CVS Health is proceeding with layoffs that could exceed 700 employees within Omnicare, its long-term care pharmacy business, a source tells McKnight’s Senior Living. Some see the layoffs as a sign that Omnicare may be sold. CVS acquired the market’s largest institutional pharmacy company in 2015.

Although CVS did not confirm to McKnight’s Senior Living the number of employees who will be affected by the layoffs, the specific types of positions that will be affected or the exact timing of the layoffs, a spokesperson said that following a comprehensive review, CVS Health will be consolidating positions within Omnicare. 

“The healthcare industry is evolving as patients and clients change how they interact with service providers and as payer programs evolve,” said Shelly Bendit, a senior communications consultant with CVS Health. “We regularly evaluate all of our businesses to ensure that we are positioned to best serve our customers while running our operations as efficiently as possible.”

Workers whose employment is terminated will be offered severance packages. They also will be able to apply for open CVS Health positions, she said.

“This difficult decision was made following a thorough analysis of resources as we look to best meet the needs of our long-term care clients,” Bendit said.

The layoffs would represent a very small percentage of the CVS workforce. CVS employs approximately 300,000 people, according to a company profile. Omnicare had approximately 13,000 employees when it was acquired by CVS.

A former Omnicare employee, who declined to be named, told McKnight’s Senior Living that more than 700 employees — from the areas of account management, operations, clinical and nursing, and inside support — will be affected. In addition, all specialized assisted living pharmacies — CVS’s community care centers — will be shuttered within 18 months of opening, and all related leadership will be let go as of Aug. 28, the former employee said. Other layoffs reportedly were effective this week.

Thelayoff, an online discussion board where people discuss the likelihood or effects of layoffs at companies, contains multiple conversation threads mentioning August layoffs at Omnicare, as well as a restructuring process. CVS held a conference call with employees earlier this week, according to posts there and on Reddit.

Experience with Omnicare ‘disappointing’

CVS Health has not publicly expressed an intention to leave the long-term care business.

In January, CVS Health CEO Larry Merlo described the company’s experience with Omnicare as “disappointing” during a J.P. Morgan Healthcare Conference session. In those remarks, he also noted that the skilled nursing space was “challenged” and that people’s desire to convalesce at home was continuing to affect demand for long-term institutional pharmacy services.

“We continue to see the opportunity in the growth of assisted and independent living, and that’s where our focus remains,” however, he said at the time, according to a transcript.

Just last week on a second-quarter earnings call, CVS executives noted that the COVID-19 pandemic has “substantially affected” Omnicare and the company’s long-term care presence overall.

“As you look at the industry challenges, we’ve seen admissions down about 20 percent and some facilities continuing to not accept new patients, but not be shut down per se,” CVS Health Vice President and Chief Financial Officer Eva Boratto said at the time.

The company reported that total revenues for its retail / long-term care segment, which includes Omnicare, increased by 1% during the second quarter, but the gains were partially offset by continued reimbursement pressure, the impact of recent generic medication introductions, lower front store revenues and decreased long-term care prescription volume.

But Merlo told those on the earnings call that the company would be “well-positioned” to serve long-term care when a COVID-19 vaccine became available.

Legal actions costly

Long-term care-related legal actions also have cost the company money.

In May, for instance, Omnicare agreed to pay a $15.3 million civil penalty to settle allegations that it violated federal law by allowing opioids and other controlled substances to be dispensed without a valid prescription.

Omnicare denied the allegations but settled the lawsuit “to avoid the expense and uncertainty of potential litigation,” a company spokesman told McKnight’s Senior Living at the time.

Omnicare also is fighting an accusation that it fraudulently billed federal healthcare programs for “hundreds of thousands” of “stale” or invalid prescriptions for residents at more than 3,000 senior living communities. Omnicare and CVS previously said they would “vigorously defend” themselves in the federal civil suit, which is ongoing.

“We are confident that Omnicare’s dispensing practices will be found to be consistent with state requirements and industry-accepted practices,” CVS told McKnight’s Senior Living in December.

CVS is headquartered in Woonsocket, RI, and Omnicare corporate offices are in Cincinnati. Neither state had posted a notice of a mass layoff as of Aug. 14.