Weighed Down by Alleged Fraud, CVS’s Omnicare Files for Bankruptcy
Omnicare’s downfall shows how health insurances' vertical integration bet collides with patient safety and accountability.
CVS’s subsidiary Omnicare has collapsed under the weight of its own alleged misconduct. Earlier this week, the long-term care pharmacy filed for Chapter 11 bankruptcy protection after being ordered to pay nearly $1 billion in penalties for filling prescriptions that were expired or out of refills, then billing Medicare and Medicaid as if nothing was wrong.
The judgment stems from years of fraud allegations. The Department of Justice accused Omnicare of dispensing drugs on “stale, invalid prescriptions” from 2010 to 2018, allowing patients — many elderly and in nursing homes — to take powerful medications.
Federal prosecutors said this put thousands of vulnerable patients at risk, as many of the drugs that were dispensed treated heart disease, dementia and depression – which need to be monitored by a physician.
This isn’t Omnicare’s first brush with scandal. In 2016, it paid $28 million to settle kickback claims. Two years earlier, it paid $124 million over similar allegations. But the latest case proved fatal for the bruised company. The $949 million judgment became Omnicare’s largest unsecured debt, forcing CVS’s hand. In its filing, the company listed up to $10 billion in liabilities against just $500 million or less in assets.
Of course, executives insist no patients were harmed and call the penalty “extreme” and “unconstitutional.”
After scooping up Aetna in 2018, CVS joined other large, vertically integrated health insurers that have bought their way into patient care, pharmacy supply and other aspects of the health care system. Last summer, my non-profit, the Center for Health & Democracy, published the Sunlight Report on UnitedHealth Group, which detailed, for the first time, the vast corporate structure of what has become the third largest corporation in America thanks to the thousands of health care delivery operations it has bought in recent years.
Earlier this week on The Real Eisman Playbook, Steve Eisman, a Wall Street investor famous for predicting the 2008 financial crisis (and who was played by Steve Carell in The Big Short), and Michael Ha, a Wall Street analyst specializing in the managed care industry, noted that UnitedHealth may be in so much turmoil right now because it’s gotten too big after citing the Sunlight Report’s findings.
Ha: “He (Potter) published a report looking at the number of subsidiaries in UnitedHealth, and I believe it was about 140 over a decade ago and today it’s like 2,700 different subsidiaries.”
Eisman answers: “You know maybe part of the problem with this is company is… its now so complicated… even the managers may not completely understand whats going on.”
And I’d wager the same thing goes for CVS and its sprawling subsidiaries.
For CVS, the bankruptcy marks another black eye. The company once believed that Omnicare would be a huge win. Instead, it became a drag and a cautionary tale of what happens when corporations expand beyond their means.
When my mother needed assisted living care, the facility required using Omnicare as the pharmacy at a charge of $300 a month just for using them - didn't include the cost of the drugs themselves. This was all justified as being efficient because Omnicare sent scrips in blister packs making it easy to administer i.e. take less time for aides to administer. I read up, researched Omnicare and found info on lawsuit after lawsuit and presented them to the director of the facility asking him if he really expected me to pay $300 a month for such an incompetent pharmacy service when I could pick up my mother's scripts for $20 a month or less at a grocery store pharmacy. He agreed with me and waived the Omnicare requirement. I'm not at all surprised by Omnicare's failure given what I read and grateful my mother didn't have to suffer at their hands.
WOW!!!!!