Omnicare Inc., a subsidiary of CVS Health Corp., has initiated Chapter 11 bankruptcy proceedings in Texas. The pharmacy-services provider filed for court protection on Monday, listing assets of at least $100 million and liabilities ranging between $1 billion and $10 billion. This significant move comes after Omnicare was ordered to pay a substantial $949 million civil judgment stemming from claims of improperly dispensing prescription drugs to individuals within long-term care facilities. While the company challenges this judgment, it is currently listed as Omnicare’s largest unsecured debt.

To ensure continuity of its operations throughout the bankruptcy process, Omnicare has secured $110 million in Chapter 11 financing. This, combined with the ongoing cash generation from its business activities, is expected to provide sufficient liquidity to meet its business obligations. The company stated that the Chapter 11 filing provides a critical window to evaluate options for resolving the judgment and to address wider financial challenges impacting the long-term care pharmacy industry.

Omnicare’s decision to seek court protection followed an inability to reach a settlement with government authorities. According to Matthew Frank, Omnicare Co-Chief Restructuring Officer, the company received no assurance that the U.S. government would not immediately begin enforcement actions concerning the judgment. Beyond the legal battle, Omnicare has been grappling with considerable financial pressures from broader economic trends adversely affecting operators of long-term care facilities. These challenges include a tightening job market, a decline in reimbursement rates, and a general shift towards outpatient care, leading to reduced use of long-term care facilities.

Further compounding its financial strain, several of Omnicare’s own clients—long-term care facility operators such as Genesis Healthcare, Petersen Health, and LaVie Care Centers—have also filed for Chapter 11 bankruptcy in recent years. These bankruptcies have resulted in significant lost revenue and substantial bad accounts receivables for Omnicare, which holds approximately $50 million in unsecured claims in these cases, with only LaVie remaining as a client.

The $949 million judgment itself originated from a whistleblower lawsuit filed in 2015 by a former Omnicare pharmacist based in New Mexico. The government later intervened in the case in 2019. In August, a federal judge denied Omnicare and CVS’s request to overturn the judgment following an earlier jury trial. The bankruptcy filing is anticipated to pause government efforts to collect on this judgment.

Despite these significant legal and financial hurdles, Omnicare has affirmed its commitment to its customers and the residents of long-term care facilities. The company asserts it remains fully focused on meeting pharmacy needs and will continue to provide safe and reliable services without disruption. Customers and patients are assured that they can expect uninterrupted access to pharmacy and clinical services during this court-supervised process. The case is filed as Omnicare LLC, number 25-80486, in the US Bankruptcy Court for the Northern District of Texas.