Largest US Pharmacy Chain Splits In Two, Separates Selling Drugs And Insurance

America’s leading healthcare company announced it is branching off into two independent, publicly traded companies, following a strategic review by the CVS Health Board of Directors.

CVS Pharmacy announced Wednesday it would be splitting into two distinct companies, dividing the healthcare conglomerate’s $117 billion in what some stock market analysts are calling “a defensive move against regulation,” a Reuters report found.

A representative from CVS Health Communications did not immediately respond to the DCNF request for comment.

“CVS shares are weak ​today despite very strong Q3 operating results because the announced split of the company came as a surprise, and is perceived as happening as a defensive move against regulation ⁠rather than an offensive move,” UBS analyst Kevin Caliendo told Reuters on Wednesday.

Chief Financial Officer Brian Newman, said that CVS’s pharmacy benefit business would face challenges next year from government discount drug pricing program as well as a “less robust selling season” with customers and declining membership in health plans on a third quarter earnings call with the company’s chief quarterly advisors the outlet reported.

The decision for the company split came at the same-time the Centers for Medicare & Medicaid Services (CMS) announced it is slashing 340B payment rates for a federal drug discount program to broaden site-neutral policies in 2027, according to a final rule released by the CMS on Wednesday.

“By better aligning payments with documented acquisition costs, CMS estimates this policy will save people with Original Medicare an estimated $1.1 billion in drug costs and save taxpayers an additional estimated $4.35 billion in drug expenditures, reducing total drug spending by approximately $5.45 billion in 2027 alone,” the announcement said.

CVS shares closed down 12.5% at $79.96, slashing nearly $15 billion in market value, Reuters reported.

The corporation will form an interim healthcare solutions company called CVS Health made up of Aetna, CVS Caremark, CVS Specialty, Oak Street Health and Signify Health, and comprise its approximately 9,000 CVS pharmacies, mail pharmacy, MinuteClinic virtual care, and Health100 technology services into a national retail company called CVS Pharmacy, CVS’ Wednesday press release said.

“Our history is defined by proactively evolving to stay ahead of what’s next in healthcare, and in today’s environment, that means delivering more affordability, greater access, and a simpler experience,” CVS CEO David Joyner said in the announcement.

“Over the last two years, we have made meaningful progress: we built a world-class leadership team, strengthened our financials, revitalized operations across the enterprise, and drove total shareholder return,” he added. “From a position of strength, and a focus on the long term, we plan to create two focused companies to improve consumer engagement, affordability, and care coordination.”

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