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CVS will halt COVID-19 vaccines in 16 states as it is unclear whether vaccinations will be available.
Straight Arrow News
- Omnicare, a former Cincinnati-based company, has filed for Chapter 11 of the federal bankruptcy law.
- Parent company CVS Health said it will use the bankruptcy to address financial challenges and consider restructuring or divesting.
Omnicare, a former Cincinnati-based Fortune 500 company, filed for Chapter 11 bankruptcy in Texas after a civil ruling of nearly $1 billion this summer.
Drugstore giant CVS Health, the parent company that acquired OmniCare for $12.7 billion in 2015, has suggested that it could sell its specialist pharmacy services business.
“The company will use this process to address other financial challenges and evaluate restructuring options, including implementing a sole restructuring and divestment strategy,” CVS said in a government filing with the U.S. Securities and Exchange Commission.
Bankruptcy on $949 million fraud
The bankruptcy filing comes weeks after a New York judge ordered Omnicare to pay $949 million fine after a civil trial jury found Omnicare responsible for fraudulently dispensing medicines to elderly people and disabled people in nursing homes and other residential long-term care facilities for seniors and disabled people without a valid prescription.
The penalty order follows a four-week trial in the spring, and the jury found that OmniCare had filed more than 3 million false claims against Medicare, Medicaid and Toricare between 2010 and 2018.
In its latest filing, CVS called the ruling against Omnicare “overstood,” adding that bankruptcy could also help “settle” the lawsuit. According to court records, Omnicare is seeking an appeal against the fraud verdict.
“The court has imposed a penalty that is… extreme and we believe is against the constitution,” Omnicare president David Azolina said in a statement. “In light of this ruling and many other issues facing our business, we are currently taking the necessary steps to move forward.”
What does omnicare do?
OmniCare offers specialized pharmacy services for long-term and acute care facilities. The company fills out and delivers prescriptions, provides clinical support and consultation, and manages medicines for facilities such as nursing homes and rehabilitation centers.
The company vows to restructure
Officials with CVS and OmniCare declined to comment on bankruptcy or legal issues. They directed all inquiries regarding OmniCare’s reorganization to the website.
The website says, “(Bankruptcy) does not mean that the business will go out of business.” “We are continuing to operate as usual and continue to devote ourselves to meeting the pharmacy needs of our customers and residents of long-term care facilities.”
CVS had previously considered selling OmniCare. In its annual report, the company determined that the business unit is “no longer a strategic asset” and plans to sell it in 2022. After the valuation, the company amortized a loss of $2.5 billion on assets in the division, and an additional $349 million was amortized in early 2023. The company decided to cancel the sale of OmniCare in late 2023 after a CVS official “deemed there is no longer a chance that the sale will be completed in the short term.”
Over the decades, Omnicare has grown in Cincinnati
The bankruptcy marks a new chapter for Omnicare, which became independent from Kemed in 1981, shortly after Kemed was separated from his former parent company WR Grace.
The company grew to the Fortune 500 through a series of acquisitions.
Cincinnati officials told Enquirer, part of the USA TODAY network, that they don’t know how many Omnicare workers have remained in Cincinnati since 2017, when the CVS acquisition reduced the company’s employees to 246. In 2020, the city received a $1.6 million clawback payment for OmniCare’s failure to maintain and create new jobs.
