CVS to split off drugstore business in major breakup of healthcare giant; shares fall 10%

CVS Health plans to split into two separate public companies by the first half 2028 in what would be one of the largest corporate breakups in history, the company announced Wednesday. 

The move would reverse the company's massive $78 billion acquisition of its insurer, Aetna, and dismantle the vertically integrated healthcare conglomerate it created in 2018. The plan would specifically separate CVS' roughly 9,000 retail pharmacies from its major insurance business and pharmacy benefit manager, Caremark, one of the nation's three largest PBMs.

The decision follows a "comprehensive strategic review" by the company's board of directors, according to a news release. Shares of CVS fell more than 12% on Wednesday.

It's a stunning reversal for the healthcare powerhouse, which has spent the last two decades working to turn itself into a one-stop health destination. The move also comes as CVS' aggressive turnaround plan under CEO David Joyner shows substantial progress, with the company pursuing $2 billion in cost cuts, store closures, leadership shake-ups and efforts to rein in Medicare Advantage costs.

But Joyner told CNBC's "Squawk on the Street" on Wednesday that the decision to split is "out of a position of strength," pointing to recovery in Aetna's Medicare business and solid performance in the retail pharmacy.

"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 later added.

CVS shares have jumped roughly 70% since Joyner took the helm in October 2024, bringing the company's market value to $117 billion.

The two new companies would both be publicly traded.

The insurance and PBM company will retain the CVS Health name and be run by Joyner, while the other company will be called CVS Pharmacy and be led by Prem Shah, who is currently group president of CVS Health. Additional leadership positions and board members will be announced at a later date, CVS said.

Existing CVS shareholders will own stock in both companies after the split. The Financial Times on Tuesday first reported the breakup plans.

The company's pharmacy business raked in $37.66 billion in 2025 sales, while its insurance unit booked $36.29 billion in revenue and the healthcare services segment generated $51.24 billion.

CVS on Wednesday also posted third-quarter earnings and revenue that topped Wall Street expectations. Total sales climbed to $108.40 billion, from $102.87 billion in the prior-year period.

Sales were boosted by year-over-year growth in the company's healthcare benefits and health services segments. Meanwhile, revenue in its pharmacy services business slid from the previous year.

On Wednesday, CVS said it will lump its insurer and PBM with its primary care business Oak Street Health, home visit provider Signify Health and the company's specialty drug business. 

CVS also said the split will allow the two companies to experience a "focused strategic agenda" and greater ability to "innovate, adopt technology, increase efficiency," among other benefits.

It's not the first time CVS has weighed splitting the company. In October 2024, CVS engaged advisors in a strategic review of its business and considered breaking up its retail pharmacy and insurance units. 

But Joyner told CNBC that the company was "in a turnaround" at that time without the flexibility, cash position or business performance to execute a split.

In an interview, Leerink Partners analyst Michael Cherny said the split shows "the stability of the pharmacy," which has won market share from competitors and is seeing gross margins stabilize thanks to CostVantage, a new pharmacy reimbursement model introduced by CVS last year that the company bills as more transparent.

"This business is a much different business from the one that's been considered three years ago, five years ago, 10 years ago, where there had been a litany of headwinds that the pharmacy just couldn't overcome," he told CNBC on Wednesday.

One potential concern for investors is whether the retail pharmacy will lose its competitive advantage of being directly linked with a PBM, which negotiates drug prices and manages prescription drug benefits on behalf of insurers and employers.

But Joyner told analysts Wednesday that the synergy between the two businesses "are going to be preserved in commercial agreements between the two organizations," adding that "we don't need the integration of an operating structure." 

Cherny said the rationale for the split could also extend to the state legislative scrutiny over the company's level of vertical integration.

The potential breakup also comes as pharmacy benefit managers face mounting bipartisan scrutiny in Washington, D.C., and across states. Republicans in Tennessee and Arkansas have passed laws that would ban co-ownership of PBMs and pharmacies. Those have been challenged in court by CVS and other companies.

PBMs have been criticized for opaque pricing practices, their growing market power and potential conflicts of interest when they are owned by companies that also operate insurers and pharmacies.