CVS Health plans to split its business into two publicly traded companies, separating its retail pharmacy operations from its insurance and pharmacy benefit management activities, according to a Wall Street Journal report.

The restructuring would divide the company’s approximately $117 billion business and reverse the strategy behind its acquisition of Aetna nearly a decade ago.

Chief Executive David Joyner told the Journal that the businesses would be better served operating separately, describing the transaction as a move to create two independent companies from one integrated organization.

CVS did not respond to a Reuters request for comment ahead of its scheduled quarterly earnings announcement on Wednesday.

How the Two Businesses Will Be Organized

Under the reported plan, one company will retain the CVS Health name and be led by Joyner. It will include Aetna’s insurance operations, Caremark’s pharmacy benefit management business, Oak Street Health’s primary care clinics, Signify Health’s home health services and CVS’s specialty-drug operations.

The second company, CVS Pharmacy, will include the retail pharmacy network, mail-order pharmacy operations and the MinuteClinic chain.

CVS operates approximately 9,000 retail pharmacies across the United States.

The company acquired Caremark nearly 20 years ago and later expanded through its $78 billion purchase of Aetna, followed by several smaller acquisitions in clinical and healthcare services.

According to the Journal, the two independent businesses would retain certain commercial agreements.

Regulatory Scrutiny Adds to Restructuring Context

The proposed separation comes as U.S. lawmakers and regulators increase pressure on healthcare companies with integrated pharmacy, insurance and benefit management operations.

The Trump administration is planning rules requiring CVS and its competitors to disclose more information about service pricing and the profits generated by interconnected healthcare businesses.

Some states are also seeking restrictions on which healthcare operations can be owned by the same company.

The Federal Trade Commission reached a settlement with CVS this summer that restricts certain aspects of how Caremark conducts business with other pharmacies.

Pharmacy benefit managers, or PBMs, oversee prescription drug benefits and related pharmacy services for government programs, corporations and large employers. Their role in the drug supply chain has attracted scrutiny over pricing and competition.

Strategic Rationale and Potential Shareholder Value

CVS previously explored strategic alternatives, including a possible breakup, in 2024 as it faced operational challenges and weaker financial performance at Aetna. Former CEO Karen Lynch was subsequently replaced by Joyner.

Analysts suggest that separating the businesses could allow investors to value each operation independently.

Mizuho analyst Ann Hynes said the separation could create meaningful valuation opportunities for shareholders, who would be expected to retain ownership interests in both companies.

CVS currently trades at 10.8 times the analyst’s 2027 adjusted earnings estimate, below the healthcare sector’s 10-year average of 15.7 times.

Evercore ISI analyst Elizabeth Anderson also noted that separating the businesses could help address regulatory concerns, particularly those involving common ownership of a pharmacy benefit manager and retail pharmacy operations.

Challenges Across Insurance and Retail Pharmacy

The restructuring comes amid pressures affecting both sides of CVS’s business.

Health insurers have faced rising medical costs as consumers increased healthcare utilization following the COVID-19 pandemic. Aetna has exited Affordable Care Act plans and reduced certain benefits and offerings in Medicare Advantage.

Meanwhile, CVS’s retail pharmacy operations face competition from online platforms such as Amazon, as more consumers choose prescription delivery and fewer shoppers visit physical stores.

The changing retail environment has weakened the role of in-store shopping as a source of additional sales. Products increasingly kept behind locked glass have also affected the customer experience.

The potential sale or separation of a standalone retail pharmacy business may present challenges because the pool of interested buyers is limited, as illustrated by Walgreens’ prolonged sale process before its acquisition by Sycamore Partners.

What Investors Should Watch Next

Investors will be monitoring further details on the proposed separation, including its structure, timing, commercial agreements and financial implications for shareholders.

The company’s upcoming quarterly results will also provide an opportunity to assess its performance across insurance, pharmacy benefit management and retail operations.

The central question is whether independent ownership can improve the valuation and operating focus of each business while reducing regulatory concerns surrounding integrated healthcare operations.