Omnicare Files for Bankruptcy Following Massive Fraud Judgment
By a contributing business correspondent

Omnicare, once a proud Cincinnati-based Fortune 500 company, has filed for Chapter 11 bankruptcy protection in Texas, a move that comes on the heels of a staggering $949 million civil fraud judgment.

The company, now owned by CVS Health, is seeking to restructure or potentially sell off its specialty pharmacy services division.

CVS, which acquired Omnicare for $12.7 billion back in 2015, disclosed in a recent SEC filing that the bankruptcy process will be used to

“address other financial challenges” and explore “standalone restructuring or sale strategy” options.

A Billion-Dollar Blow

The bankruptcy filing follows a New York court ruling that found Omnicare liable for dispensing medications without valid prescriptions to elderly and disabled residents in long-term care facilities.

The jury concluded that between 2010 and 2018, the company submitted more than 3 million false claims to Medicare, Medicaid, and Tricare.

CVS has called the penalty “excessive,” and Omnicare is now seeking to appeal the verdict. In a statement, Omnicare President David Azzolina said,

“The court imposed an extreme and, we believe, unconstitutional penalty. Given that ruling and a number of other issues facing our business, we now are taking necessary steps to move forward.”

What Omnicare Does

Omnicare specializes in pharmacy services for long-term and acute care facilities, including prescription fulfillment, clinical support, and medication management for nursing homes and rehabilitation centers.

Despite the legal and financial turmoil, the company insists it’s business as usual. A restructuring website set up by CVS states,

“Bankruptcy does not mean that a business is shutting down. We are continuing to operate as normal and remain fully focused on meeting the pharmacy needs of our customers and long-term care residents.”

A History of Strategic Uncertainty

This isn’t the first time CVS has considered parting ways with Omnicare. In its 2022 annual report, CVS revealed plans to sell the unit, citing it was “no longer a strategic asset.”

That year, the company wrote off $2.5 billion in Omnicare-related losses, followed by another $349 million in early 2023. By late 2023, however, CVS reversed course, stating a sale was “no longer probable in the near term.”

Cincinnati Roots, Fading Presence

Omnicare’s journey began in Cincinnati in 1981, spun off from Chemed shortly after its separation from W.R. Grace.

Through aggressive acquisitions, the company climbed into the ranks of the Fortune 500.

But its local footprint has dwindled. By 2017, the workforce had shrunk to just 246 employees following the CVS acquisition.

In 2020, the City of Cincinnati received a $1.6 million clawback payment tied to Omnicare’s reduced presence.

Now, with bankruptcy proceedings underway and a billion-dollar judgment looming,

Omnicare faces an uncertain future, one that may soon be written by new owners or reshaped entirely through restructuring.    Click to Send your story to admin@usabilityclassifieds.com