Bloomberg News

Omnicare Sued by FTC to Block Takeover of Rival PharMerica

January 29, 2012

(Updates with FTC official’s comment in third paragraph.)

Jan. 27 (Bloomberg) -- Omnicare Inc. was sued by the U.S. Federal Trade Commission to block its $440.8 million takeover of rival drug-supply company PharMerica Corp., a deal that regulators said would hurt competition and increase drug prices.      Omnicare’s unsolicited bid for the Louisville, Kentucky, company would boost medicine prices for Medicare Part D health plans that are responsible for providing drug benefits for nursing home residents and other beneficiaries, the FTC said in a statement today.

“If Omnicare is allowed to purchase its biggest and only national competitor, it will diminish competition and raise health care costs, leaving taxpayers and patients to foot the bill,” said Richard Feinstein, director of the FTC’s bureau of competition, in a statement.

The combined companies would be able to control as much as 60 percent of the market to distribute drugs to nursing homes, hospitals and hospices, said Jeff Jonas, an analyst with Gabelli & Co. in Rye, New York.

Omnicare fell less than 1 percent to $33.05 at the close of New York trading. PharMerica declined less than 1 percent to $14.30.      The deal offers an opportunity to save money through automation and scale, Covington, Kentucky-based Omnicare CEO John Figueroa said when it was announced in August. Omnicare is trying become more efficient amid U.S. cuts to health-care spending, he said.

Initial Rejection

     PharMerica initially rejected the offer, saying Omnicare would save more money through efficiency than was reflected in the $15-a-share bid price, said Gregory Weishar, PharMerica’s chief executive officer.

The deal had a value of $716 million including net debt, Omnicare said when announcing the takeover bid in August.

“It undervalues PharMerica,” Weishar said Jan. 12 at the J.P. Morgan Chase Health Care Conference in San Francisco. “Reasonable success in executing our growth strategy will lead to greater shareholder value than the $15.”

The FTC in 2005 allowed Omnicare’s takeover of NeighborCare, saying that the company had many rivals in local areas and that the institutional pharmacy market was easy to enter. The commission also dismissed a concern that the Medicare Modernization Act would allow Omnicare to get above-market rates by coordinating with prescription drug plans.

--Editors: Justin Blum, Fred Strasser

To contact the reporter on this story: Sarah Frier in New York at sfrier1@bloomberg.net

To contact the editors responsible for this story: Reg Gale at rgale5@bloomberg.net; Steven Komarow at skomarow1@bloomberg.net


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