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CVS conducting strategic review, considering breakup
CVS has been grappling with falling profit margins at its retail pharmacies and rising costs of patient care from Aetna, which generates about a third of its revenue.
CVS Health Corp. is conducting a strategic review of options including a possible breakup, according to a person familiar with the matter, as the company faces headwinds from its drugstore chain and Aetna health insurance arm.
The diversified health-care company retained bankers to facilitate the ongoing review, the person said. While CVS isn’t yet close to making a decision, the person added, options under consideration include the various forms a potential breakup could take, including a separation of the company’s retail and insurance businesses.
CVS is continually exploring ways to create shareholder value, a spokesperson said in a statement, declining to answer further questions about the company’s future direction.
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The shares rose as much as 2.4% in premarket trading Tuesday, having fallen more than 20% so far this year.
CVS has been grappling with falling profit margins at its retail pharmacies and rising costs of patient care from Aetna, which generates about a third of its revenue. In August, the company cut its 2024 earnings forecast for a third straight quarter.
Surging medical costs have been affecting companies throughout the insurance industry, including Humana Inc. and UnitedHealth Group Inc. CVS also recently took a hit when Medicare, the US health program for the elderly, lowered quality ratings for one of its national health plans, reducing reimbursement levels.
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Brian Kane, who had headed the insurance unit, departed in August after less than a year in the role. Kane was replaced by Chief Executive Officer Karen Lynch and Chief Financial Officer Tom Cowhey while CVS searches for a successor.
The Wall Street Journal previously reported that CVS executives would meet Monday with Glenview Capital Management on how to improve operations amid a drop in share value. The investor’s founder, Larry Robbins, has a large position in CVS – which represents about $700 million of his $2.5 billion fund – the paper wrote.
Reuters earlier reported the news of the review.
With assistance from Subrat Patnaik.
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