CVS Health CEO Pushes Back on $1 Billion Split Cost Estimate, Outlines Growth Plans

Key Points

• CEO David Joyner said recurring costs from separating CVS’s pharmacy business are likely closer to $500 million than the more than $1 billion some investors estimate; one-time separation expenses would be additional.
• CVS Pharmacy’s outlook has improved from an expected 5% decline to low-single-digit growth, with adjusted operating income projected to rise for a third consecutive year in 2027. Growth plans include expanding direct-to-consumer and other healthcare services.
• CVS Specialty will remain with CVS Health and Caremark, while the separated pharmacy business will operate independently. The company says $35 billion in deployable capital remains available across the two businesses, with allocation still undecided.

CVS Health NYSE: CVS executives said the company’s planned separation of its pharmacy business will create two companies capable of growing independently, while addressing investor questions about the costs and competitive implications of the transaction.

Speaking at a Wolfe Research healthcare conference, Chairman and CEO David Joyner said improvements in the Aetna insurance business and retail pharmacy operations helped put CVS in a position to pursue the separation. Prem Shah, the executive vice president and group president slated to lead the standalone CVS Pharmacy, outlined opportunities to expand its healthcare services.

Joyner said the regulatory environment has changed since CVS and Caremark combined about 20 years ago and since the acquisition of Aetna. While regulation was one factor in evaluating the businesses, he said both are now operating from a position of strength and can compete on their own.

Separation Costs and Specialty Pharmacy

Joyner challenged investor estimates that the separation would result in more than $1 billion in lost synergies. When Wolfe Research analyst Justin Lake suggested a recurring cost closer to $500 million, Joyner said that figure was “much closer” to what CVS had in its models. He also confirmed Lake’s distinction between recurring costs of operating two companies and one-time separation expenses.

Joyner said a longstanding firewall between CVS Pharmacy and Caremark meant the businesses had largely operated separately. The company will also incur one-time costs to establish a separately traded company, he said.

CVS Specialty will remain with CVS Health and its pharmacy benefit management business. Joyner said the specialty pharmacy fits within that structure because control over formularies and brand purchasing helps the company compete in a fast-growing, high-cost segment of healthcare.

He also distinguished specialty pharmacy from retail pharmacy in the regulatory debate. State-level pressure, he said, has largely targeted pharmacy benefit managers with affiliated retail pharmacies, which compete directly with independent drugstores.

Pharmacy Growth Plans

Shah said CVS Pharmacy has moved from an earlier outlook for a 5% decline to guidance for low-single-digit growth. He said 2027 is expected to be the third consecutive year of growth in adjusted operating income for the business.

The company addressed reimbursement pressure through its CostVantage model and invested in technology and service improvements, Shah said. He added that CVS Pharmacy would retain its relationship with Red Oak Sourcing for generic drug purchasing after the separation.

Looking beyond 2028, Shah said he expects reimbursement pressure to largely stabilize. He identified direct-to-consumer offerings, including weight-loss services, and other healthcare services as potential areas for expansion. He said the company would provide more detail on its plans during 2027.

Asked whether the pharmacy business could achieve mid-single-digit growth, Shah did not provide a specific target. Instead, he described a strategy of stabilizing reimbursement pressure, growing prescription volume slightly above the market and developing adjacent services.

Capital and Medicare Outlook

Joyner said both businesses are intended to have investment-grade balance sheets. He confirmed Lake’s description of the previously discussed $35 billion in deployable capital as remaining available across the two companies, though its allocation has yet to be determined.

For the remaining CVS Health, Joyner pointed to Medicare, specialty pharmacy and investments in Oak Street and Signify as growth opportunities. He said the company expects to work through pressures related to rebate guarantees and the 340B drug pricing program, with 2027 previously identified as a trough year.

Joyner said it was too early to give a detailed update on Medicare Advantage enrollment, with more information expected in February. He said the company continues to prioritize margins over growth and does not expect a change to its recovery plan or the 2028 target of a 3% margin or better cited by Lake.

About CVS Health (NYSE:CVS)

CVS Health is a U.S.-based health care company that operates retail pharmacies, provides pharmacy benefit management services, and offers health insurance and other health services. Its businesses include CVS Pharmacy, pharmacy benefit manager CVS Caremark, and Aetna, its health benefits division.

The company also provides care through MinuteClinic walk-in clinics and health care businesses including Oak Street Health and Signify Health. Its services span prescription fulfillment, pharmacy benefit management, health insurance, primary care, and in-home and community-based care.

Founded in 1963 as Consumer Value Stores in Lowell, Massachusetts, the company expanded from a retail pharmacy business into a broad health care organization and adopted the CVS Health name in 2014.

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