CVS Health announced plans to separate into two independent, publicly traded companies dividing its retail pharmacy operations from its healthcare services businesses on November 4, 2026, along with its Third Quarter Report.
Much of the early coverage has described the announcement as the end of the vertical integration strategy CVS built over two decades by acquiring Caremark and Aetna. A closer look at what CVS chose to keep together suggests otherwise. Under the proposed separation, CVS Caremark, Aetna, and CVS Specialty will remain part of the same healthcare solutions company, preserving key elements of CVS Health’s vertically integrated business model.
For independent pharmacies, health systems, and other providers that deal with CVS every day, the split raises immediate practical questions about network access, reimbursement, and patient steering.
What Businesses Will Be Included in CVS Health’s Planned Separation?
The planned separation creates two companies. The first will be a healthcare solutions company comprising Aetna, CVS Caremark, CVS Specialty, Oak Street Health, and Signify Health, which will be called CVS Health in the interim. The second will be a retail pharmacy and community healthcare company, made up of about 9,000 CVS pharmacies, mail pharmacy, MinuteClinic, and the Health100 technology services business, which will be named CVS Pharmacy.
CVS expects to complete the separation in the first half of 2028. The deal is subject to customary conditions, including final Board approval, an effective Form 10 registration statement filed with the SEC, and receipt of customary tax confirmation. CVS intends the transaction to be tax-free for U.S. federal income tax purposes. Until then, CVS says it will keep operating, competing, and serving customers as it does today.
Why CVS Caremark and CVS Specialty Will Remain Together
The businesses most often criticized for vertical integration and self-preferencing will stay together. CVS Health Chairman and CEO David Joyner told investors the new structure lets CVS “maintain and expand integration where it matters,” including in specialty pharmacy, and that joint products will be preserved through commercial agreements between the two companies.
Explaining the decision, Joyner said CVS Pharmacy “has been operating behind a firewall for the last two decades,” and that the integration opportunities between the two companies are “nothing that we cannot solve for with a commercial agreement.”
Even assuming CVS’s existing internal firewall operates as described, separating its retail pharmacies does not necessarily change how Caremark interacts with competing pharmacies. More concerning is that continued commercial agreements between the two companies may preserve the vertical integration that has been the focus of several governmental investigations. For pharmacies the more significant issue may be what CVS has chosen to retain. Caremark will continue to set reimbursement, network terms, and audit policies for pharmacies that compete with CVS Specialty, and CVS Pharmacy will remain tied to Caremark by contract.
The announcement is also silent on several CVS businesses that sit between manufacturers, plans, and pharmacies: its rebate aggregator, Zinc Health Services; its biosimilar subsidiary, Cordavis; its 340B administrator, Wellpartner; and Red Oak Sourcing, its generic purchasing venture with Cardinal Health. If all remain with the PBM business, then little integration is being split.
Part of Broader Scrutiny of Vertical Integration
Joyner told analysts that CVS is acting from a position of strength, “not because there is any issue that may be on the horizon in ’28.” Yet among the split’s benefits he listed the ability to “more effectively adapt to the regulatory and other external dynamics.”
The proposed separation comes amid heightened federal and state scrutiny of vertically integrated PBMs. The anticipated 2028 completion date also coincides with significant regulatory developments, includingTennessee’s pharmacy ownership restrictions and new limits on PBM compensation in Medicare Part D. The announcement follows years of scrutiny of PBM vertical integration by federal and state regulators. Some observers have suggested the split may help CVS deflect state scrutiny of its vertical integration.
The Federal Trade Commission’s (FTC) July 2024 interim report found that the three largest PBMs, including Caremark, processed nearly 80 percent of prescriptions dispensed in 2023, and that their affiliated pharmacies accounted for nearly 70 percent of specialty drug revenue. The FTC warned that vertically integrated PBMs may have the ability and incentive to favor their own pharmacies, disadvantaging unaffiliated pharmacies and increasing drug costs.
The FTC’s January 2025 second interim report went further, finding that the three largest PBMs marked up specialty generic drugs dispensed at their affiliated pharmacies by thousands of percent, generating more than $7.3 billion in revenue above acquisition cost from 2017 to 2022.
In July 2026, the FTC announced a proposed settlement with Caremark resolving its insulin rebating case, under which Caremark would be required to offer retail community pharmacies the opportunity to move to a cost-plus reimbursement model and would be prohibited from unfairly interfering with pharmacies’ use of hub service providers. The order’s key requirements do not apply to Medicare, Medicaid, or Exchange plans.
State regulators and lawmakers have also increased scrutiny of PBM practices.
The Florida Attorney General issued a Civil Investigative Demand to CVS Health and Caremark in June 2026, Oklahoma settled its below-cost reimbursement case against Caremark for $5.08 million, and Arkansas and Tennessee have passed laws restricting PBM ownership of pharmacies. Arkansas’s law has been preliminarily blocked since July 2025, and CVS is challenging Tennessee’s law in federal court. Most recently, CMS’s Request for Information on Medicare Part D pharmacy contracting asks how vertical integration among plans, PBMs, and pharmacies affects access and competition.
Notably, the split keeps Caremark and CVS Specialty, the PBM and specialty pharmacy pairing at the heart of the FTC’s specialty findings, under the same roof. Providers should expect regulators and courts to keep examining that relationship.
What the CVS Health Split Means for Pharmacies and Providers
For independent pharmacies, health systems, and other providers, the split is unlikely to bring immediate relief because Caremark will continue to control network access, reimbursement, and audits, and nothing in the announcement suggests it will stop favoring CVS pharmacies, whether they are tied to Caremark by ownership or by contract.
CVS Kept Its Specialty Pharmacy
After the separation, specialty pharmacy will be the principal dispensing business left inside CVS Health. Joyner explained on CVS Health’s recent earnings call that roughly 2 percent of patients drive more than half of pharmacy spend, and “the synergistic opportunity with the PBM in specialty remains intact.” That, he said, “is part of the logic of keeping it together.” CVS kept those dollars next to the PBM that decides which specialty drugs are covered, which pharmacies may dispense them, and what those pharmacies are paid.
For independent and health-system specialty pharmacies, expect the current status quo to remain, the separation alone is unlikely to resolve existing concerns regarding restrictive specialty networks that favor CVS Specialty.
Pharmacies should document every steering letter, network denial, and claim redirected to CVS Specialty. Those records may be important in evaluating potential claims or contractual rights under state any willing pharmacy laws and the federal “reasonable and relevant” Part D contract standards CMS must finalize under the Consolidated Appropriations Act.
Implications for 340B Covered Entities and Health Systems
The proposed separation also raises important questions for 340B covered entities and health systems.
Certain CVS-related 340B contract pharmacy arrangements involve multiple affiliated businesses, including CVS Specialty, with Caremark adjudicating claims and CVS’s 340B administrator, Wellpartner, managing the program. The continued relationships among these entities may be significant for covered entities evaluating their contractual rights and obligations.
Lawsuits filed by health systems represented by Frier Levitt allege that this chain of CVS entities was used to divert 340B savings. Based on information currently available, the separation does not change who sits on the other side of those relationships.
Covered entities deciding whether to sign CVS’s new contract pharmacy agreements by the December 1, 2026 deadline should evaluate those terms, including mandatory confidential arbitration and narrower audit rights, on their merits, and should not expect the split to change them.
The announcement itself does not establish changes to existing 340B contract pharmacy agreements or resolve disputes concerning their terms. Covered entities should therefore evaluate applicable deadlines, contractual provisions, and available legal remedies independently of the proposed restructuring.
What Pharmacies and Providers Should Consider Now
Although CVS Health’s proposed separation is not expected to be completed until 2028, pharmacies and healthcare providers should continue evaluating their existing contractual and regulatory relationships with CVS Caremark and its affiliated businesses.
Depending on their circumstances, affected organizations may wish to:
- Review PBM network participation agreements, reimbursement provisions, and audit requirements.
- Document potential patient steering, network access restrictions, and reimbursement disputes.
- Evaluate specialty pharmacy contracting arrangements and applicable federal and state protections.
- Review 340B contract pharmacy agreements, including arbitration provisions, audit rights, and upcoming deadlines.
- Monitor regulatory developments and changes to CVS’s proposed corporate structure.
How Frier Levitt Can Help Pharmacies and Healthcare Providers
Frier Levitt has represented pharmacies in disputes with PBMs for decades, including matters involving reimbursement below acquisition cost, burdensome or retaliatory audits, restrictive network contracts, and improper network terminations. The firm also represents covered entities in 340B contract pharmacy disputes, including several pending federal lawsuits against CVS. The firm advises PSAOs, specialty pharmacies, and drug manufacturers on PBM contracting, network access, and rebate arrangements.
If your pharmacy, PSAO, health system, practice, or 340B program has questions about how CVS Health’s separation or evolving PBM regulations may affect your organization, contact Frier Levitt’s attorneys. Our team can assist with contract review, reimbursement and network access disputes, audit defense, regulatory advocacy, and litigation.
