Will CVS corporate break-up impact Aetna’s Hartford campus? Not for ‘time being’

As CVS begins to unwind a merger with Aetna that once promised to reshape the health care industry, observers inside and outside of the company said the break-up should have little effect, at least immediately, on the health insurer’s Farmington Avenue campus in Hartford.

Observers said CVS apparently did not speak with political or business development officials in Connecticut before announcing last week that the $400 billion health care giant will be broken into two companies, one housing health insurer Aetna and pharmacy-benefit manger Caremark, and the other consisting of the 9,000 CVS pharmacies.

At the same time, officials in and out of CVS said said the company apparently has disclosed no plans to diminish the Aetna footprint in Hartford.

“We are proud of our long-standing commitment to Hartford, and we remain focused on caring for our friends, family, and neighbors in the communities where we live and work,” an Aetna spokesman said. “We noted last week that our planned separation won’t be completed until the middle of 2028, and it’s business as usual for the time being. Any related decisions about future locations, structure, and staffing will be made in due course.”

The break-up is planned to become effective, pending regulatory approvals, a decade after the $70 billion Aetna-CVS merger that defined what has turned out to be a short-lived era of growth and consolidation in the health care industry.

The Aetna merger, along with smaller acquisitions of businesses that provide home visits and primary care to seniors, was part of what CVS called its strategy to cut health costs and improve care by combining insurance and retail pharmacy

But health costs have continued to rise and consolidation has created skepticism on the parts of regulators and lawmakers toward health care conglomerates such as CVS and peers UnitedHealth and Cigna. One result has been pressure to separate pharmacies from prescription benefit managers.

Two states – Arkansas and Tennessee – have enacted laws that would ban conglomerates from simultaneously managing prescription benefits and running retail and mail-order pharmacies. Such concern could grow in Congress, where health costs were a bipartisan election issue.

CVS Chief Executive David Joyner announced the corporate beak-up a day after the polls closed on a Democratic election rout.

While making the announcement in a conference call with investors, Joyner said the timing of the split was based on corporate financial strength, with major CVS components forecasting better than expected growth and Aetna experiencing a turn around in hits Medicare related business. But Joyner acknowledged increased regulatory scrutiny was a factor in the decision.

When the split becomes effective, Joyner will be chairman and CEO of the healthcare and insurance businesses. Prem Shah, currently Group President of CVS Health, will be the CEO of CVS Pharmacy.

One of the two new firms will keep the CVS Health name. In addition to Aetna and and prescription benefit manager Caremark, it will include  include Oak Street Health, which operates clinics for senior citizens; Signify Health, which provides home visits for seniors;  and CVS’s specialty-drug business.

The second company, CVS Pharmacy, will keep the mail order pharmacy business and the retail drugstores.

“Aetna, CVS Caremark and CVS Specialty, along with our value-based care and in-home health businesses, will advance together as a leading healthcare solutions provider, delivering differentiated, comprehensive benefits to clients, members and patients” Joyner said. “CVS Pharmacy will build on its position as America’s leading retail pharmacy, serving as the front door to health and care in our country as the most frequently accessed consumer health touchpoint.”

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