CVS Health to divide into two distinct public companies by 2028

CVS Health announced it will separate into two independent publicly traded companies, ending a decades-long effort to combine retail pharmacies, insurance, and pharmacy benefit management under one corporate roof. The split will create CVS Health and CVS Pharmacy, both of which will retain the familiar brand name but operate as distinct entities.

CVS Health will retain the Caremark pharmacy benefit manager, the Aetna health insurer, the specialty pharmacy division, and businesses that provide primary care and home visits to older adults. CVS Pharmacy will hold the 9,000 retail locations, the mail-order prescription operation, and the company’s technology business. Executives expect the separation to be completed by 2028.

The decision surprised financial markets, causing the stock to drop 11 percent despite the company exceeding third-quarter earnings expectations. For years, management argued that integrating these services would lower costs for consumers and boost investor returns. Michael Cherny, a health care analyst at Leerink Partners, described the potential retail spin as a complete shock in an investor note issued Tuesday night.

The announcement coincides with increased political pressure on major health care conglomerates. Democrats recently secured control of Congress, and lawmakers in states such as Arkansas and Tennessee have passed laws attempting to ban companies from owning both pharmacies and pharmacy benefit managers. CVS executives stated that these political proposals did not drive the decision, although they did not directly answer analyst questions about the specific rationale for the split.

David Joyner, who became CEO in 2024, explained the move on an investor call. He said the company can now examine its assets and determine the best strategic path without distress. Joyner replaced Karen Lynch after the company reported losses in its health insurance business, particularly among Medicare enrollees. The Federal Trade Commission also investigated CVS and other pharmacy benefit managers regarding insulin pricing.

The corporate structure dates back to 2007, when CVS acquired Caremark to enter the pharmacy benefit market. In 2018, the company purchased Aetna for $70 billion. Then-CEO Larry Merlo told investors that integrating Aetna’s medical information with CVS Health’s pharmacy data would benefit patients. The upcoming spin-off will effectively reverse the effects of the Caremark acquisition.