Report: Break-up of CVS Health would unwind a blockbuster CT acquisition

CVS Health Corp, which is struggling financially with rising medical costs, is exploring options that include a potential break-up of the company, Reuters reported Tuesday, a stunning development that would essentially unwind CVS’ $69 billion acquisition of Hartford-based Aetna in 2018.

CVS is examining a potential split of its retail and insurance units and other options, Reuters reported, citing sources familiar with the matter. CVS has been meeting with its financial advisers and investors in recent weeks, Reuters and The Wall Street Journal have reported.

Sources told Reuters that the board of directors at CVS has discussed how dividing the businesses would work and that two separately, publicly-traded companies could be created. But the sources said no plans have been finalized and CVS may choose another strategy, Reuters reported.

How a potential break-up would affect the operations and employment of the Aetna health insurance unit in Hartford is not clear. When CVS acquired Aetna in 2018, it agreed to keep the health insurance business in Hartford for at least a decade, establishing a “center of excellence” in the city.

The Reuters report comes a day after Woonsocket, R.I.-based CVS said it would cut another 2,900 jobs across the country as it seeks to cut $2 billion in expenses and invest in technology in the next several years. Last year, CVS cut 5,000 jobs nationwide, with 336 layoffs directly impacting Hartford.

The latest round of job cuts would likely mean a hit in Hartford but CVS did not specify how the layoffs would be distributed by region or a timetable. If Connecticut is involved in this new round of cuts, the state labor department would likely be notified.

Connecticut lawmaker Tony Hwang, a Fairfield Republican and ranking senator on the General Assembly’s insurance and real estate committee, sounded the alarm Monday on how potential job cuts by CVS would affect Connecticut. On Tuesday, Hwang took aim at a possible break-up of CVS, calling for more transparency in the process.

“Hundreds and hundreds of Hartford insurance jobs hang in the balance,” Hwang said, in a statement. “State economic development, labor and insurance officials must be kept apprised of developments. So must Hartford city officials. Is that the case? Or is everyone in the dark?”

In a statement late Tuesday, CVS said its management team and board “are continually exploring ways to create shareholder value.”

“We remain focused on driving performance and delivering high quality healthcare products and services enabled by our unmatched scale and integrated model,” the statement said.

A potential break-up of CVS would come just six years after it acquired Aetna. Aetna was founded in Hartford in 1853 and had transformed itself from a multiline insurer to one focused on health insurance.

In 2018, CVS’ $69 billion acquisition of Aetna was seen as charting a new path in the changing health care industry. Combining Aetna’s health insurance expertise with CVS’ storefront pharmacies under one corporate umbrella held potential to cut costs between insurers and pharmacies. Uniting the two also was, at the time, was seen as giving the merged company more leverage to negotiate better prices with drug companies.

The merger also was viewed as a giant step toward a rapidly transforming digital future where the insurer’s vast trove of data would play a critical role in personalized health.

But rising medical services costs at Aetna’s Medicare business, for Americans 65 years and older, played prominently in the decision announced by CVS in August that it would cut its profit forecast and look to cut slash the $2 billion in expenses. Aetna’s chief executive Brian Kane also left the company after less than a year at the helm.

Kenneth R. Gosselin can be reached at [email protected].

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