Kindred teams with Omnicare, splits with skilled nursing pharmacy PharMerica

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Kindred CEO Paul Diaz
Kindred CEO Paul Diaz

Major long-term care provider Kindred Healthcare will split with its current pharmacy partner, PharMerica, and team with the sector's largest pharmacy, Omnicare, at the end of 2013, according to documents filed with the Securities and Exchange Commission.

Form 8-K documents filed June 21 confirmed that Kindred will not renew its PharMerica contract for skilled nursing services after it lapses on Dec. 31, 2013. Under a separate contract, PharMerica will continue to provide pharmacy management for Kindred hospitals through 2014.

The SNF deal suggests Omnicare may take over Kindred's hospital contract in 2015, according to some observers.

Kindred's nursing facilities accounted for 11.5% of PharMerica's revenue in 2012, according to the pharmacy's annual report. Upon news of the contract loss, PharMerica share prices slid, and a Bank of America analyst lowered the price target on the company from $18 to $17. Market experts estimate the company will take “a hit” of $29 million next year. However, the company will also have lower costs by not serving Kindred, the analyst wrote, preserving the company's “buy” rating.

This is just the latest setback for PharMerica, which lost other major contracts when Golden Living created pharmaceutical services company AlixaRx last fall. Earlier in 2012, the Federal Trade Commission stepped in to block Omnicare's $441 million unsolicited takeover bid for PharMerica. Omnicare's offer undervalued PharMerica, PharMerica CEO Gregory Weishar said at the time.

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