CVS plans to sell Omnicare long-term care pharmacy business, saying

Woonsocket, RI-based CVS Health plans to sell its long-term care pharmacy business, Cincinnati-based Omnicare, reporting a $2.5 billion loss related to it in the third quarter, the company announced Wednesday.

“We continue to evaluate our portfolio strategically and are making decisions around assets that don’t fit into our portfolio strategically. Omnicare is a good example of that,” President and CEO Karen Lynch said Wednesday morning on the company’s third-quarter earnings call.

“The Company determined that its LTC business was no longer a strategic asset and during the third quarter of 2022 committed to a plan to sell the LTC business,” CVS said in a filing with the Securities and Exchange Commission on Wednesday, made in conjunction with the call.

Omnicare serves senior living communities, skilled nursing facilities and Programs of All-Inclusive Care for the Elderly (PACE).

For accounting purposes, Omnicare “met the criteria for held-for-sale accounting and the net assets were accounted for as assets held for sale,” the company reported Wednesday. “The carrying value of the LTC business was determined to be greater than its fair value and a loss on assets held for sale was recorded during the third quarter of 2022.”

In the third quarter, according to CVS, the company recorded a $2.5 billion pretax loss on assets held for sale to write down the company’s long-term care business in the current year, which partially was offset by the absence of a $431 million goodwill impairment charge on the remaining goodwill of the Omnicare unit recorded in the prior year.

2015 acquisition

CVS acquired Omnicare in 2015 for $10.4 billion plus the assumption of $2.3 billion in Omnicare debt, according to published sources. At the time, then-CEO Larry Merlo said that the purchase gave the retail pharmacy giant “access into a new pharmacy dispensing channel.”

Rumors of a possible Omnicare sale circulated in August 2020, when a CVS spokeswoman told McKnight’s Senior Living that it would be consolidating positions within the long-term care business. Some put the number of positions at stake at more than 700, although CVS did not confirm a specific amount.

“The healthcare industry is evolving as patients and clients change how they interact with service providers and as payer programs evolve,” Shelly Bendit, a senior communications consultant with CVS Health, said at the time. “We regularly evaluate all of our businesses to ensure that we are positioned to best serve our customers while running our operations as efficiently as possible.”

CVS had not publicly expressed an intention to leave the long-term care business at that point, but a few months earlier, in January 2020, Merlo had described the company’s experience with Omnicare as “disappointing.” In remarks during a J.P. Morgan Healthcare Conference session, he also noted…