CVS Health to Split Into Separate Pharmacy and Insurance Companies; Shares Tumble Despite Q3 Beat

CVS plans to split into two independent, publicly traded companies by the first half of 2028, separating its roughly 9,000 retail pharmacies from its Aetna insurance business and Caremark pharmacy benefit manager. The move would reverse the $78 billion acquisition of Aetna that created the vertically integrated healthcare conglomerate in 2018. The company said the separation is intended to be tax-free to CVS Health and its shareholders, and existing shareholders would own shares in both companies.

The insurance and PBM company, which also takes Oak Street Health, Signify Health and the specialty drug business, will keep the CVS Health name and be run by CEO David Joyner, while the drugstore chain will become CVS Pharmacy under Prem Shah, currently group president. The plan follows a strategic review by the board and was first reported by the Financial Times, which framed it against mounting political pressure on pharmacy benefit managers and health insurers. Leerink Partners analyst Michael Cherny said the split "feels like a complete shock," adding that the rationale could be to avoid "relentless state legislative scrutiny" of the company's vertical integration.

The announcement landed alongside a strong quarter. Third-quarter revenue rose 5.4% to $108.4 billion and adjusted EPS came in at $2.09, against a $1.65 consensus cited by Investing.com and $1.60 a year earlier, according to the company's earnings release. CVS raised its 2026 adjusted EPS guidance to at least $8.20 from a range of $7.90 to $8.10 and lifted its operating cash flow outlook to at least $15.5 billion from at least $11.5 billion. Its medical benefit ratio improved to 91.3% from 92.8%.

Investors focused on the breakup instead. CVS shares were down about 12% at roughly $80 by late morning Wednesday, per SentiSense market data, after CNBC reported a drop of roughly 10% following the announcement. Before the slide, the stock had gained roughly 70% since Joyner took over in October 2024, lifting the company's market value to $117 billion. Key questions now include the one-time separation costs management said are contemplated in its guidance, the dis-synergies of unwinding the integrated model, and how each company will be valued on its own.