CVS Seeks Seniors, Specialty Pharmacy In $12.7B Omnicare Deal

In a deal that expands CVS Health’s presence in the rapidly growing specialty pharmacy and long-term care business, the drugstore giant said it would buy Omnicare (OCR) for $12.7 billion.

The deal, which includes $98 per share in cash and assumption of $2.3 billion in debt gives CVS (CVS) 160 Omnicare locations in 47 states across the U.S. where the drugstore giant can expand in the growing business of dispensing and managing prescriptions for the booming number of Americans taking specialized drugs. Increasingly, more Americans are taking more expensive biologics beyond pills and capsules and they require specialty pharmacies to dispense them, working with an array of providers, particularly for an aging population in assisted living and long-term care facilities.

"The acquisition of Omnicare significantly expands our business, providing CVS Health access into a new pharmacy dispensing channel," said CVS Health President and CEO Larry Merlo. "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.”

The deal comes a week before rival Walgreens Boots Alliance (WBA) has its first annual shareholders meeting as a much larger company after Walgreens merged with European drugstore giant Alliance Boots. Interim CEO and large shareholder Stefano Pessina has also hinted that Walgreens may have to do more deals and consolidate the U.S. pharmacy market.

In the U.S., the government has expanded health insurance under the Affordable Care Act by expanding Medicaid coverage to more poor Americans and subsidized coverage to eligible uninsured people via private insurance companies. And all of these health insurance programs as well as the private sector are moving to new reimbursement models for doctors, hospitals and pharmacies and triggering consolidation across the health care industry.

Under the ACA, payments are more based on quality and costs, moving health care payment away from the traditional fee-for-service approach that leads to overtreatment to value-based medicine. Pharmacies are more involved in coordinating care and have to keep a close eye on costs, urging use of cheaper generics while helping providers adhere to more effective and often less costly medicines.

Omnicare president and chief executive officer Nitin Sahney said the deal will enhance the ability of the combined companies to "care for complex patient populations."

Wondering how Obamacare will affect your health care and pharmacy? The Forbes eBook Inside Obamacare: The Fix For America’s Ailing Health Care System answers that question and more. Available now at Amazon and Apple.

Also on Forbes: