CVS split: a step towards a better future?

CVS Health, one of the largest healthcare players in the United States, is facing a potential major change. The company is considering splitting its core divisions - retail pharmacy and insurance - in response to financial challenges and pressure from investors. The move could fundamentally affect the direction the company takes and open the door to a new era of its operations.

The contemplated demerger

In recent weeks, CVS management has discussed several options for reshaping its structure. Among them is a plan to separate the retail pharmacy network from the insurance division, which includes Aetna, CVS's key 2017 acquisition. Discussions with financial advisors are still ongoing and a final decision has not yet been made, but the plan has already been presented to the board.

An important question in the process is where the pharmacy benefits manager (PBM) division, which handles benefits administration for health plans, should fall. One option is to put it under the retail division, the other is to put it under the insurance division if the company were to be split into two separate companies.

Investor pressure and economic challenges

The decision on a possible split is not random. CVS is currently facing one of the most difficult periods in its 60-year history. The company has experienced a decline in profits, with its stock down nearly a quarter of its value since the beginning of 2023. The situation has been further exacerbated by the departure of Aetna CEO Brian Kane, who had to leave due to poor results in Medicare, where health care costs are rising.

Other health insurers, such as UnitedHealth and Humana, are also under pressure as they also face rising costs. However, investors such as Glenview Capital are putting pressure on CVS to look for ways to increase efficiency and improve its results.

Historical roots and current challenges

CVS was founded in 1963 as a chain of pharmacies and has grown over time into a giant healthcare company with more than 9,000 locations across the United States. Its expansion has been through major acquisitions such as Caremark, Medicare home care provider Signify Health, and Oak Street Health, which focuses on primary care for Medicare patients.

Although CVS is known primarily for its pharmacy network, many analysts believe that this division has become the company's weakest link. Unless there is a major transformation, such as an expansion of medical services provided directly at these pharmacies, the company will be forced to make strategic changes to maintain its competitiveness.

Splitting CVS Health would be a step back from its key move, which was the acquisition of Aetna, but it could also be a solution for future growth. The company's management recognizes the need to improve performance and is always looking for ways to maximize value for its shareholders. Therefore, the future of CVS will depend on the company's ability to respond effectively to rising costs and adapt to the new demands of the healthcare market.

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Source: CNN, Investing.com, Yahoo.

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