Despite COVID Revenue Hit, Omnicare’s President Sees Stronger Future for Long-Term Care Pharmacies

James Love took the top post at one of the nation’s leading long-term care pharmacies in perhaps the most crucial and consequential month in the entire history of the sector: April 2020.

In the six months since, the Omnicare president has had to navigate a post-acute and long-term care landscape forever changed by COVID-19, while also ensuring that facilities across the country continue to receive the medications that their residents still need even during a pandemic.

Omnicare, a subsidiary of retail pharmacy giant CVS Health (NYSE: CVS), hasn’t been immune to the financial strains that have rippled through long-term care — though despite a revenue hit caused by lower occupancy in nursing homes, and thus reduced demand for pharmaceuticals in the space, Love noted that the business line remains profitable.

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And as operators move into a new normal, Love predicted that there will be a even firmer role for long-term pharmacy partners that can provide a range of services beyond drugs, such as diagnostic testing.

SNN spoke with Love earlier in October — prior to the rollout of a federal nursing home vaccine program that will rely on CVS and Walgreens — to discuss the state of the LTC pharmacy landscape, Omnicare’s COVID-19 testing efforts, and what operators will demand from pharmacy partners in a post-coronavirus landscape.

What have been some of the biggest changes or stresses that you’ve seen with serving nursing homes and post-acute care facilities during the pandemic?

The biggest thing is that we’ve got to keep our staff safe so they continue to operate pharmacies. Then we’ve got to make sure that we’re getting all the medications to the facilities in a safe way — so things like contactless delivery.

But more important than ever is that the drugs have to get to the facilities on time. If we say we’re going to deliver at eight o’clock, because they have a med pass at 8:05, then it’s got to be there at eight o’clock, and the orders have to be complete. If there are 10 prescriptions in an order, it really doesn’t help that only nine of them are there on time. They all have to be there on time.

We’ve put a lot of emphasis on that, and I think, at this point, our on time and complete order stats say that we’re the best in the industry — both are running, across our book of business, right at about 97%.

How do you achieve those safe deliveries? It’s been a challenge for vendors of all types during the pandemic — both making sure they have access to the facility to provide necessary services, while also preventing the spread of COVID.

The supply chain starts with our pharmacy, so we’ve got to make sure that nobody in our pharmacy is COVID-positive; that causes staff shortages at our pharmacy. The supply chain starts there. So we immediately implemented the CDC guidelines for how to keep a pharmacy open: temperature checks, self-reporting, quarantines if somebody is positive or believes they’re positive, the appropriate PPE for all employees, social distancing. We employed all that.

Step one, make sure the pharmacies can stay open. Step two is contactless delivery. We put measures in place so that as we were delivering drugs, or refilling an Omnicell medication dispensing unit, it was done in a contactless way.

How have the financial strains on the long-term care industry affected Omnicare? Obviously there’s been significant CARES Act funding, but not necessarily for LTC pharmacies.

Let’s bifurcate the question into the impact on the facilities, and then the impact on the pharmacy vendor for the facility. The facilities are under significant financial pressure as their occupancy rates have gone down. Across the industry, the occupancy rates have gone down — empty beds don’t make any money. I think the CARES Act has helped that.

Now you look at the next level down: How has that impacted the pharmacies? I’ll speak specifically to how it’s impacted Omnicare. It has certainly reduced revenue — less beds, less patients that need medication. Our revenues have come down. We’ve adjusted operations to reflect that. We remain a very profitable business, and importantly, we have not any real pickup in bad debt, where facilities can’t pay us.

We were prepared for that — we took appropriate reserves for it — but we’ve not seen a meaningful pickup in bad debt from our facilities. That may be unique to our book of business, I’m not 100% sure. But so far, the impact has been on reducing the revenues.

It’ll be interesting to see how everything shakes out with future stimulus — it remains up in the air, and there are questions about how long players in the space can stay afloat without more support. The CARES Act cash has also kind of scrambled the financial picture, since it’s hard to separate performance from relief.

Remember, these facilities are critically important to the health care system. We’ve got a population that’s not going to stop getting older; that population is not going to stop getting elective surgery or having health care events that lead to the need to be in one of these facilities. There’s a long-term tailwind that’s very positive for the industry.

Speaking of tailwinds, how is Omnicare prepping for the eventual distribution of a vaccine? Long-term care providers are being prioritized, but it’s going to be a huge logistical undertaking — both to handle a potentially delicate vaccine, and to meet likely federal and state reporting requirements.

CVS as an enterprise has been very involved in discussions about distributing the COVID-19 vaccine, very involved with CDC in those discussions, and we expect as an enterprise, and as a long-term care pharmacy, to be a major provider of vaccines going forward.

One of the reasons that we’re confident that we could do a good job of that is: We’re very experienced in flu vaccines. It’s been a business line of CVS’s enterprise and Omnicare for years now.

This year, we think the whole enterprise is going to administer somewhere around 18 million [flu] vaccines, which is twice as much as we did last year. On the flu vaccines, we do about 8,000, 9,000 clinics a year in the long-term care industry.

How do you think this pandemic is going to permanently change the long-term care pharmacy space?

I think the long-term impacts are positive for vendors like ourselves, who both run a national network, who have the resources to adapt, but also can provide the additional resources that these facilities are going to need in the pandemic and potentially going to need in the future. The facilities are going to look to somebody who, if they need testing, if there God forbid is another pandemic: Which one of my partners supplied testing? Which one of my partners provided a vaccine?

I think they’re going to start looking for broader services going forward, and I think we’re uniquely positioned that way; we’re not just a pharmacy company. We’re providing solutions to them.

What’s the status of your testing efforts?

We were hired by the state of Pennsylvania — I think we’re about to do some more testing, the state wants us to do some more testing for them. We were also hired by the states of North Carolina and Texas. We’re about to embark on our second contract with the state of Texas.

Importantly, in Pennsylvania, we were not hired just to test facilities where we’re the pharmacy; we were hired to do testing across the whole industry, and provide a benefit to the whole industry. So we did that in Texas, North Carolina, and there’s plus or minus 15 more states that we’re talking to about that, providing the same services.

How long do you think those routine testing burdens will last within the industry?

Our view as a company is that we’ll be testing well into next year. Certainly the first half of the year, we’ll be testing; one of the three states hired us with the assumption that testing is going to go through the latter part of next year.

Where we are today versus where we may have been six months ago? What are some of the biggest improvements on testing? And where are there still challenges?

We deployed two types of testing. In the state of Texas, we did point-of-care tests, and there was no issues with turnaround times there, because we’d roll up to a facility with testers and a machine, we’d test all the patients and stay there for the day, or however long necessary to test all the patients and the staff. The results come back roughly 15 to 20 minutes after the test is initiated.

In North Carolina and Pennsylvania, they chose to deploy a swab-and-send, where we would do the swabbing, collect all the samples, send them off to a reference lab, and then report the results back. Just like the rest of the industry, those turnaround times ballooned as testing really ramped up, but has come back down to really a manageable level [under two days in most cases].

This interview has been condensed and edited for clarity.

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