Almost four years after
CVS Health Corp. spent nearly $13 billion to acquire Omnicare, the
long-term-care (LTC) pharmacy business attracted negative attention as a major
contributor to "headwinds" in the company’s report on fourth quarter
and full-year 2018 financial results.
For the quarter ended
Dec. 31, CVS Health reported a net loss of $421 million on revenues that
increased 12.5% to $54.4 billion year over year. Losses reflect $2.2 billion in
quarterly and $6.1 billion in full-year 2018 "goodwill impairment
charges" related to its LTC business, the company said.
"The Omnicare deal
made good strategic sense," says Adam Fein, Ph.D., president of Pembroke
Consulting, Inc. and CEO of Drug Channels Institute. "CVS gained a strong
position in LTC [long-term care] while also augmenting its already significant
specialty pharmacy business."
"However," Fein
adds, "CVS Health has become a very complex and highly diverse
organization. It has struggled against the smaller, nimble local competitors
within the LTC industry."
CVS Health blames
"industrywide challenges" in LTC pharmacy as affecting its ability to
grow the business at the rate originally estimated when it acquired Omnicare.
"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," the company says.
As a result, a goodwill
impairment charge of $3.9 billion was recorded during the second quarter of
2018, CVS Health said.
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