CVS plans to split into two public companies by the first half of 2028

What CVS is doing and who runs what

CVS is preparing for a breakup among the biggest in corporate history, aiming to complete the separation by the first half of 2028. The move would reverse the vertically integrated model the company built in 2018 through its $78 billion purchase of Aetna. After the transaction, existing shareholders would hold stakes in both companies.

The insurance and pharmacy benefit manager business would keep the CVS Health name and be led by CEO David Joyner. The retail operation would become CVS Pharmacy, run by Prem Shah, currently group president of CVS Health. Each of the two entities will trade on public markets, and CVS said it will detail further leadership posts and board seats later.

Per the blueprint, the insurer and Caremark - counted among the nation's three biggest PBMs - will remain within CVS Health alongside Oak Street Health, Signify Health, and the specialty pharmacy unit.

Why now, and how the model changes

CVS said its board completed a "comprehensive strategic review" before deciding to pursue a split. Joyner told CNBC's Squawk on the Street that the decision stems from current strength, citing a rebound in Aetna's Medicare operations and strong results in retail. "So it's all about the strength of the business that affords us the opportunity to make what we think are the right strategic decisions for the future of this company," he said.

One investor question is whether the pharmacy chain loses an edge by no longer being directly linked to a PBM that negotiates drug prices. Joyner told analysts the synergy between the two businesses "are going to be preserved in commercial agreements," adding "we don't need the integration of an operating structure."

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Turnaround progress, results and scale

The move comes as an aggressive turnaround under Joyner shows substantial progress, with CVS targets $2 billion in expense reductions, closes stores, reshapes leadership, and works to curb Medicare Advantage costs. Since Joyner assumed leadership in October 2024, the stock has climbed about 70%, bringing market capitalization to $117 billion.

CVS on Wednesday reported third-quarter profit and sales that exceeded forecasts. Total sales rose to $108.40 billion from $102.87 billion a year earlier, helped by year over year gains in health care benefits and health services. Revenue in pharmacy services declined from the prior year.

For 2025, the pharmacy business generated $37.66 billion in sales, the insurance unit brought in $36.29 billion, and the health care services segment delivered $51.24 billion. Shares fell roughly 11% on the day of the announcement. The Financial Times first reported the breakup plans on Tuesday.

Context: scrutiny on PBMs and what could change

CVS said the split would let each company pursue a more focused strategy and move faster on technology and efficiency. Leerink Partners analyst Michael Cherny said the plan underscores "the stability of the pharmacy," citing market share gains and steadier margins tied to CostVantage, a reimbursement model CVS introduced last year that it presents as more transparent.

The structure shift also arrives as PBMs face mounting bipartisan scrutiny in Washington and across states. In Tennessee and Arkansas, Republican lawmakers approved measures to prohibit co-ownership of PBMs and pharmacies, a move CVS and others are contesting in court. Critics say PBMs obscure pricing, wield increasing market power, and face potential conflicts of interest when they're part of companies that also run insurers and pharmacies.

What this means for your portfolio

If CVS completes the plan, shareholders would receive stock in both companies, with the insurer and PBM housed with Oak Street Health, Signify Health and specialty drugs under CVS Health, and the stores operating as CVS Pharmacy. Management says commercial agreements would keep key links between the PBM and the retail chain even after the separation. The bottom line: the company plans to finish the split by the first half of 2028.

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