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Hiltzik: CVS unwinds its big mergers, ending a dream of healthcare dominance
CVS unwinds its big mergers by splitting into two companies, with Aetna and Caremark in one and the drugstores in the other.
Key points
- CVS Health announced on Wednesday it will split into two companies, one holding Aetna and Caremark.
- CVS Health shares fell 12.5% the day after the breakup was announced.
- The columnist says the split reflects government skepticism about combining drug retailing, pharmacy management and insurance.
Why it matters. The column says regulatory pressure on combining drug retail, pharmacy management and health insurance is likely to intensify in coming years.
CVS Health said on Wednesday it will split into two companies, reversing the 2018 Aetna acquisition that former CEO Larry J. Merlo had hailed as transformative. The company containing Aetna and Caremark will keep the CVS Health name, while the other, CVS Pharmacy, will own the 9,000 CVS drugstores. CEO David Joyner said the goal is 'more affordability, greater access, and a simpler experience,' but CVS Health shares fell 12.5% the day after the announcement.
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Hiltzik: CVS unwinds its big mergers, ending a dream of healthcare dominance
CVS thought bigness would be better, but it turned out to be wrong. I'm old enough to remember the day when CVS, the big drugstore company, opted to get even bigger by acquiring the health insurer Aetna. "Today marks the start of a new day in healthcare and a transformative moment for our company and our industry,” CVS Health President and Chief Executive Officer Larry J. Merlo boasted. The $70-billion deal would lead to "improved health outcomes and lower medical costs," he said. I'm not giving away my age with this recollection. The deal happened a mere eight years ago, in 2018. Merlo's ambitions and braggadocio didn't have much of a shelf life: On Wednesday, the company announced it was deconstructing the edifice he had erected, by splitting into two companies. One, encompassing Aetna and Caremark, the pharmacy benefit manager it acquired in 2007 for $26.5 billion, will retain the name CVS Health, and the other, dubbed CVS Pharmacy, will own the 9,000 CVS drugstores, the nationwide legacy of the original company that started with a single Massachusetts store. The company's current CEO, David Joyner, announced the breakup with the same cocksure swagger his predecessor had employed in promoting his big idea. The goal would be to create "two distinct leaders in healthcare" where before there was only one. The result would deliver "more affordability, greater access, and a simpl.