The Challenges of a Potential CVS Breakup: Why It’s Complicated and Unlikely

A CVS breakup is making headlines, with reports suggesting that the company is considering splitting up its various business lines. While this move may seem drastic, it raises important questions about the trend of vertical integration in the healthcare industry.

CVS currently operates as a chain of retail pharmacy stores, a major health insurer, and the country’s largest pharmacy benefit manager. The idea behind this vertical integration is to create efficiencies and improve patient value. However, some analysts are skeptical about the potential breakup, questioning whether CVS would lose its competitive advantage if it were to divest certain assets.

The discussion around a potential breakup has been fueled by pressure from hedge fund Glenview Capital Management, although the company denies actively pushing for this change. CVS has also announced plans to cut around 2,900 jobs in an effort to reduce costs.

One of the main challenges facing CVS is the performance of its health benefits arm, which has deviated from the typical trend line in 2024. Retail pharmacy, in particular, is facing intense competition and operating pressures. Some experts believe that CVS’s struggles may be attributed to the specific combination of businesses it has integrated, rather than a broader industry issue.

While some analysts suggest that improving the performance of the Aetna side of the business could be a more viable solution than breaking up the company, the path forward remains uncertain. The federal government’s efforts to crack down on overspending in Medicare Advantage plans add another layer of complexity to CVS’s situation.

As the discussion around a potential CVS breakup continues, industry experts will be closely watching how the company navigates these challenges and whether it can find a path to sustainable growth and success.