CVS Health's Omnicare unit has started voluntary Chapter 11 bankruptcy proceedings as it navigates a series of legal challenges.
Earlier this year, a federal jury determined that Omnicare, which provides pharmacy services to long-term care facilities, submitted more than 3.3 million fraudulent prescription claims between 2010 and 2018. These claims filings garnered $135.6 million in federal overpayments.
As a result of the case, a New York judge ordered Omnicare to pay $948.8 million in fees and damages. As part of the bankruptcy process, Omnicare has entered into an agreement to secure $110 million in debtor-in-possession financing that it intends to deploy to meet its business obligations.
The company added that it plans "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."
CVS acquired Omnicare in 2015, and the jury determined that the parent company incentivized Omnicare to submit more than 1 million of these claims. The jury ruled there was no injury to the government related to those particular submissions.
The case against Omnicare was first filed that same year by a whistleblower, and the Department of Justice joined the case in 2019.
Omnicare's customers and patients will not see a disruption to their clinical or pharmacy services, according to the announcement. The company said it also expects to be able to continue to pay employee wages and benefits without an interruption, and it expects to pay vendors and suppliers in full for goods or services provided after the bankruptcy filing.
CVS said in July that it believes the hefty fine levied under the case to be "unconstitutional," and it reiterated that in the announcement. Omnicare President David Azzolina said the company "has a proud history of providing industry-leading, pharmacy and clinical care solutions to long-term care providers and their residents."
"Omnicare has been engaged in a civil lawsuit alleging technical violations of pharmacy law based on practices the government knew about and approved," Azzolina said in the statement. "There were no allegations of harm to any Omnicare patients nor did the government allege that any patient got anything other than the medicine they needed when they needed it."
"The District Court nevertheless imposed an extreme and, we believe, unconstitutional penalty," he continued. "Given that ruling and a number of other issues facing our business, we now are taking necessary steps to move forward and ensure the continued delivery of safe and reliable pharmacy service to our customers."