By Sabrina Valle
Nov 3 (Reuters) – CVS Health is testing a breakup that would separate its retail pharmacy business from its insurance operations, a person familiar with the matter said on Tuesday.
The Wall Street Journal reported, citing CVS, that the group would split into two companies and one would retain the CVS Health name to be led by current CEO David Joyner.
CVS Health, which is set to report quarterly results on Wednesday, did not immediately respond to a Reuters request for comment.
A separation of its retail business, which runs about 9,000 pharmacies, from its health insurer Aetna and pharmacy benefit manager Caremark would mark a reversal of CVS’ strategy of building an integrated healthcare business through acquisitions.
CVS acquired Aetna for about $78 billion in 2018 and since then has made a series of smaller acquisitions, including buying some businesses that offer clinical health services. No final decision on a breakup has been made, the person said.
Shares of the company were up 0.1% in extended trading.
PRESSURE ON INTEGRATED HEALTH BUSINESSES
CVS explored options including a potential breakup in 2024, Reuters reported at the time, as the company grappled with challenges across its businesses.
The latest deliberations come as CVS faces pressure across both its insurance and pharmacy-benefit operations.
Pharmacy benefit managers are facing growing political and regulatory scrutiny on concerns that healthcare consolidation has given these companies, which act as middlemen in the drug supply chain, too much influence over prescription drug prices.
At the same time, health insurers have struggled with rising medical costs over the past three years as consumers increased their use of healthcare services, prompting companies to raise prices, cut benefits and exit less profitable plans.
CVS executive Prem Shah said in August that Caremark expects to lose clients in 2027 after taking a more cautious approach to signing contracts.
CVS Health has greater exposure to vertical integration than its peers because it owns both Caremark, one of the country’s largest pharmacy benefit managers, and a major retail pharmacy chain, Julie Utterback, an analyst at Morningstar, said.
Separating the businesses could, however, come at a cost.
“A potential spinoff faces some financial consequences, like the potential for lost synergies and new corporate standup costs,” Utterback said.
Shares of CVS have rebounded under Joyner, who took over in October 2024, helping lift the company’s market value to about $117 billion.
(Reporting by Siddhi Mahatole in Bengaluru; Editing by Rashmi Aich and Sonali Paul)
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