Contact

Payer

Pharma

Provider

Formulary guidance and transparency from P&T to point of care

Radar On Market Access: What Is Behind CVS Health’s LTC Woes?

Posted by Judy Packer Tursman on Mar 7, 2019

new-blog-image-payer

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, AIS Health reported.

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.


Subscribe to the MMIT blog for more pharma, provider, and payer perspectives on key topics that affect the healthcare network.

Subscribe for Weekly Perspectives

Topics: Data & Analytics, Industry Trends