CVS is buying more than an LTC pharmacy; they are buying the “big picture”

Today’s news that CVS Health Corporation (NYSE: CVS) will acquire Omnicare, Inc. (NYSE: OCR) is exciting for a guy like me who has managed both outpatient and long term care (LTC) pharmacy operations and is now in an academic role trying to tie everything together. CVS stated in their press release that this “…will significantly expand its ability to dispense prescriptions in assisted living and long term care facilities, serving the senior patient population. CVS Health will also expand its presence in the rapidly growing specialty pharmacy business.”[1] While growing prescription volume is all well and good, this deal means a whole lot more to me.
CVS eating Omnicare2

Most people are familiar with community pharmacies like CVS or Walgreens (NYSE: WAG) who provide care and dispense medications to patients at home. LTC pharmacies, such as Omnicare, primarily service skilled nursing facilities (SNFs) and assisted living facilities (ALFs). When patients require more assistance than what is available at home, they often end up being admitted to one of these types of facilities. There are operational differences between typical retail pharmacies and LTC pharmacies that typically prevent a retail pharmacy from taking on a large segment of LTC business. In addition to basic operational differences, these LTC pharmacies also handle different regulatory and practice nuances that can be quite challenging. A great example is with the dispensing of controlled substances.[2]

Continuum of Care

Over five million patient transfers occur between hospitals and these LTC facilities each year, making the “transition” an area where many challenges occur.[3] This move by CVS to acquire the largest LTC pharmacy operation in the United States signifies to me that they are ready to tackle some of the challenges that exist in order to capitalize on a much bigger picture: population health. CVS Health already controls one of the largest pharmacy benefit management (PBM) networks in the US, CVS/caremark, so they understand the payer perspective well. By operating in both retail and LTC spaces, CVS Health will be able to provide care to a large percentage of patient discharges from the hospital and become the leader in post-acute care. This will also provide leverage to negotiate with hospitals across the country to develop partnerships to help acute care facilities achieve quality goals (e.g. reduced readmission, increased medication adherence).

While this still could be a narrowly minded business decision to capture prescription revenue, deep down I truly believe that Larry Merlo understands where the health care system is going and this is a much bigger play for CVS Health than volume of prescriptions.

 

References:

  1. CVS Health and Omnicare sign definitive agreement for CVS Health to acquire Omnicare. Newsroom. CVS Health. Available at: http://www.cvshealth.com/newsroom/press-releases/corporate-info-events/cvs-health-and-omnicare-sign-definitive-agreement-cvs, accessed on May 21, 2015.
  2. Mattingly II TJ. Rescheduling of combination hydrocodone products: problems for long-term care practitioners. The Consultant Pharmacist. 2015;30:13-17.
  3. King BJ, Gilmore-Bykovskyi AL, Roiland RA et al. The consequences of poor communication during transitions from hospital to skilled nursing facility: a qualitative study. J Am Geriatr Soc. 2013;61:1095-102.
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Joey
Joey Mattingly, PharmD, MBA is an assistant professor at the University of Maryland School of Pharmacy located in Baltimore, Maryland. Joey has managed retail and long-term care pharmacy operations in Kentucky, Illinois and Indiana. Leading Over The Counter is a blog of Joey's views and opinions on the topics of pharmacy leadership and management and do not represent the University of Maryland, Baltimore. Joey can be followed on Twitter @joeymattingly.

One Response to “CVS is buying more than an LTC pharmacy; they are buying the “big picture”

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