CVS Pharmacy & Consumer Wellness Segment Income Rises 10.6% as Sales Fall

CVS Health’s Pharmacy & Consumer Wellness segment posted higher adjusted operating income but lower revenue in the third quarter. The results add financial context to the company’s plan to separate its retail pharmacy operations, but do not show how either proposed company would perform on its own.

For the quarter ended Sept. 30, the segment reported adjusted operating income of $1.635 billion, up 10.6% from a year earlier. Revenue fell 2% to $35.498 billion.

CVS attributed the increase in operating income partly to core pharmacy strength and acquisitions of Rite Aid assets. It attributed the revenue decline in part to regulatory-related price reductions, new generic drugs and reimbursement pressure.

The segment also includes infusion operations and pharmacy fulfillment services. Its results therefore do not isolate the retail pharmacies and services planned for the new CVS Pharmacy company.

CVS announced its planned separation on Nov. 4, with a target of creating two publicly traded companies by the first half of 2028. The healthcare solutions company would include Aetna, pharmacy benefit manager CVS Caremark, CVS Specialty, Oak Street Health and Signify Health. CVS Pharmacy would include about 9,000 retail pharmacies, mail pharmacy, MinuteClinic, including virtual care, and Health100.

CVS shareholders would own shares in both companies if the plan proceeds. CVS intends the separation to be tax-free for the company and its shareholders for U.S. federal income tax purposes. Completion remains subject to final board approval, an effective Form 10 registration statement with the Securities and Exchange Commission and confirmation of the expected tax treatment.

CVS’s Health Care Benefits segment, which would be part of the healthcare solutions company, reported adjusted operating income of $912 million, compared with $314 million a year earlier. Its medical benefit ratio fell to 91.3% from 92.8%. CVS also reported $1.3 billion in favorable development of prior-year health care cost estimates during the nine months ended Sept. 30, a factor that complicates the year-over-year comparison.

CVS completed its Aetna acquisition in 2018, valuing the deal at about $70 billion, or $78 billion including Aetna’s debt. The planned separation would move the retail pharmacy business out of that combined structure while keeping Aetna and Caremark together. CVS has not disclosed the companies’ final capital structures, debt allocation or commercial agreements.