CVS Health Will Have a Longer Wait to Divest Omnicare

It has been one year since CVS Health announced during third quarter 2022 earnings call 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 attempted a number of different activities over the years to make its acquisition of Omnicare profitable. One year later, in CVS Health’s Form 10Q for the third quarter of 2023, the company stated that the sale of Omnicare isn’t expected “in the near term.”

The announcement, part of the company’s quarterly earnings report, was made to explain a decision on the how the company accounted for assets. Omnicare serves skilled nursing facilities, senior living communities, and PACE programs.

CVS Health, in connection with its new operating model adopted in the first quarter of 2023, realigned the composition of its segments to reflect how its Chief Operating Decision Maker (the CODM) reviews information and manages the business.

As a result of this realignment, the Company formed a new Health Services segment, which in addition to providing a full range of pharmacy benefit management (“PBM”) solutions, also delivers health care services in the Company’s medical clinics, virtually, and in the home, as well as provider enablement solutions.

In addition, the Company created a new Pharmacy & Consumer Wellness segment, which includes its retail and long-term care pharmacy operations and related pharmacy services, as well as its retail front store operations. This segment will also provide pharmacy fulfillment services to support the Health Services segment’s specialty and mail order pharmacy offerings.

While the Company continues to evaluate strategic alternatives for the LTC business, during the third quarter of 2023, the Company determined it was no longer probable that a sale would be completed in the near term. At that time, the Company concluded that the LTC business no longer met the criteria to be classified as held for sale.

Accordingly, the assets and liabilities associated with this business have been reclassified to held and used at their respective fair values on the unaudited condensed consolidated balance sheet as of September 30, 2023.

Takeaway: The question we raised last year remains: 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.

View AMI’s Pharmacy in Long-Term Care Annual Review 2023-2024 for more comprehensive information.