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CVS seeks to buy Omnicare

Annie Baxter May 21, 2015
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If you’re in the business of filling and managing prescription drugs, you probably want to get as close as possible to some of your potentially biggest customers: folks in nursing homes.

No surprise, then, that CVS Health is snapping up Omnicare, the nation’s leading provider of pharmacy services for long-term care facilities. The deal, valued at nearly $13 billion, including debt, is subject to shareholder and regulatory approval.

“This is a really strategic deal for CVS Health,” says Dan Mendelson, chief executive of the consulting company Avalere Health.

Mendelson says with the American population aging, it makes sense for CVS to want a foothold in the markets served by Omnicare, which has 160 locations in 47 states.

“The seniors in these facilities are sometimes taking upwards of 10 medications,” Mendelson says.

When those medications don’t mix well together, or when people take too little or too much of a medication, they can get really sick and even die. CVS could help seniors in long-term care avoid those health disasters, says Joel Hay, Professor of Pharmaceutical Economics and Policy at the University of Southern California. 

Hay says CVS has sophisticated systems to manage drug use.

If they can bring these into the long-term care arena, senior living arena, there’s a very good opportunity to dramatically improve health,” he says.

CVS might also be able to use the greater economies of scale from its acquisition of Omnicare to buy drugs at cheaper prices. It will get more customers, after all, says Albert Wertheimer, a professor of Temple University’s School of Pharmacy. But Wertheimer doubts CVS would actually pass those cost savings to its customers.

“Well, that would be nice,” he says, “but I’ve learned to be skeptical over the years.”

Wertheimer says the more likely beneficiary would be CVS’s own bottom line.