CVS’ Omnicare files for bankruptcy after $949M judgment
Omnicare, a subsidiary of CVS Health, has filed for Chapter 11 bankruptcy two months after it was ordered to pay $949 million, having been found liable in federal court for filing millions of fraudulent claims for unnecessary prescription drugs.
The company filed its bankruptcy petition Monday, citing upwards of $10 billion in debts—far more than its $500 million in assets. In a subsequent announcement, CVS Health said it is seeking either a court-ordered restructuring of its business—or a sale, assuming it can find a buyer.
Omnicare said it plans to continue to operate as normal during the proceedings, meaning its pharmacy operations will be uninterrupted. The company stated that it was able to earn $110 million in “debtor-in-possession” financing, which will be subject to court approval.
It added that it will continue to pay employees and vendors as normal, without interruption. Notably, Omnicare’s pharmacy services mostly support long-term care facilities such as nursing homes.
As for its $949 million judgment—$542 million in restitution and a $407 million penalty—bankruptcy will likely pause the collection efforts from the government. It’s unclear how much of that fine will be paid, as details will be worked out during bankruptcy proceedings.
3.3 million false claims
In May, a jury found that Omnicare was guilty of upcoding and submitting some 3.3 million claims to insurance companies from 2010 to 2018. The lawsuit was brought by a former employee-turned-whistleblower in 2015, with the U.S. Department of Justice joining in 2019 to move the case forward.
The $948.8 million judgment was upheld in July, with a judge denying the company's request for a new trial. At the time, Omnicare argued the penalty violated the Eighth Amendment of the U.S. Constitution, which forbids the government from imposing excessive fines.
Notably, CVS purchased the company in 2015, meaning incidents of fraud were taking place before its takeover.
It’s not clear if the company intends to appeal the decision to a higher court.
Chad is an award-winning writer and editor with over 15 years of experience working in media. He has a decade-long professional background in healthcare, working as a writer and in public relations.