The National Community Pharmacists Association said it is “way too early to celebrate” the news that CVS Health Corp. (NYSE: CVS) plans to separate into two publicly traded companies.
CVS announced its intentions on Nov. 4, saying each of the two independent companies will be “committed to innovating to make healthcare more affordable, accessible and simpler to navigate for the millions of people each serves.”
The announcement said the first company — described as a healthcare solutions company to be called CVS Health in the interim — will include Aetna, CVS Caremark, CVS Specialty, Oak Street Health, and Signify Health. CVS Caremark is the pharmacy benefit manager (PBM) for Aetna. Going forward, David Joyner, the current chair and CEO of CVS Health, will lead the company.
The second company — described as “the leading national retail pharmacy and community healthcare company” — will include approximately 9,000 CVS pharmacies, CVS’s mail-order pharmacy, MinuteClinic, and the Health100 technology services business. The company, to be called CVS Pharmacy, will be led by Prem Shah.
“CVS clearly sees the writing on the wall: growing sentiment on Capitol Hill and in the states against the abuses and competitive imbalances created by vertical integration in the healthcare sector,” NCPA CEO B. Douglas Hoey said in the association’s Nov. 4 statement. “NCPA strongly opposed the original merger, and since then we’ve been fighting against the three-headed hydra it created.
“We pushed hard for the historic PBM reforms signed into law this year, which the PBM lobby spent millions to stop. We litigate to protect independent pharmacies from anti-competitive PBM practices, and we have given financial and grassroots support to state pharmacy organizations to pass their own reforms, including laws that will force CVS and other conglomerates to choose between operating their PBMs or their pharmacies within the same state.”
CVS said creating two separate companies would allow each to create “a focused strategic agenda with an experienced and dedicated leadership team,” as well as to benefit from an independent capital structure and strong free cash flow.
The move would also provide “greater agility to innovate, adopt technology, increase efficiency and proactively adapt to regulatory and other external dynamics,” CVS said.
“As an independent company, CVS Pharmacy will continue to expand the services provided by its nearly 30,000 pharmacists and pursue a wider set of partnerships across the healthcare system, including with payers, pharmacy benefit managers and manufacturers, to better serve the needs of consumers and patients,” the announcement added.
Hoey said that while news of the split was potentially encouraging, it is too soon to celebrate “until the details of the transaction and its implementation in the marketplace are clear. The key question is whether CVS Health and its new spinoff, CVS Pharmacy, will choose to work with, rather than against, community pharmacies.
“Based on their press release, CVS Health shareholders will also own shares in the new pharmacy company. That means the incentives for suppressing competition, patient steering, and formulary manipulation don’t necessarily disappear. We would encourage lawmakers and regulators at the federal and state levels to scrutinize this reorganization very carefully.”
