CVS Health to split into 2 separate companies by 2028

CVS Health announced Wednesday that it intends to separate its lines of business into two publicly traded companies by the first half of 2028.

One company, which for the time being will retain the CVS Health name, will consist of the Aetna health insurance unit, the CVS Caremark pharmacy benefit manager unit, CVS Specialty, Oak Street Health, and Signify Health.

David Joyner, CVS Health’s chairman and CEO since 2024, will retain those roles at the new company.  

The other company, to be named CVS Pharmacy, will consist of approximately 9,000 CVS retail pharmacies, mail pharmacy, MinuteClinic, and a recently launched, AI-powered consumer engagement platform called Health100.

Prem Shah, who currently serves as group president of CVS Health, will be CEO of CVS Pharmacy.

The decision to split into two companies follows a strategic review by CVS Health’s board of directors.

“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,” Joyner said in a press statement.

“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,” he added.

As separate companies, CVS Health and CVS Pharmacy will have “greater agility to innovate, adopt technology, increase efficiency, and proactively adapt to regulatory and other external dynamics,” CVS Health noted. Additionally, a simplified structure will allow the companies “to better serve consumers, members, communities, patients, and colleagues.”

When the separation is finalized, CVS Health shareholders will own shares in both companies. The transaction is subject to customary conditions.  

Additional information will be provided as plans progress, CVS Health said.

Our Take: It’s worth noting that lawmakers at both the state and federal level are proposing and passing legislation to break up vertically integrated healthcare enterprises.

For instance, Arkansas and Tennessee have enacted laws to prevent companies from simultaneously owning a pharmacy business and a PBM. CVS Health has challenged the laws in both states.

And back in February, Sen. Elizabeth Warren, D-Mass., and Sen. Josh Hawley, R-Mo., introduced the Break Up Big Medicine Act, which would prohibit health insurers and PBMs from also owning a medical provider or a management services organization.

CVS Health’s decision to split into two companies will undo much of the business model the company has created in the past couple of decades.

The original drugstore chain, CVS Corp., acquired Caremark Rx, the PBM business, in 2007 for $26.5 billion before changing the corporate name to CVS Health in 2014.

CVS Health then acquired Aetna in 2018 for approximately $78 billion (including debt), followed by the acquisitions in 2023 of Signify Health (for about $8 billion) and Oak Street Health (for about $10.6 billion).

In the past several years, CVS Health has closed more than 1,100 of its retail pharmacy locations and undertaken a restructuring initiative designed to trim approximately $2 billion in costs.

CEO David Joyner said during an interview Wednesday on CNBC that CVS Health’s board took the current regulatory and political climate into consideration when evaluating whether to split up the company.

Earlier discussions of breaking up the conglomerate concluded that the timing wasn’t right, but now, according to Joyner, CVS Health is taking the step “from a position of strength.”

An analyst with Leerink Partners, Michael Cherny, told CNBC in an interview that CVS Health’s decision to split indicates “the stability of the pharmacy.” The company’s pharmacy unit is seeing more stable gross margins as a result of the CostVantage pharmacy reimbursement model the PBM unit introduced last year, according to Cherny.

“This business is a much different business from the one that’s been considered three years ago, five years ago, 10 years ago, where there had been a litany of headwinds that the pharmacy just couldn’t overcome,” Cherny told CNBC.

But, CNBC reported, the split may cause concern among investors that the pharmacy unit “will lose its competitive advantage of being directly linked with a PBM.”

Joyner sought to quell those concerns, according to CNBC, by telling analysts the synergy would be preserved in commercial agreements between CVS Health and CVS Pharmacy. “We don’t need the integration of an operating structure,” he said.

The New York Times cited Arielle Trzcinski, an analyst with research and advisory firm Forrester, as saying, “Now, CVS Health is effectively acknowledging that bigger isn’t always better.”

HCR #223: Dr. Patrick Conway, CEO, Optum

In 2012, almost no Medicare payments were tied to value. By early 2016, more than 30% were. Dr. Patrick Conway helped build that shift at CMS, and now, as CEO of Optum, he has to make it work for millions of commercial patients. He sits down with John to talk about why Optum drifted from its original model while chasing growth and how it found its way back, where AI is already taking over routine work like prior authorization, and why getting patients to take part in their own care remains the hardest unsolved problem in value-based care. They also get into what pharma can do to be a better partner on affordability. On Apple, Spotify, YouTube, and all podcast platforms.

What else you need to know

AstraZeneca made a nonbinding $10 billion offer to acquire Rhythm Pharmaceuticals, according to Wall Street Journal reporting that cited people familiar with the matter. Rhythm’s Imcivree (setmelanotide) is an injectable, peptide-based, first-in-class melanocortin-4 receptor (MC4R) agonist approved for chronic weight management in certain patient populations (e.g., those with specific rare genetic conditions or acquired hypothalamic obesity). Boston-based Rhythm plans to begin a Phase III trial of Imcivree in patients with Prader-Willi syndrome this year.

Rhythm’s pipeline also includes bivamelagon, an oral MC4R entering Phase III clinical development as a potential next-generation complement to Imcivree, and another MC4R known as RM-178 that is poised to begin late-stage evaluation as a weekly treatment for some of the same obesity-related indications.

Rhythm just revised its licensing agreement with Seoul, South Korea-based LG Chem for bivamelagon, increasing Rhythm’s investment by another $350 million, reducing LG Chem’s royalty payments, and adding a $200 million sales-related milestone payout to LG Chem. An analyst with William Blair said, “Essentially, Rhythm is paying more up front to lower its long-term costs on a platform it believes is highly valuable.”

AstraZeneca offered to acquire Rhythm for $124 per share up front, the Journal reported on Wednesday; Rhythm’s stock price closed up 28% that day. Alexion, the biopharma subsidiary AstraZeneca acquired in 2021 for $39 billion, would handle the proposed transaction. Several analysts suggested a bidding war for Rhythm could ensue.  

A coalition of healthcare organizations asked CMS to postpone launching the Ambulatory Specialty Model (ASM), a mandatory payment and performance model set to take effect on Jan. 1 for specialists in the areas of low back pain management and heart failure who provide care in an outpatient setting. In a letter to the head of CMS’ Innovation Center, the groups said significant issues have made it difficult for participants to prepare — including delayed receipt of the final list of participants; delayed access to and problems with the ASM portal; and challenges with receiving assistance and guidance from staff at the Innovation Center.

Some of the issues, the groups noted, still have not been resolved. They want the launch delayed until all operational and technical infrastructure has been tested and is ready for the model to begin. If the Jan. 1 launch date is upheld, they said participants should not be subject to downside risk for the initial performance period. The American Hospital Association, the American Medical Association, the National Association of ACOs, and group purchasing organization Premier are among those that signed the letter.

In related news, a report from the Center for Healthcare Quality and Payment Reform (CHQPR) indicates ASM will reduce access to care for patients, an unintended result that will end up increasing Medicare spending instead of producing savings.

Harold Miller, CEO of CHQPR, told Cardiovascular Business that because ASM “has no predefined performance standard or target that physicians are expected to meet, more physicians participating in the model will receive payment reductions than increases.” The pay cuts, according to the report, will disincentivize physicians who must participate in the model from treating patients with heart failure or low back pain. Miller referred to ASM as “a remarkably bad program that has gotten far too little attention.”

CHQPR recommends terminating the model and replacing it with patient-centered payments for care of chronic conditions.

CMS cut the payment rate for drugs purchased under the 340B Drug Pricing Program as part of the final 2027 Medicare outpatient payment rule. The new rate will be the drug’s average sales price minus 28%; the current rate is the average sales price plus 6%. The reason for reducing the rate is “to better reflect what hospitals pay for these medications,” CMS said in a press release. The agency estimated that traditional Medicare beneficiaries will save $1.1 billion in drug costs and taxpayers will save an estimated $4.35 billion in drug expenditures next year as a result of the new rate. To maintain budget neutrality, CMS will increase payments for non-drug outpatient items and services by 7.5%.

Ashley Thompson, a senior executive with the American Hospital Association, said in a statement, “We remain deeply concerned about CMS’ continued assault on the 340B program by reducing reimbursement rates and the accelerated clawback of funds from hospitals, both of which will further stress hospitals’ ability to care for their patients.” Beth Feldpush, a senior executive at America’s Essential Hospitals also panned the agency’s decision to lower the rate, saying in a press release the cuts “are landing at a time when essential hospitals and their mission are more important than ever, as millions of people risk losing their Medicaid coverage in the coming months.”

MultiCare Health System and Samaritan Health Services completed their affiliation on Nov. 1, creating an 18-hospital nonprofit health system. Tacoma, Wash.-based MultiCare has committed to investing $700 million in Samaritan over 10 years. The funding will be used to expand access to care, recruit and retain clinicians, support workforce development, and improve facilities and technology.

MultiCare’s CEO, Bill Robertson, said in the announcement, “Together, we can make a meaningful difference in the lives of our neighbors in the Willamette Valley and Central Oregon coast by improving access, delivering exceptional care, and helping people live healthier lives.”

Corvallis, Ore.-based Samaritan will retain its local leadership and pair its name with MultiCare’s branding. Marty Cahill, Samaritan’s president and CEO, now also serves as senior vice president and chief executive of MultiCare’s Oregon Coast to Cascades Region.

AI developments

A majority of Americans are uncomfortable with their doctor using AI in their care for tasks such as diagnoses and treatment, Pew Research Center found during a survey of nearly 3,500 adults in June. While 30% said they would be comfortable with this of AI, 60% said they are not. Those surveyed were split when asked how they thought such use of AI would affect patients’ health outcomes: 37% said it would lead to better outcomes, 36% said the outcomes would be worse, and 26% said it would not make much difference either way.

According to the survey report, most survey participants were open to the use of AI for tasks such as translating, scheduling appointments, ordering prescription refills, note-taking during doctor visits, analyzing medical scans, and explaining lab results — but most also said they want a human doing a final review. The task they were least comfortable with having AI involved in was making decisions on insurance claims.

Most survey respondents (51%) indicated they believe AI would adversely affect the security of their personal health information and 47% felt the same about AI’s effect on patient-doctor relationships. Only 8% and 10%, respectively, said they thought AI would improve those aspects of healthcare; the remaining respondents either said they were unsure or that AI would not make much difference.

A test of nine AI models found they made mistakes in at least 2.3% of drug dosing claims they made, and 43.8% of the detected errors were “serious or potentially lethal.” Doximity conducted the research and released the findings in tandem with the launch of DoseCheck, a new safety feature within the clinical decision support tool Doximity Ask.

Doximity used more than 8,000 dosing questions based on actual physician queries to evaluate the widely used AI models. Common sources of errors fell into three categories: recently approved drugs (on which the models had less training); failure to adjust dosing for patient-specific parameters such as kidney function, age, weight, and medical history; and clerical errors, such as incorrect units, placement of decimal points, and confusion of drugs with similar names.

DoseCheck uses a structured drug database that includes FDA labeling and professional guidelines to verify the accuracy of AI-generated drug dosing claims, Doximity explained in a press release, adding that the additional safety layer increases accuracy to more than 99%.

What we’re reading

Health Care in the 2026 Midterm Election. KFF, 11.4.26

Beyond the Milkman: AI’s New Playbook for Medtech Commercial Excellence. BCG, 11.2.26

Navigational Health—The Next Transformation in Health Care. JAMA, 11.5.26 (subscription or registration required)