CVS Health announced on Wednesday that it intends to divide into two independent public companies by the first half of 2028. This strategic decision represents one of the most significant corporate separations in recent history and effectively reverses the company's $78 billion acquisition of Aetna in 2018. The plan will dismantle the vertically integrated healthcare model established over the past eight years by separating the retail pharmacy network from the insurance and pharmacy benefit manager operations.
The separation will specifically isolate the approximately 9,000 retail pharmacies from the major insurance business and Caremark, which is one of the three largest pharmacy benefit managers in the United States. According to a news release, the decision follows a comprehensive strategic review conducted by the board of directors. Following the announcement, CVS shares declined by roughly 10% on Wednesday trading.
This move marks a dramatic shift for a company that has spent the last two decades attempting to become a one-stop destination for healthcare needs. The decision coincides with a period of substantial progress under CEO David Joyner, who has driven an aggressive turnaround plan. This plan includes pursuing $2 billion in cost reductions, closing underperforming stores, implementing leadership changes, and managing Medicare Advantage expenses more efficiently.
In the release, Joyner stated that the company plans to create two focused entities from a position of strength to enhance consumer engagement, affordability, and care coordination. Since Joyner assumed leadership in October 2024, CVS stock has risen by approximately 70%, lifting the company's market value to $117 billion.
The insurance and pharmacy benefit manager unit will retain the CVS Health name and remain under Joyner's leadership. The new retail entity will be named CVS Pharmacy and will be headed by Prem Shah, currently the group president of CVS Health. The company indicated that additional leadership details and board member appointments will be revealed at a later date. Existing shareholders will hold stakes in both new companies, a fact first reported by the Financial Times on Tuesday.
Financially, the split divides distinct revenue streams. The pharmacy business generated $37.66 billion in sales in 2025. The insurance unit recorded $36.29 billion in revenue, while the healthcare services segment produced $51.24 billion. CVS also reported third-quarter results on Wednesday that exceeded Wall Street expectations, with total sales climbing to $108.40 billion from $102.87 billion in the same period last year.
Growth in the health care benefits and health services segments drove these sales increases, although revenue in the pharmacy services business declined compared to the previous year. The company stated that the insurance and PBM unit will also include Oak Street Health, Signify Health, and the specialty drug business. Management argues that this structure will allow each entity to pursue a focused strategic agenda, innovate more effectively, and increase operational efficiency.
This is not the first time CVS has considered a breakup. In October 2024, the company engaged advisors to review its strategic options, including potential separation of its retail and insurance units. However, Michael Cherny, an analyst at Leerink Partners, described the finalized plan as a complete shock in a note published on Tuesday.
Cherny noted that the retail pharmacy business has performed well recently, gaining market share and stabilizing margins due to CostVantage, a new reimbursement model introduced last year. He suggested that the outlook for a standalone retail pharmacy is now stronger than previously anticipated. Additionally, he pointed out that the split may serve to mitigate the intense state legislative scrutiny directed at the company's vertical integration.
The timing of the breakup also aligns with growing bipartisan attention to pharmacy benefit managers in Washington and state legislatures. PBMs face criticism for opaque pricing, expanding market power, and conflicts of interest arising from their ownership of insurers and pharmacies. Congress passed PBM reforms in February, including changes to Medicare Part D compensation, while states continue to restrict PBM ownership of retail pharmacies.
