The news: CVS Health plans to split its vertically integrated healthcare business into two publicly traded companies by H1 2028:

• CVS Health, which will comprise health insurer Aetna, pharmacy benefit manager (PBM) Caremark, CVS' specialty pharmacy, senior-focused primary care chain Oak Street Health, and home health company Signify Health. Current CVS Health Chairman and CEO David Joyner will lead it.
• CVS Pharmacy, the spinout comprising 9,000 retail pharmacies, mail-order pharmacy, MinuteClinic, and the Health100 technology services arm. Prem Shah, currently group president at CVS Health, will lead it.

Zooming out: CVS explored a breakup in 2024 amid mounting pressure from Aetna’s rising medical costs and retail pharmacy headwinds, including declining reimbursements and online retailers carving into its drugstore business. But CVS has since rebounded, with its pharmacy unit recovering and Aetna’s margins improving. The company has raised guidance multiple times this year, generated over $8 billion in profit in the first nine months, and added over $60 billion in market value since its December 2024 low.

The turnaround positioned CVS to split into two successful companies, Joyner said. The separation would also free up more capital for the retail business, money that previously went to other parts of the enterprise, he told Bloomberg.

Why it matters: The breakup marks a sharp reversal for CVS, which generated over $400 billion in revenues last year, ranking seventh among US public companies, according to FactSet data cited by The New York Times. CVS grew into one of the largest US healthcare conglomerates, building an integrated ecosystem designed to capture value across insurance, pharmacy benefits, and care delivery—including by directing more prescription volume from Aetna and Caremark members to CVS pharmacies.

But CVS’ split comes as federal and state lawmakers across party lines and regulators increasingly target healthcare consolidation over concerns about anticompetitive practices and rising consumer costs. We think these pressures influenced CVS’ decision, even though Joyner cited other reasons for the breakup. Legislative efforts to rein in healthcare giants include recently passed laws in Tennessee and Arkansas that would bar companies like CVS from owning both pharmacies and PBMs in those states. Enactment of both laws is on hold amid legal challenges. Separately, bipartisan legislation, reintroduced by Sens. Elizabeth Warren (D-MA) and Josh Hawley (R-MO) earlier this year, would prohibit PBMs and health insurers from owning pharmacies.

Implications for healthcare companies: CVS’ planned breakup reveals the limits of how large and powerful vertically integrated empires can become. For years, healthcare giants have expanded across insurance, prescription drugs, and care delivery, building businesses that touch nearly every corner of the industry. Whether CVS acted out of confidence that each company is better on its own or under regulatory pressure, the split could help it get ahead of legislation targeting healthcare conglomerates and spare it costly legal battles and forced divestitures. Scrutiny will likely shift to other vertically integrated giants, particularly UnitedHealth Group.

Meanwhile, CVS’ retail pharmacy spinout faces a challenging future without the financial cushion of an insurer and PBM. Walgreens’ and Rite Aid’s struggles underscore the tough economics of standalone pharmacy chains. Still, prescription drugs remain a massive market that CVS leads, with its retail pharmacy segment estimated to generate approximately $145 billion in revenue this year. The key is reducing reliance on front-of-store retail as consumers increasingly buy everyday essentials from Amazon rather than local drugstores, which is why CVS is experimenting with smaller-format, pharmacy-focused stores with lower overhead.

This content is part of EMARKETER’s subscription Briefings, where we pair daily updates with data and analysis from forecasts and research reports. Our Briefings prepare you to start your day informed, to provide critical insights in an important meeting, and to understand the context of what’s happening in your industry. Not a subscriber? Click here to get a demo of our full platform and coverage.