“We’re basically taking what I believe is one great company and making it two.”
David Joyner, CEO of CVS Health, on Wednesday’s announcement
CVS Health said Wednesday that it will split into two public companies by the first half of 2028. The half that leaves is the drugstores.
The half that lawmakers in both parties have been trying to break up stays together: the insurer Aetna bundled with the pharmacy benefit manager Caremark. So does a specialty pharmacy.
That is the gap in the headline version. CNN called it the breakup of a “$117 billion healthcare empire,” and CVS will indeed stop being one company. What it will not stop being is an insurer, a benefit manager and a pharmacy under one owner, which is the arrangement the critics object to.
Here is where each piece lands, checked against the Patients Before Monopolies Act that Senators Josh Hawley and Elizabeth Warren reintroduced in May. Hawley’s office says the bill would “prohibit a parent company of a PBM or an insurer from owning a pharmacy business.” We checked against that published summary. We did not have the bill text.
| Business | Goes to | Parent also owns an insurer or benefit manager? | Inside the bill’s ban, as summarized? |
|---|---|---|---|
| About 9,000 retail pharmacies, mail-order pharmacy, MinuteClinic, Health100 | CVS Pharmacy | No | No |
| Aetna, Caremark, Oak Street Health, Signify Health | CVS Health | Yes | No, none of them is a pharmacy |
| CVS Specialty | CVS Health | Yes | Yes |
The split moves the storefronts out from under the insurer. It leaves the specialty pharmacy, which handles the high-cost drugs, under the insurer and the benefit manager, which is where the bill says a pharmacy cannot sit.
Joyner’s case is focus. He said “same mission, sharper focus,” that the decision came from “a position of strength,” and that Aetna benefits from having Caremark and the specialty business beside it.
Read that last part twice. It is the integration the critics describe, offered as the reason to keep it.
The quarter backs the strength claim. Third-quarter profit came in at $2.09 a share against an analyst average of $1.65, and Aetna’s adjusted operating income rose to $912 million from $314 million.
Investors were not moved. Shares fell about 12 percent on the day, to roughly $80, a drop of about $11 a share.
The stock had been up about 15 percent for the year before the announcement. By our arithmetic, 1.15 times 0.88 is about 1.01, so one day took back almost all of it.
Customers are told to expect nothing. CVS announced no closures, and the split will not change what patients pay for prescriptions.
One industry observer expects a standalone chain to face pressure to close low-margin stores. Both things can be true, because no one has set a date for the closures nobody has announced.
The two companies will stay tied for a while. Joyner said they will sign “commercial agreements” to preserve what was built over 20 years, work he put at 15 to 18 months, with the consumer platform Health100 as “connective tissue.”
Counted from Wednesday, 15 to 18 months runs from early February to early May 2028. That fits inside the announced window, and it means the contracts that link the insurer to the drugstores get written while Congress is deciding what to do about them.
Morningstar analyst Julie Utterback said “CVS has the most exposure to vertical integration in the industry,” and that management “probably thought that it was a better time to move somewhat preemptively” than to wait for a legal or legislative decision.
That is an analyst’s read, not the company’s, and the company’s stated reasons are focus and agility. We note the timing anyway.
The people who watch this industry for a living were less generous about the result. Joseph Shields of Transparency Rising said: “This is not an announcement that their practices are going to stop.”
B. Douglas Hoey of the National Community Pharmacists Association pointed at the shareholders. Current CVS Health shareholders will own both companies, so the incentives behind suppressing competition, patient steering and formulary manipulation “don’t necessarily disappear.” He still called the split “potentially encouraging news.”
Anthony Loiacono of Judi Health said CVS “still owns a dispensing business and still profits from drug spend,” which he called “a conflict of interest.”
None of them was surprised that Caremark stayed. Many investors see the benefit manager as “the shining jewel of the portfolio,” and you do not hand out the jewel in a spin-off.
The bill would give a violator one year from enactment to divest. It adds automatic penalties, including disgorgement of profits and forced sales of assets, and it lets the FTC, the Justice Department, HHS, state attorneys general and private parties sue.
It also lets the FTC and the Justice Department “review and block future actions that would recreate the anticompetitive conditions addressed by the bill.” Hold that phrase up against a set of new commercial agreements between two companies that used to be one.
Now the calendar. Democrats won the House and the Senate on Tuesday, and Republicans stay in charge until the new Congress is seated in January. That is January 3, 2027.
From January 3, 2027 to the early-February-to-early-May 2028 window is 13 to 16 months. A Democratic House and Senate will have been in office that long when the split closes, with a bipartisan bill on file whose divestiture clock is one year.
We think the split is a reorganization built to survive that bill, and the new majority should write the bill so that it does not. It is defensible as corporate strategy, and Joyner is entitled to run his company as he likes. It is not an answer to the complaint, because the complaint was never about drugstore storefronts. It was about one owner holding the insurer, the benefit manager and the pharmacy that handles the costly drugs.
What should happen next is specific. Warren and Hawley should name specialty and mail-order pharmacy in the text, so nobody can satisfy the ban by spinning off the stores. The House should hold a hearing before the two CVS companies sign their commercial agreements, because those contracts are where the old integration would live on.
Joyner called this one great company becoming two. On the allocation above, it is one great company handing out the part customers see and keeping the part that decides what is covered and what it costs.
The first test is whether the bill gets a hearing in the new Congress. The second is whether CVS Specialty is still sitting next to Aetna when it does.