In September 2011 Omnicare made a hostile offer to buy its rival PharMerica for $441 million. Omnicare is the largest long-term care pharmacy – a pharmacy that sells drugs to skilled nursing facilities primarily for use by Medicare Part D beneficiaries. On January 27 2012 the Federal Trade Commission (FTC) filed an administrative complaint to stop the acquisition.

The complaint alleged that Omnicare's proposed acquisition of PharMerica would combine the two largest and only national long-term care pharmacies. The FTC alleged that the existence of regional and local long-term care pharmacies was an insufficient constraint on the combined firm because Part D plans are required to provide convenient access to long-term care pharmacies for Medicare patients who reside in skilled nursing facilities. The FTC claimed that a long-term care pharmacy with significant market share has a particular advantage in negotiating with Part D plans because of the Part D access requirement. Part D plans jeopardise their Centres for Medicare and Medicaid Services approval status if they do not have an adequate network of long-term care pharmacies. The FTC alleged that post-transaction, the combined firm would be a "must-have" for most Part D plans.

Notably, the FTC complaint cited PharMerica's public statements to shareholders that encouraged shareholders not to tender their shares because of the antitrust risk presented by the proposed offer. This illustrates the challenge that a hostile bidder faces in a transaction where there are antitrust issues in play. Omnicare not only had to convince PharMerica shareholders that the consideration for the deal was adequate, but also faced a substantial battle with the antitrust enforcers. Ultimately, in the face of a lawsuit to block the transaction, Omnicare was unable to win over PharMerica shareholders and it allowed the tender offer to expire on February 17 2012 .

For further information on this topic please contact Leigh L Oliver at Hogan Lovells US LLP by telephone (+1 202 637 5600), fax (+1 202 637 5910) or email ([email protected]).