery holdings - such as Oak Street Health, Signify Health, and the specialty pharmacy - while the other entity would house the MinuteClinics and the mail-order pharmacy. The Journal also said Chief Executive Officer David Joyner would stay on to lead one of the two entities after the split.
CVS grew from a single shop in Lowell, Massachusetts into a healthcare heavyweight valued by the market at $117 billion. Even after closing hundreds of stores over the past few years, the company still runs nearly 9,000 pharmacies, while rivals like Walgreens and Rite Aid have faced headwinds.
Company figures cited in coverage show the retail pharmacy operation is poised to produce $138 billion in revenue this year. In 2023, CVS's pharmacy and consumer wellness division brought in more than $139 billion - around one third of the company's total - even as management points to substantial revenue overlap among its segments.
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Shares moved higher on the headlines, rising up to 3.7% after the bell. Through Tuesday's close, the stock was already up 15% for the year. Bloomberg previously reported that CVS evaluated options, including a breakup, in 2024. Joyner, who took the helm two years ago, has been working to steady the broader business after the Aetna unit stumbled in recent years.
Big healthcare combos are drawing more scrutiny for bundling multiple lines of business, and certain state and federal lawmakers have floated proposals to split them apart. A CVS separation would unwind pieces of a decade of deals that paired insurers with pharmacy benefit managers and care providers, a setup that can convert what would be costs in one unit into revenue for another. Meanwhile, brick and mortar drugstores face a long slog against online competition, and among its major healthcare rivals, CVS is the only one with a sizable pharmacy chain footprint.
If completed, the move would redraw CVS's earnings map by putting the retail pharmacies in a separate entity while Aetna, Caremark, and several provider assets remain together. That could bring sharper valuation lenses to each business, especially given the company's own disclosure of overlap in sales between units. Analyst Michael Cherny at Leerink Partners called the reports "a complete shock," but noted that "perhaps the outlook for a standalone retail pharmacy (still with meaningful scale and leverage on its own) is stronger now than before," and added that the move could avoid "relentless state legislative scrutiny over the company's level of vertical integration."
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