CVS Health (NYSE: CVS) said today it plans to split into two listed companies by the first half of 2028. The US healthcare group, which runs a drugstore chain, the Aetna insurer and the Caremark drug-benefits business, said a comprehensive strategic review led to the decision.
CVS closed at $91.41 yesterday, up 3.28%, but that was before the plan was announced and is not a reaction to it. The close is about 17% below the highest close of $110.60 on the 21st of July, and the market value is about $117bn.
CVS Pharmacy, about 9,000 stores, will be led by Prem Shah, currently group president. CVS Health keeps Aetna, Caremark, Oak Street Health, Signify Health and specialty pharmacy under chief executive David Joyner. For UK investors who hold CVS through a US-stock account, that means ending up with shares in both companies.
“From a position of strength, and a focus on the long term, we plan to create two focused companies to improve consumer engagement, affordability, and care coordination.”
David Joyner, CVS Health chief executive
The split reverses the 2018 Aetna acquisition. Caremark is a pharmacy benefit manager (PBM), a middleman that negotiates drug prices for insurers, and lawmakers have targeted owners of both PBMs and pharmacies. Tennessee’s Fair Rx Act takes effect in 2028 and is under challenge, a judge has blocked an Arkansas law, and a bipartisan Senate bill from Senators Elizabeth Warren and Josh Hawley would bar PBM-pharmacy co-ownership.
Michael Cherny, an analyst at Leerink, said in a note yesterday that the move “feels like a complete shock”. He suggested the rationale “could also be to avoid what has been relentless state legislative scrutiny over the company’s level of vertical integration”.
Cherny added that “perhaps the outlook for a standalone retail pharmacy (still with meaningful scale and leverage on its own) is stronger now than before”, as pharmacy gains share and margins stabilise.
Before the announcement, analyst ratings stood at 18 Strong Buy, seven Buy and two Hold, with a mean target of $115.52. Third-quarter results are due today before the US open.