CVS Health Actively Seeking Buyer for Omnicare

AMI has followed the ongoing dilemma that has faced CVS Health since they purchased Omnicare in 2015 for $12.9 billion. Omnicare has been the market leader in the institutional or long-term pharmacy industry with more than $3 billion in sales and serving more than 1 million patients.

Looking back at the rationale for the acquisition: Omnicare’s complementary specialty pharmacy platform and clinical expertise was going to augment CVS Health’s capabilities; and CVS Health was to significantly expand its ability to dispense prescriptions in facilities serving the senior patient population, which was expected to grow significantly.

Nearly seven years later, Omnicare’s continuing poor financial results has been a drag on CVS Health financial results. (See previous posts below)

During the third quarter 2022 earnings call, CVS Health announced that it is actively exploring strategic alternatives for Omnicare. “We recorded a pre-tax loss on assets held for sale of $2.5 billion related to the write-down of our long-term care business, Omnicare, where we are in the process of exploring strategic alternatives.”

CVS Health has attempted a number of different activities over the years to make its acquisition of Omnicare profitable. Activities included:

Most recently, in July 2022, Omnicare appointed of Ahmed Hassan as president of the company. Hassan is charged with executing the firm’s business strategy and exceeding goals in service, retention, growth and culture. Hassan replaced former president Jim Love, who occupied the role for two years.

CVS Health outlined a four-point plan in August 2018 to improve the performance of Omnicare including:

• Installing a new leadership team
• Targeting ways to better retain clients
• Finding efficiencies to help lower costs for skilled care customers
• Targeting upward of $150 million in cost takeout opportunities

CVS Health’s value proposition for the Omnicare business was to be able to provide continuity of care as people progress through the different phases of aging and they move from independent living to assisted living. Market conditions have contributed to Omnicare’s results over the years.

 

View AMI’s Pharmacy in Long-Term Care Annual Review 2022 for more comprehensive information.

 

Takeaway: The question now becomes who will purchase Omnicare. Unlike other pharmacy market segments, the long-term care pharmacy market is not experiencing a number of private equity investments. Although the industry continues to slowly consolidate, there are very few companies that may be in a position to acquire Omnicare.

 

 AMI Posts

November 2021 –  “What Will CVS Health Do With Omnicare?”

August 2020 – “Has CVS Health Reached the Tipping Point with Omnicare?”

March 2019 – “Does CVS Health Have the Right Strategy for Omnicare?”