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CVS Health plans retail pharmacy spinoff
CVS Pharmacy will become a separate publicly traded company in the first half of 2028
A CVS pharmacy in Miami. (Eva Marie Uzcategui/Bloomberg)
Key Takeaways:
- CVS Health plans to spin off its retail pharmacy business as publicly traded CVS Pharmacy in the first half of 2028.
- The breakup will separate nearly 9,000 pharmacies from Aetna and Caremark, reversing the healthcare industry’s long-running consolidation trend.
- David Joyner will continue leading CVS Health while Prem Shah will run CVS Pharmacy, which executives said could grow faster independently.
CVS Health Corp. plans to spin off its retail pharmacy business in one of the biggest-ever breakups in the healthcare industry.
The drugstore business will be separated into a new company called CVS Pharmacy in the first half of 2028, split from the Aetna insurance unit and Caremark prescription benefits division. The company holding those assets will still be called CVS Health. Both companies will be publicly traded, CVS said in a statement.
The move marks the end of an era for a company that grew from a single store in Lowell, Mass., in 1963 into a healthcare powerhouse with a market value of $117 billion as of Nov. 3. Although CVS has closed hundreds of stores in recent years, it still operates almost 9,000 retail pharmacies. Rivals like Walgreens and Rite Aid have struggled to compete.
CVS Health ranks No. 17 on the Transport Topics sector list of the top wholesale and retail carriers.
The plan runs counter to the long-term trend of consolidation among major healthcare companies. Insurers combined with drug benefit managers, care providers and pharmacies to assemble vertically integrated enterprises with vast reach. Politicians decried that consolidation, with both Republicans and Democrats criticizing the sheer size of CVS and its major rivals when CEOs testified in Congress earlier this year.
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How the pharmacy chain will be positioned in the long term as a stand-alone entity in “an already-challenged retail pharmacy environment will also warrant scrutiny,” RBC Capital Markets analyst Ben Hendrix wrote in a note to clients.
CVS also reported earnings Nov. 4, raising its profit outlook for the year to at least $8.20 a share, up from $7.90 to $8.10 a share. Third-quarter profit surpassed Wall Street’s expectations, the latest sign of strength among large health companies.
Adjusted earnings in 2027 will be at least $8.65 a share, executives said on a call with analysts.
CEO David Joyner, who took over two years ago, will remain atop CVS Health. Prem Shah, who is currently group president of CVS Health, will run CVS Pharmacy.
Joyner said recent improvements in the retail business’ performance, including changing reimbursement for dispensing drugs to better align with their costs, set the stage for the breakup. He said the split would accelerate growth of the drugstore business.
“Retail has run somewhat independent of the enterprise,” Joyner said. “We think by uncoupling the retail business in terms of how we run and operate and invest in our business, we’ll allow them to actually grow faster than they would grow as part of this enterprise.”
“If you look at retail, it probably has not historically gotten the same capital investments that the other parts of our business” have, he said.
The company reviewed strategic options including a breakup in 2024, Bloomberg reported at the time.
