newratings.com  Aug 11  Comment 
WOONSOCKET (dpa-AFX) - CVS Health Corp. (CVS) announced that it has completed the acquisition of Omnicare, a provider of pharmacy services to long term care facilities, for a total enterprise value of approximately $12.9 billion. In May 2015,...
Benzinga  Jul 27  Comment 
In a report published Monday, JP Morgan analyst Lisa C. Gill downgraded the rating on Omnicare, Inc. (NYSE: OCR) from Overweight to Neutral, while raising the price target from $90 to $98. The analyst believes that there is limited upside to the...
Benzinga  Jul 27  Comment 
newratings.com  Jul 24  Comment 
WOONSOCKET (dpa-AFX) - Omnicare Inc. (OCR) reported that its net income for the second-quarter rose to $33.97 million from last year's $21.97 million, with earnings per share improving to $0.32 from $0.21 in the previous year. Adjusted cash...
Market Intelligence Center  Jul 13  Comment 
Omnicare Inc. (OCR) presents a trading opportunity that offers a 2.10% return in just 158 days. A covered call on Omnicare at the $90.00 level expiring on Dec. '15 offers an assigned return rate of 2.10% or 4.85% annualized. This trade offers...
Market Intelligence Center  Jun 23  Comment 
After closing Monday at $94.19, Omnicare Inc. (OCR) presents an attractive opportunity to get a 2.63% return in just 178 days, which is an annualized return of 5.40% (for comparison purposes only). To enter this trade, sell one Dec. '15 $90.00...
TheStreet.com  Jun 15  Comment 
CORRECTION: Corrects the name of the IBISWorld analyst in the 12th paragraph.NEW YORK (The Deal) --Late last year Larry Merlo changed the name of CVS Caremark to CVS Health  and removed cigarettes from company retail outlets. The switch was...
Benzinga  Jun 4  Comment 
In a report published Thursday, Goldman Sachs analyst Stephan Stewart downgraded the rating on Omnicare, Inc. (NYSE: OCR) from Buy to Neutral, while maintaining the $92 price target. The analyst believes that the key catalyst for the stock has...


Omnicare, Inc. (NYSE:OCR) is a pharmaceutical services provider for senior citizens who are live in nursing homes and assisted-living centers in the United States and Canada. The company is the largest service provider to long term care facilities (LTC) in both beds, with 1.4 million in 47 states and approximately 68,000 patients.[1] Its pharmacies provide prescription drugs and pharmaceutical consulting services to geriatric institutions located within a 150-mile radius. Omnicare has used its relationships with nursing homes to serve as a contract research organization (CRO) to conduct clinical trials in 27 countries for pharmaceutical and biotechnology companies.

Omnicare will see an increase in generic drugs that will benefit the company. The expiration of several key patent drugs that is used in the elderly committees, including anti-psychotics and Alzheimer medication, will allow distributors to generate both higher profit margins and higher total sales by volume. In addition, changes in health care policy--especially Medicare Part D--can result in larger volume of drugs being purchased. Omnicare benefits from the legislation because the majority of its clients are elderly covered under both Medicaid and Medicare, and the company is now able to negotiate separately with private plans paying higher prices.

However, Omnicare has suffered a series of set backs involving legal issues. Most notably, the company was charged with Medicaid fraud for deliberately switching patients to drugs that generated better margins for Omnicare[2]. One particular case resulted in Omnicare having to pay out $49.5 million for drugs they overcharged to elderly[3].

Company Overview

Started in 1981, the company has since risen to be the largest provider in pharmaceuticals for senior citizens in long term care facilities, independent communities, and etc. in both beds provided, and by revenue generated. In 2005, Omicare became the top pharmaceutical service provider for senior citizens after it bought NeighborCare Inc. for approximately $1.8 billion dollars.

Business and Financial Metrics

In 2009, Omnicare earned a total of $6.17 billion, a small decrease from the previous year's revenues of $6.31 billion. Despite this decrease in its total revenues, its net income actually increased from $156 million in 2008 to $212 million in 2009.

Business Segments

The Company is divided into two divisions: The Pharmacy Service segment and the Clinical Research segment

Pharmacy Services (97.5% of 2009 Revenue)

Omnicare pharmaceutical segment oversees all aspects of the distribution process, from acquisition to administration. They purchase prescription and non-prescription medication according to physician orders, and delivers them to skilled nursing facilities (SNFs), assisted living facilities (ALF’s), retirement centers, independent living communities, hospitals, hospice, other healthcare settings and service providers in both U.S. and Canada. OCR operates on a unit-of-use drug distribution system, designed so that patients take the right dose, at the right time. This differs from common prescriptions filled by retail pharmacies such as CVS (CVS) or Walgreen Company (WAG), which usually sells medicine in a bottle or in bulk. Additional service, Omnicare provides computerized medical record-keeping and third-party billing for residents in these facilities.

Aside from the basic coverage, Omnicare also provides services to meet specialized needs for long-term care patients. For example, Omnicare provides intravenous (IV) products and services or many home and hospice, in addition to the long-term care facilities. OCR LTC facilities include an unique "Outcomes Algorithm Technology," that quickly identify any inappropriate treatment so pharmacist can react quickly to under treatment or over treatment. For retirees, employees and dependents who have drug benefits under corporate-sponsored healthcare programs, the company provides pharmaceutical case management services.

In 2009, this segment earned $6.0 billion in total revenues.[4]

Clinical Research (2.5% of Revenue)

Omnicare's contract research organization (CRO) segment provides biotechnology, product research and development for the pharmaceutical, medical device and diagnostic industries in 30 countries. The company has decided to increase CRO with emphasis on biotech. The importance of Omnicare's CRO segment is to forge working relations with other biotech and pharmaceutical manufactures. They used their relationships with nursing homes to serve as a contract research organization (CRO) to conduct clinical trials for these pharmaceutical and biotechnology companies. They are also the leading industry in geriatrics research, which focuses on the well-being and new drug development for the elderly. Like many other CROs, Omnicare processes an experienced therapeutic program that focuses on major health concern, such as cardiovascular and musculoskeletal, in senior citizens.

In 2009, this segment earned $157 million in total revenues.[5]

Key Trends and Forces

Aging Population increase need for Health Care and LTC

In the United States, an aging population known as the baby boomers have all surpassed 44 with some turning 62. These baby boomers account for 25% of the U.S. population, disregarding the 12.7% who are already over the age of 65. It has been noted that the consumption pattern for these baby boomers are drastically different than the average consumer today. Their consumption average of consumer products are higher than the younger generation. The U.S. Census Bureau estimate by 2040, the number of senior citizens age 65 and over will double to 80 million[6]. In the United States, senior citizens over 65 face a 40% chance of enlisting in a nursing home for Long Term Care services[7]. This in turn benefits Omnicare because it is known for being the largest provider for LTC facilities and senior citizens.

Patent Expiration Benefit Omnicare

Omnicare, being an LTC pharmacies, benefits from expired patent drugs entering the generic market. When a drug is on patent, LTC pharmacies are reimbursed by Medicare through the Average Wholesale Price benchmark (benchmark used to negotiate reimbursement rates)[8]. Thus when a drug enter the generic market, Omnicare is able to deal with different suppliers of the same drug and buy it for the lowest possible price.

Many drugs have already gone generic since 2008 and more patents are expiring in 2010. The most important of these drugs are antipsychotic (Janssen Pharmaceutical - Risperdal), antiepileotic (GlaxoSmithKline, Abbott Laboratories, etc. - Anti-psychotics) and Alzheimer's medication (Pfizer - Aricept), in which over 50% of Omnicare's clients are being treated with[9]. It is estimated, in Credit Suisse report, that at least $16 billion of patent drugs in just these three categories alone are expected to join the generic market[10].

Market Share & Competiton

Omnicare Inc. and PharMerica Corp. were the main providers of institutional pharmacy services in the United States. The two companies accounted for 95% of the total revenue generated in the industry, totaling approximately $7.3 billion. Omnicare's $6.02 billion in revenue accounted for 80% of the total market share, and PharMerica's $1.2 billion accounted for the other 15%. The remaining 5% of valued is shared by companies such as Chem Rx (the third largest competitor at 4% total market share).

  • Chem Rx Corporation - The third largest provider of institutional pharmaceutical services. The company uses a "third party delivery system" to provide for approximately 65,000 beds in 400+ institutions.


  1. OCR 10-K 2009 Item 1 Pg. 4
  2. Medical News 2006
  3. NY Times 2006
  4. OCR 10-K 2009 Item 7 Pg. 64
  5. OCR 10-K 2009 Item 7 Pg. 65
  6. CS 2008, Link 2
  7. [1]
  8. Credit-Suisse 2008 Pg.09
  9. Credit-Suisse 2008, Pg.10
  10. Credit-Suisse 2008, Pg. 09
  11. Business Week 2008
  12. Business Week 2008
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