Schwab Network on $CVS (Nov 4, 2026)

I mean, CVS spent years building this integrated healthcare giant , only to come along now as part of its strategic evaluation and say, "We're going to split into two publicly traded companies ."

Is this an admission that it did not succeed as they wanted, and that the administration did not achieve what was expected of it ?

If you really think about what CVS has combined with companies like Aetna, Caremark (a pharmacy benefits management company), and retail , it has actually worked to drive growth and improve the way they manage patients.

Therefore, I would say that the strategy was indeed successful . Simply put, new rules have been issued. Transparency in the pharmaceutical benefits management sector will soon begin to emerge.

There is also a law passed in Tennessee that prohibits pharmacy benefit management companies from owning retail pharmacies. Therefore, I believe this is a way to adjust the strategy and modify the work before this Tennessee law is copied in many other states.

Well, Brian, I mean the announcement definitely surprised investors. I see a 12.25 percent drop now in the CVS stock price . What is the reason behind this rapid move towards decline?

Is it simply the element of surprise, and that the market doesn't like surprises? Is it uncertainty about the split, or does it indicate that investors are not convinced that this will actually unlock value?

Yes, I think the reason, Marley, is that people are doing calculations to evaluate the sum of the parts, isn't that right ? If you put a valuation and multiple for retail pharmacies, and when you look at previously listed retail pharmacies such as Walgreens or Rite Aid, those stocks have traded at 7 to 8 times earnings before interest, taxes, depreciation and amortization .

When you look at insurance companies, such as UnitedHealth, Elevance, or Cigna, you find that they trade at around 11.5 to 12.5 times earnings before interest, taxes, depreciation, and amortization.

When you evaluate the sum of the parts, what was essentially happening was that the retail pharmacies within CVS were benefiting from the high growth and higher insurance-related multiples.

So, when you split this company, firstly, you will face a bit of synergistic conflict, won't you? You now have to bear expenses from both sides since they are both publicly listed companies , that's the first thing.

The only difference is in the growth rates and the resulting complications . So, I think this is what is priced in stocks today, or in a share.

So, Brian, what are your thoughts on the two companies that might become independent? I mean, they're saying not before 2028. So, we're still a bit far off, but let's first look at the retail pharmacy business since you were just talking about it.

They operate around 9,000 pharmacies. I think they achieved slightly less than $38 billion in sales in 2025. They are also gaining market share from competitors. I was looking at some data before our conversation.

From your point of view, how attractive is CVS Pharmacy's business as an independent entity?

You know, Marley, what's interesting is that their pharmacy business has done really well . So, they are gaining market share and some of that is due to the closure of Rite Aid , right?

Then Walgreens began merging its stores. Therefore, there was a market share available to capture, and CVS achieved great success in driving growth by increasing its market share.

So, that's the first thing. Perhaps just to appreciate some of this, isn't it? Three years ago, their projections for retail pharmacies indicated a decline in operating income of approximately 5%.

And now, three years later, we are beginning to see positive growth, or as you know, we have seen healthy growth in retail pharmacies. So, I think they succeeded in changing the course of that business.

I think the consumer was undoubtedly a point of pressure in terms of consumer spending, but they did a good job of weathering that storm. I think the execution, in terms of store redesign, branding, and marketing, has done a really good job .

So, I'm very excited to see it go public, but I think the real question is what is the appropriate valuation for a niche retail pharmacy only.

Brian, you've highlighted some regulatory issues, with states pushing for restrictions on pharmacy benefit managers ( PBMs) owning pharmacies. Well, separating the two activities seems logical, but are there other integrated healthcare companies that we might see taking similar steps now?

Do you expect to see a wider restructuring in the healthcare sector given what CVS has done, and do we now have a model or case study of what the future might look like ?

What we are seeing, especially with the Tennessee law you mentioned , is that independent pharmacies are lobbying their state representatives and senators, saying, "We are losing our market share to these large pharmacies and we need protection."

So, I think this was one of the ways some state legislators dealt with this issue. There was concern that other states would follow Tennessee's example . It started in Arkansas, then Tennessee copied it, and over time there is growing momentum to thwart this trend.

But CVS is unique, isn't it? I mean, they're the only ones who own a retail pharmacy. So, I would say maybe not quite right now . Currently, I believe this vertical integration between pharmacy benefits manager, managed care, and even clinics is correct?

I mean, CVS owns Oak Street Health, which is a clinic operator. I believe this strategy will continue for at least the next few years unless we see real government action from Congress to break up these entities.

Good. We are seeing a decline of more than 12 percent in CVS shares. The announcement of the business split effectively overshadows the strong third-quarter report. They raised their expectations, and they also saw a sharp improvement in their insurance profitability .