CVS’s Omnicare acquisition signals specialty drug expansion

CVS Health’s acquisition of Omnicare for $12.7 billion is expected to significantly expand the drug chain’s business in specialty pharmacy, generics and long-term care.

Omnicare, the leading provider of pharmacy services to long term care facilities and the eighth largest specialty pharmacy, has around 13,000 employees at 160 locations in 47 states. “Omnicare's complementary specialty pharmacy platform and clinical expertise will augment CVS Health's capabilities and enable CVS Health to continue to provide innovative and cost-effective solutions to patients and payors,” according to a statement from CVS Health.

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“In the short-term, the biggest benefit from the Omnicare deal is increased generic and specialty scale,” Paul Burns, principal and Atlanta local practice leader for Buck Consultants at Xerox, told FormularyWatch. “This will expand CVS’ specialty revenue and enhance their services within the rheumatoid arthritis, growth hormone and mutiple sclerosis classes.”

Edward Buthusiem, managing director of Corporate Compliance & Risk Management Advisory Services for Berkeley Research Group in Philadelphia, Pa., agreed that the specialty pharmaceutical sector – along with generics –  is where CVS will realize the greatest growth and cost savings.

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“CVS's acquisition of Omnicare will better enable the combined entity to control the costs of specialty drugs by leveraging their entire retail and mail order purchasing power. Similarly, the addition of Omnicare's generic purchasing power will better enable CVS to obtain more favorable pricing [and possibly greater dispensing fees] from generic manufacturers,” Buthusiem said.

CVS Health President and CEO Larry Merlo acknowledged that the acquisition provides CVS Health access into a new pharmacy dispensing channel. "It also creates new opportunities for us to extend our high-quality, innovative pharmacy programs to a broader population of seniors and chronic care patients as they transition across the care continuum,” Merlo said.

CVS Health expects to achieve significant purchasing and revenue synergies as well as operating efficiencies from this combination. The company expects the transaction to be approximately 20 cents accretive to adjusted earnings per share in 2016, its first full year.

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