On Nov. 4, CVS Health announced its plans to separate into two individual and publicly traded companies. One company would lead in healthcare, while the other would remain focused on retail pharmacy.
The Two New Companies
The healthcare solutions company would keep the Interim name CVS Health and would consist of Aetna, CVS Caremark, CVS Specialty, Oak Street Health, and Signify Health. CVS Health is intended to keep connections that will help it lower costs while aiming to improve health outcomes and experiences for clients.
The second company, CVS Pharmacy, will include approximately 9,000 retail pharmacy locations across the country. CVS Pharmacy will also consist of mail pharmacy, MinuteClinic, and Health100, the latter two of which are tech-focused solutions to healthcare.
What Happens Upon Separation?
Under the planned structure, current CVS Health Chairman and CEO David Joyner will become chairman and CEO of the healthcare solutions company, which will be referred to as CVS Health in the interim. Prem Shah, currently Group President of CVS Health, will become CEO of CVS Pharmacy.
Additional leadership and board members will be announced at a later undisclosed date.
CVS Health says the separation is intended to accelerate its strategy by giving each company a more focused business agenda. According to the company, the new structure will allow both businesses to focus on improving consumer experiences and pursuing their own strategic priorities.
The separation will allow each company to form focused agendas bolstered by their dedicated leadership teams. The simplified structure of these new independent companies will help better serve patients and members according to the press release.
Each company will be allowed to divest funds as they please to drive its own strategic priorities and according to the press release “pay an attractive dividend.”
In the future, both companies intend to focus on advancing technology that will improve healthcare. Both CVS Health and CVS Pharmacy will remain committed to realizing the potential of Health100.
CVS Pharmacy plans to expand the services offered by its nearly 30,000 pharmacists. As an independent company, it also plans to pursue a wider range of partnerships across the healthcare system, including with payers, pharmacy benefit managers, and manufacturers.
Details of the Transaction
Once the separation is completed, CVS Health shareholders will own shares of both companies. The separation is meant to be tax-free for both CVS Health and its shareholders.
The separation is expected to be completed by the first half of 2028, and until then the Board of Directors will have the final say over the split.
CVS Health has not yet disclosed how shares will be allocated between the two companies or whether both businesses will retain their current branding.
CVS explicitly says that until the separation is completed, it will continue operating, competing, and serving customers as it does today.
