CVS Health plans to split into two separate public companies by the first half of 2028, the company announced Wednesday. The plan would separate its roughly 9,000 retail pharmacies from its insurance business and its pharmacy benefit manager, Caremark, reversing its $78 billion acquisition of Aetna.
The decision follows a "comprehensive strategic review" by the company's board of directors, according to a news release. CVS shares fell roughly 11% on Wednesday.
CVS CEO David Joyner told CNBC's "Squawk on the Street" that the split is "out of a position of strength," citing recovery in Aetna's Medicare business and solid performance in 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 said.
The insurance and PBM company will keep the CVS Health name and be run by Joyner. The other company, CVS Pharmacy, will be led by Prem Shah, currently group president of CVS Health. CVS said additional leadership and board members will be announced later. Existing shareholders will own shares in both companies.
The Financial Times first reported the breakup plans on Tuesday.
CVS also reported third-quarter earnings and revenue that topped Wall Street expectations. Total sales rose to $108.40 billion from $102.87 billion in the prior-year period. Joyner said the two businesses' synergies "are going to be preserved in commercial agreements between the two organizations."
Leerink Partners analyst Michael Cherny said the split shows "the stability of the pharmacy." He also said the rationale could extend to state legislative scrutiny of the company's vertical integration. Tennessee and Arkansas have passed laws that would ban co-ownership of PBMs and pharmacies, and CVS has challenged those laws in court.