‘The next important chapter’: CVS Health splits into two companies

CVS Health plans to split into two independent, publicly traded companies, a move executives said will sharpen each business’s focus as the healthcare giant reported stronger third-quarter earnings and raised its full-year outlook.

The company announced Wednesday that it will separate its healthcare services operations from its retail pharmacy and community healthcare business, with the transaction expected to be completed in the first half of 2028, subject to customary conditions and approvals.

"We can take this strategic action today because of our tremendous progress since 2024," said CVS Health Chairman and CEO David Joyner, who succeeded Karen Lynch in October 2024. "We rebuilt our leadership team and instilled a clear culture of accountability, excellence and execution across the organization.

"We significantly improved our financial performance, strengthened our balance sheet and reached our target leverage ratio ahead of schedule, creating capacity for disciplined capital deployment."

The healthcare solutions company, which will retain the CVS Health name, will include Aetna, Caremark, pharmacy services, specialty pharmacy, Oak Street Health and Signify Health. Joyner will be CEO.

The retail business, to be named CVS Pharmacy, will include retail stores, mail order pharmacy, MinuteClinic and Health 100, the company’s artificial intelligence-powered consumer engagement platform. Prem Shah, currently group president of CVS Health, will become CEO of CVS Pharmacy following the separation.

Joyner said the move follows a strategic review and comes from a position of strength after two years of improved financial performance and balance-sheet discipline. It also comes about nine months after Rep. Alexandria Ocasio-Cortez, D-N.Y., criticized CVS for what she called its market monopolistic tendencies.

“We are creating two distinct leaders in healthcare,” Joyner said Wednesday, calling it "the next important chapter" for CVS.

Big third quarter

CVS reported third-quarter revenue of more than $108 billion and adjusted earnings of $2.09 per share, up more than 30% from the year-earlier period. Adjusted operating income totaled nearly $4.2 billion.

The company raised its 2026 adjusted earnings guidance to at least $8.20 per share, up from its previous range of $7.90 to $8.10. It also increased its cash flow from operations outlook to at least $15.5 billion and expects full-year revenue of at least $420 billion.

CVS said it achieved its target leverage ratio ahead of schedule and expects to resume share repurchases in the fourth quarter.

The company also offered an initial outlook for 2027, projecting adjusted earnings of at least $8.65 per share, or about 13% growth from its adjusted 2026 baseline. It expects the health services segment to generate adjusted operating income of at least $7 billion, which executives described as trough earnings before a return to growth.

Aetna continued to improve its performance, with its medical benefit ratio falling to 91.3%, an improvement of about 150 basis points from a year earlier. Executives attributed the results to better Medicare performance, medical cost management and disciplined pricing.

"We have seen some pockets of favorability. It continues to be a high-trend environment generally," said Steve Nelson, executive vice president of CVS Health and president of Aetna. "But as we've laid down the foundation for this business over the last couple of years, we've seen tremendous improvement, and we're going to build on that."

The pharmacy and consumer wellness segment posted adjusted operating income of more than $1.6 billion, up more than 10%, as same-store prescription volumes grew nearly 4%.

Four reasons to separate

Joyner gave "four clear benefits" as the rationale behind the CVS separation:

Focus. Each company will have an experienced, dedicated leadership team that can concentrate on the areas where it has the greatest opportunity to create value.

Capital allocation. Each company is expected to have a solid investment-grade capital structure and strong free cash flow.

"This will enable tailored capital allocation, more closely aligned with each company's strategy and growth opportunities," Joyner explained. "What will not change is the discipline that each company demonstrates in the deployment of capital."

Agility. Each company will have greater flexibility to adopt the technologies that "best fit its needs, improve efficiency, and more effectively adapt to the regulatory and other external dynamics," Joyner said.

"As independent companies, we will innovate and move faster as we work to improve how healthcare is experienced today."

Simplicity. Greater independence will make it easier to serve consumers, members, patients, and communities, and will create opportunities for each company to pursue a broader range of partnerships, Joyner said.

The transaction is expected to be tax-free for U.S. federal income tax purposes. CVS shareholders will own shares in both companies following the separation.

© Entire contents copyright 2026 by InsuranceNewsNet.com Inc. All rights reserved. No part of this article may be reprinted without the expressed written consent from InsuranceNewsNet.com.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.