For Now, CVS To Keep Omnicare Long-Term Care Pharmacies

CVS Health isn’t ready to sell its Omnicare long-term care pharmacy business because executives see potential in an aging U.S. population with complex prescription needs.

Wall Street analysts are beginning to question whether Omnicare is still “strategic to the company” following CVS’ disclosure Wednesday that the long-term care business triggered a “$2.2 billion goodwill impairment charge.” That news was the latest in a series of challenges for the long-term care pharmacy business since CVS bought Omnicare in 2015 in a deal valued at nearly $13 billion.

CVS acknowledged the long-term care business continues to grapple with “industry wide challenges” that have kept Omnicare from living up to a growth rate the company had hoped for. “These challenges include lower occupancy rates in skilled nursing facilities, significant deterioration in the financial health of numerous skilled nursing facility customers which resulted in a number of customer bankruptcies in 2018, and continued facility reimbursement pressures,” CVS said in its fourth quarter 2018 earnings report.

But there remains a booming market of seniors moving into assisted living and independent living facilities that are also served by Omnicare and that remains a growth opportunity and CVS executives are bullish.

“The growth opportunity with Omnicare was always focused on the independent and assisted living spaces,” CVS CEO Larry Merlo told analysts. “And those opportunities still exist. And they’re consistent with our strategy of putting the customer at the new place of transforming care.”

When CVS purchased Omnicare, the drugstore giant wanted to expand in the growing business of dispensing and managing prescriptions for the booming number of Americans taking specialized drugs. Increasingly, Americans are taking more expensive biologics beyond pills and capsules and they require specialty pharmacies to dispense them, working with an array of providers, particularly for an aging population in assisted living and long-term care facilities.

“As you look at the Omnicare business, don’t lose sight of there was a specialty component of that business, which has been fully integrated and quite successful for the business,” Merlo said. “So, I don’t want to lose that element of the acquisition.”

https://www.forbes.com/sites/brucejapsen/2019/02/21/cvs-wants-omnicare-pharmacies-to-target-assisted-living-market/#5c529ba3502b