Omnicare, a subsidiary of CVS Health, has initiated a voluntary court-supervised Chapter 11 process to resolve issues related to its recent litigation in the U.S. District Court for the Southern District of New York. The company also intends to use this process to address other financial challenges facing the broader long-term care pharmacy industry and to evaluate its restructuring options, including the implementation of a standalone restructuring or sale strategy.
“Omnicare has a proud history of providing industry-leading, pharmacy and clinical care solutions to long-term care providers and their residents. Omnicare has been engaged in a civil lawsuit alleging technical violations of pharmacy law based on practices the government knew about and approved. There were no allegations of harm to any Omnicare patients nor did the government allege that any patient got anything other than the medicine they needed when they needed it,” David Azzolina, president of Omnicare, said. “The District Court nevertheless imposed an extreme and, we believe, unconstitutional penalty. Given that ruling and a number of other issues facing our business, we now are taking necessary steps to move forward and ensure the continued delivery of safe and reliable pharmacy service to our customers.”
Azzolina continued, “Supporting our customers and residents is our top priority. As we move through this process, we remain fully committed to providing optimal care for the residents and customers we serve. We are grateful to our facility and senior living community partners for their continued support. I want to thank the entire Omnicare team for their unwavering dedication and passion they bring to delivering the high level of service and clinical expertise that sets Omnicare apart.”
In connection with this process, Omnicare has entered into an agreement for $110 million in debtor-in-possession (DIP) financing. Upon court approval, Omnicare expects this financing, along with cash generated from operations, will provide sufficient liquidity for Omnicare to meet its ongoing business obligations during the court-supervised process.
Omnicare is filing a number of customary motions seeking court authorization to continue to support its ongoing operations during the court-supervised process. Subject to approval of these motions, Omnicare expects to uphold its go-forward commitments to its stakeholders, including continued payment of employee wages and benefits without interruption. Omnicare fully expects to pay vendors and suppliers in full under normal terms for goods and services provided after the filing date.
Jenner & Block and Haynes Boone are serving as legal counsel, Houlihan Lokey is serving as investment banker and Alvarez & Marsal is serving as restructuring advisor to Omnicare.
