Newsletter

CVS Health is considering breaking up its operations due to pressure from investors, following years of stagnant stock performance. While the company’s retail pharmacy and insurance businesses, including Aetna, were integrated to create synergies, recent financial challenges have led to disappointing earnings. CVS’s stock has remained flat over the past five years, contrasting with a doubling of the S&P 500. Separating Aetna and its pharmacy benefit manager, Caremark, could yield benefits by making the company more focused, similar to Cigna or Humana, which have higher forward price/earnings multiples (11.3 and 15.7 respectively, compared to CVS's 8.5). However, disentangling these businesses would be complex, as Caremark plays a key role in both the insurance and pharmacy operations. Investors are now questioning whether the company should retain its retail arm, given the recent closures and struggles in the pharmacy sector.

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• How will the breakup affect CVS’s ability to negotiate contracts and partnerships with suppliers or healthcare providers?

• Could the breakup open doors for new acquisitions in the pharmacy or insurance markets by competitors?

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Read more from The Wall Street Journal here.