Dive Brief:
CVS pharmacy services subsidiary Omnicare has filed for Chapter 11 bankruptcy after being hit with a $949 million federal judgment over improper billing of government healthcare programs.
Omnicare claimed up to $500 million in assets and between $1 billion and $10 billion in debts in its bankruptcy petition with a Texas court on Monday.
Omnicare has brokered an agreement to receive $110 million in debtor-in-possession financing, a type of loan which it expects will allow it to continue operating through the bankruptcy process, the company said.
Dive Insight:
In July, a federal judge ordered Omnicare to pay $948.8 million in penalties and damages after determining that the company, which provides pharmacy services to long-term care and post-acute facilities, illegally charged the U.S. government for prescription drugs. The decision, which CVS said it planned to appeal, sent Omnicare reeling — the business reportedly hired a consulting firm to help bolster operations, according to Bloomberg.
Omnicare is now seeking the protection of Chapter 11, which is likely to pause efforts from the government to collect the $949 million payment. The bankruptcy will help Omnicare reorganize its finances, which could include a potential sale, the company said in press release Monday.
“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 said.
Omnicare intends to continue providing services to its customers and said that the bankruptcy should not affect regular operations, including wages to employees.
Editor’s note: This is a developing story and will be updated.
