CVS Health has confirmed plans to separate into two independent, publicly traded companies by the first half of 2028, restructuring its retail pharmacy operations and broader healthcare services portfolio. The proposed transaction is intended to be tax-free for U.S. federal income tax purposes, with shares in the new company distributed to existing shareholders.
Under the proposed structure, CVS Health will retain Aetna, its health insurance business; Caremark, its pharmacy benefit manager (PBM); Oak Street Health, its primary care platform; Signify Health, its home-based healthcare assessment business; and specialty pharmacy operations. Current CEO David Joyner will continue leading CVS Health.
The newly independent CVS Pharmacy will operate approximately 9,000 retail locations and employ nearly 30,000 pharmacists nationwide. Prem Shah, currently Group President of CVS Health, will lead the standalone company. Both businesses intend to maintain long-term commercial agreements covering purchasing arrangements and pharmacy network participation.
The announcement coincided with CVS Health's third-quarter 2026 financial results, which reported revenue of $108.4 billion, representing 5.4% year-over-year growth. Adjusted operating income reached $4.19 billion, while quarterly operating cash flow totaled $4.7 billion.
Aetna reported adjusted operating income of $910 million, supported by a 150-basis-point improvement in its medical benefit ratio to 91.3%. Meanwhile, the retail pharmacy segment recorded 3.9% growth in same-store prescription volumes, including a 23% increase in GLP-1 dispensations. Adjusted operating income for the segment increased more than 10% to $1.64 billion.
The separation comes amid increasing regulatory scrutiny of vertically integrated healthcare organizations, particularly arrangements involving insurers, PBMs, and retail pharmacies. State-level restrictions on PBM-pharmacy ownership have added pressure to existing corporate structures.
The transaction also reflects differing capital requirements between retail pharmacy operations and healthcare services. CVS Pharmacy's CostVantage reimbursement model, which introduces a cost-plus pricing structure, has contributed to greater predictability in retail pharmacy margins.
Despite the positive quarterly results, CVS shares declined more than 12% following the announcement, reflecting investor concerns regarding execution risks and future capital allocation.
The proposed separation remains subject to implementation and regulatory considerations ahead of its targeted 2028 completion.
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