---

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UNITED
STATESSECURITIES
AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

(Mark
One)

|  |                                                                                           
|- | ------------------------------------------------------------------------------------------
|x | QUARTERLY
  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|  | For the quarterly period ended June 30, 2007                                              
|  | or                                                                                        
|o | TRANSITION
  REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|  | For the transition period from __________ to __________.                                  
|  |                                                                                           
|  | Commission File Number 1-8269                                                             

|                                                      
|------------------------------------------------------
|OMNICARE,
  INC.                                      
|                                                      
|(Exact name of registrant as specified in its
charter)

|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 31-1001351                          
|                                                               |  |                                     
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               |  |                                     

|                                                          |                                            |           
|--------------------------------------------------------- | ------------------------------------------ | ----------
|100 East RiverCenter Boulevard, Covington, Kentucky 41011
|                                                         
|                                                          | (Address of
  principal executive offices) | (Zip Code)

|                                                                                    
|------------------------------------------------------------------------------------
|(859) 392-3300                                                                      
|                                                                                    
|(Registrants telephone number, including area code)                                
|                                                                                    
|                                                                                    
|(Former name, former address and former fiscal year, if changed since
  last report)

Indicate by
check mark whether the registrant:

| |    |                                                                                                                                                                                                                                      
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1) | has filed
  all reports required to be filed by Section 13 or 15(d) of the Securities
  Exchange Act of 1934 during the preceding 12 months (or for such shorter
  period that the registrant was required to file such reports), and
| | 2) | has been
  subject to such filing requirements for the past 90 days.                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                      
| |    | Yes x   No o                                                                                                                                                                                                                         

Indicate by
check mark whether the registrant is a large accelerated filer, an accelerated
filer or a non-accelerated filer. See definition of accelerated filer and
large accelerated filer in Rule 12b-2 of the Exchange Act (Check one):

|                          |  |                     |  |                        
|------------------------- |  | ------------------- |  | -----------------------
|Large accelerated filer x |  | Accelerated filer o |  | Non-accelerated filer o

Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act).

Yes o   No x

|                             |  |                    |  |              
|---------------------------- |  | ------------------ |  | -------------
|COMMON STOCK
OUTSTANDING     |  | Number of
  Shares |  | Date         
|                             |  |                    |  |              
|Common
  Stock, $1 par value |  | 121,630,323        |  | June 30, 2007

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OMNICARE,
INC. AND

SUBSIDIARY
COMPANIES

FORM
10-Q QUARTERLY REPORT JUNE 30, 2007

INDEX

|         |  |                                                                                            |     
|-------- |  | ------------------------------------------------------------------------------------------ | ----
|         |  |                                                                                            | PAGE
|         |  |                                                                                            |     
|         |  | PART I - FINANCIAL
  INFORMATION:                                                          |     
|        
|ITEM 1.  |  | FINANCIAL STATEMENTS (UNAUDITED)                                                           |     
|         |  |                                                                                            |     
|         |  | Consolidated Statements of Income  
Three and six
  months ended  June 30, 2007 and 2006 | 3   
|         |  |                                                                                            |     
|         |  | Consolidated Balance Sheets  
  June 30, 2007 and
  December 31, 2006                     | 4   
|         |  |                                                                                            |     
|         |  | Consolidated Statements of Cash Flows 
  Six months ended  June 30,
  2007 and 2006      | 5   
|         |  |                                                                                            |     
|         |  | Notes to Consolidated Financial Statements                                                 | 6   
|         |  |                                                                                            |     
|ITEM 2.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
  RESULTS OF OPERATIONS    | 38  
|         |  |                                                                                            |     
|ITEM 3.  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                 | 64  
|         |  |                                                                                            |     
|ITEM 4.  |  | CONTROLS AND PROCEDURES                                                                    | 66  
|         |  |                                                                                            |     
|         |  | PART II - OTHER INFORMATION:                                                               |     
|         |  |                                                                                            |     
|ITEM 1.  |  | LEGAL PROCEEDINGS                                                                          | 66  
|         |  |                                                                                            |     
|ITEM 1A. |  | RISK FACTORS                                                                               | 69  
|         |  |                                                                                            |     
|ITEM 2.  |  | UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS                                 | 75  
|         |  |                                                                                            |     
|ITEM 4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                        | 75  
|         |  |                                                                                            |     
|ITEM 6.  |  | EXHIBITS                                                                                   | 76  

---



PART I - FINANCIAL INFORMATION:

ITEM 1. - FINANCIAL STATEMENTS

CONSOLIDATED STATEMENTS OF
INCOME
OMNICARE, INC. AND SUBSIDIARY COMPANIES
UNAUDITED(in thousands, except
per share data)

|                                                       |  |                                |           |                              |   |           |   |      |           |   |   |           |  
|------------------------------------------------------ |  | ------------------------------ | --------- | ---------------------------- | - | --------- | - | ---- | --------- | - | - | --------- | -
|                                                       |  | Three months ended,
  June 30, |           | Six months ended,
  June 30, |  
|                                                       |  |                                |           |                              |  
|                                                       |  | 2007                           |           | 2006                         |   | 2007      |   | 2006 |          
|                                                       |  |                                |           |                              |   |           |   |      |          
|Net sales                                              |  | $                              | 1,549,157 |                              | $ | 1,641,110 |   | $    | 3,126,222 |   | $ | 3,299,708 |  
|                                                      
|Cost of sales (COS)                                  |  |                                | 1,150,109 |                              |   | 1,240,819 |   |      | 2,341,102 |   |   | 2,482,902 |  
|Heartland matters - COS (Note 11)                      |  |                                | 4,015     |                              |   |          |   |      | 8,311     |   |   |          |  
|                                                       |  |                                |           |                              |   |           |   |      |           |   |   |           |  
|Gross profit                                           |  |                                | 395,033   |                              |   | 400,291   |   |      | 776,809   |   |   | 816,806   |  
|Selling, general and administrative expenses
(S,G&A) |  |                                | 257,907   |                              |   | 239,751   |   |      | 512,420   |   |   | 487,093   |  
|Restructuring and other related charges (Note 10)      |  |                                | 6,250     |                              |   | 11,889    |   |      | 15,424    |   |   | 19,602    |  
|Litigation charges (Note 11)                           |  |                                | 9,010     |                              |   | 64,482    |   |      | 15,917    |   |   | 98,582    |  
|Heartland matters - S,G&A (Note 11)                    |  |                                | 896       |                              |   |          |   |      | 2,392     |   |   |          |  
|                                                       |  |                                |           |                              |   |           |   |      |           |   |   |           |  
|Operating income                                       |  |                                | 120,970   |                              |   | 84,169    |   |      | 230,656   |   |   | 211,529   |  
|                                                      
|Investment income                                      |  |                                | 2,102     |                              |   | 3,049     |   |      | 4,023     |   |   | 4,848     |  
|Interest expense                                       |  |                                | (41,718   | )                            |   | (43,069   | ) |      | (83,766   | ) |   | (85,481   | )
|                                                       |  |                                |           |                              |   |           |   |      |           |   |   |           |  
|Income before income taxes                             |  |                                | 81,354    |                              |   | 44,149    |   |      | 150,913   |   |   | 130,896   |  
|                                                      
|Income tax provision                                   |  |                                | 32,113    |                              |   | 35,770    |   |      | 58,685    |   |   | 69,286    |  
|                                                       |  |                                |           |                              |   |           |   |      |           |   |   |           |  
|Net income                                             |  | $                              | 49,241    |                              | $ | 8,379     |   | $    | 92,228    |   | $ | 61,610    |  
|                                                       |  |                                |           |                              |   |           |   |      |           |   |   |           |  
|Earnings per share:                                    |  |                                |           |                              |   |           |   |      |           |   |   |           |  
|Basic                                                  |  | $                              | 0.41      |                              | $ | 0.07      |   | $    | 0.77      |   | $ | 0.52      |  
|                                                       |  |                                |           |                              |   |           |   |      |           |   |   |           |  
|Diluted                                                |  | $                              | 0.41      |                              | $ | 0.07      |   | $    | 0.76      |   | $ | 0.50      |  
|                                                       |  |                                |           |                              |   |           |   |      |           |   |   |           |  
|Dividends per common share                             |  | $                              | 0.0225    |                              | $ | 0.0225    |   | $    | 0.0450    |   | $ | 0.0450    |  
|                                                       |  |                                |           |                              |   |           |   |      |           |   |   |           |  
|Weighted average number of common shares outstanding:  |  |                                |           |                              |   |           |   |      |           |   |   |           |  
|Basic                                                  |  |                                | 119,389   |                              |   | 118,544   |   |      | 119,233   |   |   | 118,229   |  
|                                                       |  |                                |           |                              |   |           |   |      |           |   |   |           |  
|Diluted                                                |  |                                | 121,371   |                              |   | 123,016   |   |      | 121,375   |   |   | 123,303   |  
|                                                       |  |                                |           |                              |   |           |   |      |           |   |   |           |  
|Comprehensive income                                   |  | $                              | 49,831    |                              | $ | 8,597     |   | $    | 95,206    |   | $ | 59,476    |  
|                                                       |  |                                |           |                              |   |           |   |      |           |   |   |           |  

The Notes to Consolidated
Financial Statements are an integral part of these statements.

3

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CONSOLIDATED BALANCE SHEETS
OMNICARE, INC. AND SUBSIDIARY COMPANIES(in thousands, except
share data)

|                                                                                                                        |  |                               |           |                     |   |           |  
|----------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- | --------- | ------------------- | - | --------- | -
|                                                                                                                        |  | (UNAUDITED)
  June 30,
  2007 |           | December 31,
  2006 |  
|                                                                                                                        |  |                               |           |                     |  
|ASSETS                                                                                                                  |  |                               |           |                     |   |           |  
|Current assets:                                                                                                         |  |                               |           |                     |   |           |  
|Cash and cash equivalents                                                                                               |  | $                             | 151,262   |                     | $ | 138,034   |  
|Restricted cash                                                                                                         |  |                               | 14,362    |                     |   | 3,777     |  
|Accounts receivable, less allowances of $205,219
(2006-$191,048)                                                        |  |                               | 1,505,986 |                     |   | 1,522,266 |  
|Unbilled receivables, CRO                                                                                               |  |                               | 29,724    |                     |   | 21,949    |  
|Inventories                                                                                                             |  |                               | 427,103   |                     |   | 449,671   |  
|Deferred income tax benefits                                                                                            |  |                               | 91,325    |                     |   | 94,231    |  
|Other current assets                                                                                                    |  |                               | 219,514   |                     |   | 194,900   |  
|                                                                                                                        |  |                               |           |                     |   |           |  
|Total current assets                                                                                                    |  |                               | 2,439,276 |                     |   | 2,424,828 |  
|                                                                                                                        |  |                               |           |                     |   |           |  
|Properties and equipment, at cost less accumulated depreciation of
  $299,425 (2006-$286,157)                           |  |                               | 198,355   |                     |   | 200,425   |  
|Goodwill                                                                                                                |  |                               | 4,274,763 |                     |   | 4,225,011 |  
|Identifiable intangible assets, less accumulated amortization of
  $97,517 (2006-$80,095)                               |  |                               | 314,688   |                     |   | 319,588   |  
|Rabbi trust assets for settlement of pension obligations                                                                |  |                               | 100,716   |                     |   | 83,184    |  
|Other noncurrent assets                                                                                                 |  |                               | 142,422   |                     |   | 145,435   |  
|                                                                                                                        |  |                               |           |                     |   |           |  
|Total noncurrent assets                                                                                                 |  |                               | 5,030,944 |                     |   | 4,973,643 |  
|                                                                                                                        |  |                               |           |                     |   |           |  
|Total assets                                                                                                            |  | $                             | 7,470,220 |                     | $ | 7,398,471 |  
|                                                                                                                        |  |                               |           |                     |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                    |  |                               |           |                     |   |           |  
|Current liabilities:                                                                                                    |  |                               |           |                     |   |           |  
|Accounts payable                                                                                                        |  | $                             | 287,020   |                     | $ | 262,918   |  
|Accrued employee compensation                                                                                           |  |                               | 29,440    |                     |   | 33,864    |  
|Deferred revenue, CRO                                                                                                   |  |                               | 23,351    |                     |   | 26,434    |  
|Current debt (Note 4)                                                                                                   |  |                               | 4,971     |                     |   | 5,371     |  
|Other current liabilities and income taxes
payable                                                                      |  |                               | 221,998   |                     |   | 223,814   |  
|                                                                                                                        |  |                               |           |                     |   |           |  
|Total current liabilities                                                                                               |  |                               | 566,780   |                     |   | 552,401   |  
|                                                                                                                        |  |                               |           |                     |   |           |  
|Long-term debt, notes and convertible debentures (Note 4)                                                               |  |                               | 2,857,830 |                     |   | 2,955,120 |  
|Deferred income tax liabilities                                                                                         |  |                               | 418,506   |                     |   | 384,989   |  
|Other noncurrent liabilities                                                                                            |  |                               | 367,075   |                     |   | 342,510   |  
|                                                                                                                        |  |                               |           |                     |   |           |  
|Total noncurrent liabilities                                                                                            |  |                               | 3,643,411 |                     |   | 3,682,619 |  
|                                                                                                                        |  |                               |           |                     |   |           |  
|Total liabilities                                                                                                       |  |                               | 4,210,191 |                     |   | 4,235,020 |  
|                                                                                                                        |  |                               |           |                     |   |           |  
|Commitments and contingencies (Note 11)                                                                                 |  |                               |           |                     |   |           |  
|                                                                                                                        |  |                               |           |                     |   |           |  
|Stockholders equity:                                                                                                   |  |                               |           |                     |   |           |  
|Preferred stock, no par value, 1,000,000 shares
authorized, none
  issued and outstanding                               |  |                               |          |                     |   |          |  
|Common stock, $1 par value, 200,000,000 shares
authorized,
  124,560,800 shares issued (2006-124,269,500 shares issued) |  |                               | 124,561   |                     |   | 124,269   |  
|Paid-in capital                                                                                                         |  |                               | 1,904,501 |                     |   | 1,885,529 |  
|Retained earnings                                                                                                       |  |                               | 1,381,492 |                     |   | 1,300,550 |  
|Treasury
    stock, at cost-2,930,500 shares (2006-2,805,000 shares)                                                    |  |                               | (93,361   | )                   |   | (86,755   | )
|Accumulated other comprehensive income                                                                                  |  |                               | (57,164   | )                   |   | (60,142   | )
|                                                                                                                        |  |                               |           |                     |   |           |  
|Total stockholders equity                                                                                              |  |                               | 3,260,029 |                     |   | 3,163,451 |  
|                                                                                                                        |  |                               |           |                     |   |           |  
|Total liabilities and stockholders
equity                                                                              |  | $                             | 7,470,220 |                     | $ | 7,398,471 |  
|                                                                                                                        |  |                               |           |                     |   |           |  

The Notes to Consolidated
Financial Statements are an integral part of these statements.

4

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CONSOLIDATED STATEMENTS OF CASH FLOWS
OMNICARE, INC. AND SUBSIDIARY COMPANIES
UNAUDITED(in thousands)

|                                                                                                         |  |                             |          |      |   |          |  
|-------------------------------------------------------------------------------------------------------- |  | --------------------------- | -------- | ---- | - | -------- | -
|                                                                                                         |  | Six months ended
  June 30, |         
|                                                                                                         |  |                             |         
|                                                                                                         |  | 2007                        |          | 2006 |  
|                                                                                                         |  |                             |          |      |  
|Cash flows from operating activities:                                                                    |  |                             |          |      |   |          |  
|Net income                                                                                               |  | $                           | 92,228   |      | $ | 61,610   |  
|Adjustments to reconcile net income to net cash flows from operating
  activities:                       |  |                             |          |      |   |          |  
|Depreciation                                                                                             |  |                             | 28,080   |      |   | 28,453   |  
|Amortization                                                                                             |  |                             | 29,128   |      |   | 32,684   |  
|Provision for doubtful accounts                                                                          |  |                             | 58,803   |      |   | 35,160   |  
|Deferred tax provision                                                                                   |  |                             | 35,424   |      |   | 16,916   |  
|Changes in assets and liabilities, net of effects from acquisition of
  businesses:                      |  |                             |          |      |   |          |  
|Accounts receivable and unbilled
receivables                                                             |  |                             | (36,594  | )    |   | (197,633 | )
|Inventories                                                                                              |  |                             | 26,244   |      |   | (6,037   | )
|Deposits with drug wholesalers                                                                           |  |                             | (227     | )    |   | 37,669   |  
|Current and noncurrent assets                                                                            |  |                             | (34,820  | )    |   | (4,595   | )
|Accounts payable                                                                                         |  |                             | 28,340   |      |   | (23,602  | )
|Accrued employee compensation                                                                            |  |                             | (4,379   | )    |   | 1,694    |  
|Deferred revenue                                                                                         |  |                             | (3,083   | )    |   | 211      |  
|Current and noncurrent liabilities and income taxes
payable                                              |  |                             | 16,783   |      |   | 145,527  |  
|                                                                                                         |  |                             |          |      |   |          |  
|                                                                                                        
|Net cash flows from operating activities                                                                 |  |                             | 235,927  |      |   | 128,057  |  
|                                                                                                         |  |                             |          |      |   |          |  
|Cash flows from investing activities:                                                                    |  |                             |          |      |   |          |  
|Acquisition of businesses, net of cash
received                                                          |  |                             | (69,299  | )    |   | (51,076  | )
|Capital expenditures                                                                                     |  |                             | (18,925  | )    |   | (14,565  | )
|Transfer of cash to trusts for employee health and
severance costs,
  net of payments out of the trust   |  |                             | (10,501  | )    |   | (9,311   | )
|Other                                                                                                    |  |                             | (106     | )    |   | 90       |  
|                                                                                                         |  |                             |          |      |   |          |  
|                                                                                                        
|Net cash flows from investing activities                                                                 |  |                             | (98,831  | )    |   | (74,862  | )
|                                                                                                         |  |                             |          |      |   |          |  
|Cash flows from financing activities:                                                                    |  |                             |          |      |   |          |  
|Borrowings on line of credit facilities and term A
loan                                                  |  |                             | 74,000   |      |   | 133,000  |  
|Payments on line of credit facilities and term A
loan                                                    |  |                             | (174,000 | )    |   | (133,000 | )
|Payments on long-term borrowings and
obligations                                                         |  |                             | (3,631   | )    |   | (1,394   | )
|Fees paid for financing arrangements                                                                     |  |                             |         |      |   | (3,212   | )
|Change in cash overdraft balance                                                                         |  |                             | (11,644  | )    |   | 10,287   |  
|Proceeds from stock offering, net of issuance
costs                                                      |  |                             |         |      |   | 49,239   |  
|Payments for stock awards and exercise of stock
options and warrants,
  net of stock tendered in payment |  |                             | (8,132   | )    |   | (3,295   | )
|Excess tax benefits from stock-based
compensation                                                        |  |                             | 4,079    |      |   | 11,472   |  
|Dividends paid                                                                                           |  |                             | (5,482   | )    |   | (5,461   | )
|                                                                                                         |  |                             |          |      |   |          |  
|                                                                                                        
|Net cash flows from financing activities                                                                 |  |                             | (124,810 | )    |   | 57,636   |  
|                                                                                                         |  |                             |          |      |   |          |  
|                                                                                                        
|Effect of exchange rate changes on cash                                                                  |  |                             | 942      |      |   | 1,011    |  
|                                                                                                         |  |                             |          |      |   |          |  
|                                                                                                        
|Net increase in cash and cash equivalents                                                                |  |                             | 13,228   |      |   | 111,842  |  
|Cash and cash equivalents at beginning of period                                                         |  |                             | 138,034  |      |   | 215,421  |  
|                                                                                                         |  |                             |          |      |   |          |  
|                                                                                                        
|Cash and cash equivalents at end of period                                                               |  | $                           | 151,262  |      | $ | 327,263  |  
|                                                                                                         |  |                             |          |      |   |          |  

The Notes to Consolidated
Financial Statements are an integral part of these statements.

5

---



NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS 
OMNICARE, INC. AND SUBSIDIARY COMPANIES 
UNAUDITED

Note 1 - Interim Financial Data, Description
of Business and Summary of Significant Accounting Policies

Interim Financial Data

The interim
financial data is unaudited; however, in the opinion of the management of
Omnicare, Inc., the interim data includes all adjustments (which include only
normal adjustments, except as described in the Restructuring and Other Related
Charges and Commitments and Contingencies notes) considered necessary for a
fair presentation of the consolidated results of operations, financial position
and cash flows of Omnicare, Inc. and its consolidated subsidiaries (Omnicare
or the Company). These financial statements should be read in conjunction
with the Consolidated Financial Statements and related notes included in
Omnicares Annual Report on Form 10-K for the year ended December 31, 2006
(Omnicares 2006 Annual Report) and any related updates included in the
Companys periodic quarterly Securities and Exchange Commission (SEC)
filings. Certain reclassifications of prior year amounts have been made to
conform with the current year presentation.

Description of Business and Summary of
Significant Accounting Policies

The Companys
description of business and significant accounting policies have been disclosed
in Omnicares 2006 Annual Report. As previously disclosed, these financial
statements should be read in conjunction with the Consolidated Financial
Statements and related notes included in Omnicares 2006 Annual Report and any
related updates contained in the Companys periodic quarterly SEC filings,
including those presented below.

Concentration of Credit Risk

The
prescription drug benefit under Medicare Part D (Part D) became effective on
January 1, 2006. As a result, providers of long-term care pharmacy services,
including Omnicare, experienced a significant shift in payor mix beginning in
2006. Approximately 42% of the Companys revenues in the six months ended June
30, 2007 were generated under the Part D program. The Company estimates that
approximately 35% of these Part D revenues during the six months ended June 30,
2007 relate to patients enrolled in Part D prescription drug plans sponsored by
UnitedHealth Group and its Affiliates (United). Prior to the implementation
of the Medicare Part D program, most of the Part D residents served by the
Company were reimbursed under state Medicaid programs and, to a lesser extent,
private pay sources.

Under the Part
D benefit, payment is determined in accordance with the agreements Omnicare has
negotiated with the Part D Plans. The remainder of Omnicares billings are paid
or reimbursed primarily by individual residents, long-term care facilities
(including revenues for residents funded under Medicare Part A) and other third
party payors, including private insurers.

6

---



The Medicaid
and Medicare programs are highly regulated. The failure, even if inadvertent,
of Omnicare and/or client facilities to comply with applicable reimbursement
regulations could adversely affect Omnicares reimbursement under these
programs and Omnicares ability to continue to participate in these programs.
In addition, failure to comply with these regulations could subject the Company
to other penalties.

As noted, the
Company obtains reimbursement for drugs it provides to enrollees of a given
Part D Plan in accordance with the terms of the agreement negotiated between
    it and that Part D Plan. The Company has entered into such agreements with
    nearly all Part D Plan sponsors under which it will provide drugs and associated
services to their enrollees. The Company continues to have ongoing discussions
with Part D Plans in the ordinary course and may, as appropriate, renegotiate
agreements. Further, the proportion of the Companys Part D business serviced
under specific agreements may change over time. Consequently, there can be no
assurance that the reimbursement terms which currently apply to the Companys
Part D business will not change. Moreover, as expected in the transition to a
new program of this magnitude, certain administrative and payment issues have
arisen, resulting in higher operating expenses, as well as outstanding gross
accounts receivable (net of allowances for contractual adjustments, and prior
to allowances for doubtful accounts) for copays and rejected claims. As of June
30, 2007, copays outstanding from Part D Plans were approximately $29 million,
of which approximately $20 million relates to 2006. Additionally, as of June
30, 2007, Part D rejected claims outstanding from Part D Plans for the 2006 transitional
year were approximately $21 million. Until all administrative and payment issues
are fully resolved, there can be no assurance that the impact of the Part D Drug
Benefit on the Companys results of operations, financial position or cash
flows will not change based on the outcome of any unforeseen future
developments.

On July 16,
2007, the Company commenced legal action against a group of its customers for,
among other things, the collection of past-due receivables that are owed to the
Company. Specifically, approximately $85 million is owed to the Company by this
group of customers as of June 30, 2007, of which approximately $72 million is
past due based on applicable payment terms.

Accumulated Other Comprehensive Income

The
accumulated other comprehensive income (loss) balances at June 30, 2007 and
December 31, 2006, net of aggregate applicable tax benefits of $36.0 million
and $34.9 million, respectively, by component and in the aggregate, follow (in
thousands):

|                                                                               |  |                 |         |                     |   |         |  
|------------------------------------------------------------------------------ |  | --------------- | ------- | ------------------- | - | ------- | -
|                                                                               |  | June 30,
  2007 |         | December 31,
  2006 |  
|                                                                               |  |                 |         |                     |  
|Cumulative foreign currency translation adjustments                            |  | $               | 2,208   |                     | $ | 1,705   |  
|Unrealized depreciation in fair value of investments                           |  |                 | (2,514  | )                   |   | (1,423  | )
|Unamortized prior service cost and loss for pension and long-term
  care plans |  |                 | (56,858 | )                   |   | (60,424 | )
|                                                                               |  |                 |         |                     |   |         |  
|Total accumulated other comprehensive loss balances, net                       |  | $               | (57,164 | )                   | $ | (60,142 | )
|                                                                               |  |                 |         |                     |   |         |  

7

---



Recently Issued Accounting Standards

In September
2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No.
157, Fair Value Measurements (SFAS 157). SFAS 157 defines fair value,
establishes a framework for measuring fair value in generally accepted accounting
principles (GAAP) and expands disclosures about fair value measurements. SFAS
157 applies under other accounting pronouncements that require or permit fair
value measurements, the FASB having previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute.
Accordingly, SFAS 157 does not require any new fair value measurements. SFAS
157 is effective for fiscal years beginning after November 15, 2007, and
interim periods within those fiscal years, with earlier adoption permitted. The
provisions of SFAS 157 should be applied prospectively, as of the beginning of
the fiscal year in which it is initially applied, with limited exceptions. The
Company currently does not believe SFAS 157 will have a material impact on its
consolidated results of operations, financial position or cash flows, but is
continuing its evaluation of the new standard.

In February
2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets
and Financial Liabilities, including an amendment of FASB Statement No. 115
(SFAS 159). SFAS 159 permits entities to choose to measure many financial
instruments and certain other items at fair value that are not currently
required to be measured at fair value. Unrealized gains and losses on items for
which the fair value option has been elected are reported in earnings. SFAS 159
does not affect any existing accounting literature that requires certain assets
and liabilities to be carried at fair value. SFAS 159 is effective for fiscal
years beginning after November 15, 2007. The Company currently does not believe
SFAS 159 will have a material impact on its consolidated results of operations,
financial position or cash flows, but is continuing its evaluation of the new
standard.

Note 2 - Acquisitions

Since 1989,
the Company has been involved in a program to acquire providers of
pharmaceutical products and related pharmacy management services and medical
supplies to long-term care facilities and their residents. The Companys
strategy has included the acquisition of freestanding institutional pharmacy
businesses, as well as other assets, generally insignificant in size, which
have been combined with existing pharmacy operations to augment their internal
growth. From time-to-time the Company may acquire other businesses, such as
long-term care software companies, contract research organizations, pharmacy
consulting companies, specialty pharmacy companies, medical supply companies,
hospice pharmacy companies and companies providing distribution and patient
assistance services for specialty pharmaceuticals, which complement the
Companys core business. During the first six months of 2007, Omnicare
completed 12 acquisitions of businesses and other assets in the Pharmacy
Services segment, none of which were, individually or in the aggregate,
significant to the Company. Acquisitions of businesses required cash payments
of $69.3 million (including amounts payable pursuant to acquisition agreements
relating to pre-2007 acquisitions) in the six months ended June 30, 2007. The
impact of these aggregate acquisitions on the Companys overall goodwill
balance has been reflected in the disclosures at the Goodwill and Other
Intangible Assets note. Omnicare engages independent valuation firms to assist
with identification and valuation of other identifiable intangible assets in
connection with the purchase price allocation of certain

8

---



acquisitions.
The Company also continues to evaluate the tax effects and other
pre-acquisition contingencies relating to certain acquisitions. Omnicare is in
the process of completing its allocation of the purchase price for certain
acquisitions and, accordingly, the goodwill and other identifiable intangible
assets balances are preliminary and subject to change. The net assets and
operating results of acquisitions have been included in the Companys
consolidated financial statements from their respective dates of acquisition.

Note 3 - Goodwill and Other Intangible Assets

Changes in the
carrying amount of goodwill for the six months ended June 30, 2007, by business
segment, are as follows (in thousands):

|                                                        |  |                     |           |                |   |        |  |   |           | 
|------------------------------------------------------- |  | ------------------- | --------- | -------------- | - | ------ |  | - | --------- | 
|                                                        |  | Pharmacy
  Services |           | CRO
  Services |   | Total  | 
|                                                        |  |                     |           |                |   |        | 
|Balance as of December 31, 2006                         |  | $                   | 4,134,235 |                | $ | 90,776 |  | $ | 4,225,011 | 
|Goodwill acquired in the six months ended June 30, 2007 |  |                     | 31,841    |                |   |       |  |   | 31,841    | 
|Other                                                   |  |                     | 17,876    |                |   | 35     |  |   | 17,911    | 
|                                                        |  |                     |           |                |   |        |  |   |           | 
|Balance as of June 30, 2007                             |  | $                   | 4,183,952 |                | $ | 90,811 |  | $ | 4,274,763 | 
|                                                        |  |                     |           |                |   |        |  |   |           | 

The Other
captions above include the settlement of acquisition matters relating to
prior-year acquisitions, (including, where applicable, payments pursuant to
acquisition agreements such as deferred payments, indemnification payments and
payments originating from earnout provisions, as well as adjustments for the
finalization of purchase price allocations, including identifiable intangible
asset valuations). Other also includes the effect of adjustments due to
foreign currency translations, which relate solely to the Contract Research
Organization (CRO) Services segment and one pharmacy located in Canada that
is included in the Pharmacy Services segment.

The decrease
in the net carrying amount of the Companys other identifiable intangible
assets of approximately $4.9 million from December 31, 2006, primarily relates
to amortization expense recorded during the period, partially offset by
increases due primarily to customer relationship assets and non-compete
agreements, with a weighted average life of approximately 11 years, recorded as
part of the purchase price allocation for certain acquisitions.

9

---



Note 4 - Debt

A summary of
debt follows (in thousands):

|                                                             |  |                 |           |                     |   |           |  
|------------------------------------------------------------ |  | --------------- | --------- | ------------------- | - | --------- | -
|                                                             |  | June 30,
  2007 |           | December 31,
  2006 |  
|                                                             |  |                 |           |                     |  
|Revolving loans, due 2010                                    |  | $               |          |                     | $ |          |  
|Term loan, due 2010                                          |  |                 | 47,019    |                     |   | 42,911    |  
|Senior term A loan, due
  2010                               |  |                 | 500,000   |                     |   | 600,000   |  
|6.125% senior subordinated
  notes, due 2013                 |  |                 | 250,000   |                     |   | 250,000   |  
|6.75% senior subordinated
  notes, due 2013                  |  |                 | 225,000   |                     |   | 225,000   |  
|6.875% senior subordinated
  notes, due 2015                 |  |                 | 525,000   |                     |   | 525,000   |  
|4.00% junior subordinated
  convertible debentures, due 2033 |  |                 | 345,000   |                     |   | 345,000   |  
|3.25% convertible senior
  debentures, due 2035              |  |                 | 977,500   |                     |   | 977,500   |  
|Capitalized lease and
  other debt obligations               |  |                 | 10,496    |                     |   | 14,127    |  
|                                                             |  |                 |           |                     |   |           |  
|Subtotal                                                     |  |                 | 2,880,015 |                     |   | 2,979,538 |  
|Less interest rate swap
  agreement                          |  |                 | (17,214   | )                   |   | (19,047   | )
|Less current portion of
  debt                               |  |                 | (4,971    | )                   |   | (5,371    | )
|                                                             |  |                 |           |                     |   |           |  
|Total long-term debt, net                                    |  | $               | 2,857,830 |                     | $ | 2,955,120 |  
|                                                             |  |                 |           |                     |   |           |  

The Companys
debt instruments, including related terms and financial covenants, have been
disclosed in further detail at the Debt note of the Notes to Consolidated
Financial Statements in Omnicares 2006 Annual Report.

At June 30,
2007, there was no outstanding balance under the Companys $800 million
revolving credit facility (Revolving Loans), maturing on July 28, 2010, and
$500 million outstanding under the Companys senior term A loan facility,
maturing on July 28, 2010 (the Term Loans). The Company repaid $100
million on the Term Loans during the six months ended June 30, 2007. The interest
rate on the Term Loans was 6.57% at June 30, 2007. As of June 30, 2007, the Company
had approximately $22.6 million outstanding relating to standby letters of
credit, substantially all of which are subject to automatic annual renewals.
The Company amortized to expense $2.0 million of deferred debt
issuance costs during the three months ended June 30, 2007 and 2006. During the
six months ended June 30, 2007 and 2006, the Company amortized to expense $4.1
million of deferred debt issuance costs.

At June 30,
2007, the overall weighted average interest rate on the Companys variable
interest portion of its long-term debt, excluding the interest rate swap
agreement, was 6.56%. The estimated floating interest rate on the interest rate
swap agreement was 7.66% at June 30, 2007.

Note 5 - Public Offering of Common Stock

During January
2006, the underwriters of the common stock offering completed by the Company in
December 2005 exercised their option, in part, to purchase an additional
850,000 shares of common stock, $1 par value, at $59.72 per share. Gross cash
proceeds, before underwriting discount, commission and expenses, were
approximately $51 million.

10

---



Note 6 - Stock-Based Employee Compensation

At June 30,
2007, the Company had four stock-based employee compensation plans under which
incentive awards were outstanding, which are described in further detail at the
Stock-Based Employee Compensation note of the Notes to Consolidated Financial
Statements in Omnicares 2006 Annual Report. Omnicare believes that the
incentive awards issued under these plans serve to better align the interests
of its employees with those of its stockholders. As further described in
Omnicares 2006 Annual Report, non-vested stock awards are granted to key
employees at the discretion of the Compensation and Incentive Committee of the
Board of Directors.

Total pretax
stock-based compensation expense recognized in the Consolidated Statement of
Income as part of S,G&A expense for stock options and stock awards for the
three and six months ended June 30, 2007 and 2006 is as follows (in thousands):

|                                         |  |                                |       |                              |   |       |  |      |        |  |   |        | 
|---------------------------------------- |  | ------------------------------ | ----- | ---------------------------- | - | ----- |  | ---- | ------ |  | - | ------ | 
|                                         |  | Three months ended,
  June 30, |       | Six months ended,
  June 30, |  
|                                         |  |                                |       |                              |  
|                                         |  | 2007                           |       | 2006                         |   | 2007  |  | 2006 |       
|                                         |  |                                |       |                              |   |       |  |      |       
|Stock awards                             |  | $                              | 4,990 |                              | $ | 5,228 |  | $    | 9,437  |  | $ | 9,956  | 
|Stock options                            |  |                                | 1,026 |                              |   | 1,309 |  |      | 2,042  |  |   | 3,328  | 
|                                         |  |                                |       |                              |   |       |  |      |        |  |   |        | 
|Total stock-based
  compensation expense |  | $                              | 6,016 |                              | $ | 6,537 |  | $    | 11,479 |  | $ | 13,284 | 
|                                         |  |                                |       |                              |   |       |  |      |        |  |   |        | 

The
assumptions used to value stock options granted during the three and six months
ended June 30, 2007 and 2006 are as follows:

|                                         |  |                               |       |                             |   |       |   |      |       |   |   |       |  
|---------------------------------------- |  | ----------------------------- | ----- | --------------------------- | - | ----- | - | ---- | ----- | - | - | ----- | -
|                                         |  | Three months ended
  June 30, |       | Six months ended
  June 30, |  
|                                         |  |                               |       |                             |  
|                                         |  | 2007                          |       | 2006                        |   | 2007  |   | 2006 |      
|                                         |  |                               |       |                             |   |       |   |      |      
|Expected volatility                      |  |                               | 30.3  | %                           |   | 30.0  | % |      | 30.3  | % |   | 30.0  | %
|Risk-free interest rate                  |  |                               | 4.6   | %                           |   | 5.1   | % |      | 4.6   | % |   | 5.1   | %
|Expected dividend yield                  |  |                               | 0.2   | %                           |   | 0.2   | % |      | 0.2   | % |   | 0.2   | %
|Expected term of options
  (in years)    |  |                               | 4.50  |                             |   | 4.70  |   |      | 4.50  |   |   | 4.70  |  
|Weighted average fair
  value per option |  | $                             | 11.25 |                             | $ | 15.07 |   | $    | 12.14 |   | $ | 16.02 |  

11

---



A summary of
stock option activity under the plans for the six months ended June 30, 2007,
is presented below (in thousands, except exercise price and term data):

|                                           |  |        |       |                                       |   |                                                     |  |                               |     |  |   |        | 
|------------------------------------------ |  | ------ | ----- | ------------------------------------- | - | --------------------------------------------------- |  | ----------------------------- | --- |  | - | ------ | 
|                                           |  | Shares |       | Weighted
  Average
  Exercise
  Price |   | Weighted
  Average
  Remaining
  Contractual
  Term |  | Aggregate
  Intrinsic
  Value |    
|                                           |  |        |       |                                       |   |                                                     |  |                               |    
|Options outstanding,
  beginning of period |  |        | 7,663 |                                       | $ | 31.34                                               |  |                               |     |  |   |        | 
|Options granted                            |  |        | 63    |                                       |   | 37.26                                               |  |                               |     |  |   |        | 
|Options exercised                          |  |        | (75   | )                                     |   | 23.91                                               |  |                               |     |  |   |        | 
|Options forfeited                          |  |        | (207  | )                                     |   | 48.04                                               |  |                               |     |  |   |        | 
|                                           |  |        |       |                                       |   |                                                     |  |                               |     |  |   |        | 
|Options outstanding, end
  of period       |  |        | 7,444 |                                       | $ | 31.01                                               |  |                               | 5.4 |  | $ | 63,868 | 
|                                           |  |        |       |                                       |   |                                                     |  |                               |     |  |   |        | 
|Options exercisable, end
  of period       |  |        | 5,522 |                                       | $ | 25.95                                               |  |                               | 4.3 |  | $ | 63,248 | 
|                                           |  |        |       |                                       |   |                                                     |  |                               |     |  |   |        | 

The total
exercise date intrinsic value of options exercised during the six months ended
June 30, 2007 was approximately $1.2 million.

A summary of
non-vested restricted stock awards for the six months ended June 30, 2007 is
presented below (in thousands, except grant price data):

|                                         |  |        |       |                                         |   |       | 
|---------------------------------------- |  | ------ | ----- | --------------------------------------- | - | ----- | 
|                                         |  | Shares |       | Weighted
  Average
  Grant Date
  Price |  
|                                         |  |        |       |                                         |  
|Non-vested shares,
  beginning of period |  |        | 2,617 |                                         | $ | 34.56 | 
|Shares awarded                           |  |        | 211   |                                         |   | 39.81 | 
|Shares vested                            |  |        | (591  | )                                       |   | 24.61 | 
|Shares forfeited                         |  |        | (44   | )                                       |   | 45.62 | 
|                                         |  |        |       |                                         |   |       | 
|Non-vested shares, end of
  period       |  |        | 2,193 |                                         | $ | 37.52 | 
|                                         |  |        |       |                                         |   |       | 

As of June 30,
2007, there was approximately $82 million of total unrecognized compensation
cost related to non-vested stock awards and stock options granted to Omnicare
employees, which is expected to be recognized as expense prospectively over a
remaining weighted-average period of approximately 4.7 years. The total grant
date fair value of shares vested during the six months ended June 30, 2007
related to stock awards and stock options was approximately $29.2 million.

Note 7 - Employee Benefit Plans

The Company
has various defined contribution savings plans under which eligible employees
can participate by contributing a portion of their salary for investment, at
the direction of each employee, in one or more investment funds, as further
described in Omnicares 2006 Annual Report. Expense relating primarily to the
Companys matching contributions for these defined contribution
plans was $1.6 million and $3.2 million for the three and six months ended June
30,

12

---



2007, respectively, and $1.6 million and $3.5 million for the three and six
months ended June 30, 2006, respectively.

The Company
has a non-contributory, defined benefit pension plan covering certain corporate
headquarters employees and the employees of several companies sold by the
Company in 1992, for which benefits ceased accruing upon the sale (the
Qualified Plan). Benefits accruing under this plan to corporate headquarters
employees were fully vested and frozen as of January 1, 1994.

The Company
also has an excess benefit plan (EBP) that provides retirement payments to
certain headquarters employees in amounts generally consistent with what they
would have received under the Qualified Plan. The retirement benefits provided
by the EBP are generally comparable to those that would have been earned in the
Qualified Plan, if payments under the Qualified Plan were not limited by the
Internal Revenue Code.

In addition,
the Company has a supplemental pension plan (SPP) in which certain of its
officers participate. Retirement benefits under the SPP are calculated on the
basis of a specified percentage of the officers covered compensation, years of
credited service and a vesting schedule, as specified in the plan document.

The Qualified
Plan is funded with an irrevocable trust, which consists of assets held in the
Vanguard Intermediate Term Treasury Fund Admiral Shares fund (Vanguard Fund),
a mutual fund holding U.S. Treasury obligations. In addition, the Company has
established rabbi trusts, which are also held in the Vanguard Fund and the AIM
Limited Maturity Treasury Fund, to provide for retirement obligations under the
EBP and SPP. The Companys policy is to fund its pension obligations in
accordance with the funding provisions of the Employee Retirement Income
Security Act.

The following
table presents the components of pension cost for all pension plans for the
three and six months ended June 30, 2007 and 2006 (pretax, in thousands):

|                                                                     |  |                               |       |                             |   |       |   |      |        |   |   |       |  
|-------------------------------------------------------------------- |  | ----------------------------- | ----- | --------------------------- | - | ----- | - | ---- | ------ | - | - | ----- | -
|                                                                     |  | Three months ended
  June 30, |       | Six months ended
  June 30, |  
|                                                                     |  |                               |       |                             |  
|                                                                     |  | 2007                          |       | 2006                        |   | 2007  |   | 2006 |       
|                                                                     |  |                               |       |                             |   |       |   |      |       
|Service cost                                                         |  | $                             | 1,087 |                             | $ | 561   |   | $    | 2,174  |   | $ | 1,122 |  
|Interest cost                                                        |  |                               | 2,051 |                             |   | 1,043 |   |      | 4,102  |   |   | 2,086 |  
|Amortization of deferred
  amounts(primarily prior actuarial losses) |  |                               | 2,901 |                             |   | 1,091 |   |      | 5,802  |   |   | 2,182 |  
|Return on assets                                                     |  |                               | (47   | )                           |   | (44   | ) |      | (94    | ) |   | (88   | )
|                                                                     |  |                               |       |                             |   |       |   |      |        |   |   |       |  
|Net periodic pension cost                                            |  | $                             | 5,992 |                             | $ | 2,651 |   | $    | 11,984 |   | $ | 5,302 |  
|                                                                     |  |                               |       |                             |   |       |   |      |        |   |   |       |  

As of June 30,
2007, the aggregate defined benefit plans liabilities total approximately $151
million. During the first six months of 2007, the Company made payments of
$17.0 million related to funding the rabbi trusts for the settlement of the
Companys pension obligations, resulting in
aggregate assets with a fair value of approximately $101 million at June 30,
2007.

13

---



The Company currently anticipates making contributions of approximately
$13 million during the remainder of the 2007 year.

Note 8 - Income Taxes

The Company
files income tax returns in the U.S. federal jurisdiction, and various states
and foreign jurisdictions. With few exceptions, the Company is no longer
subject to U.S. federal examinations by tax authorities for years before 2004,
and state and local or non-U.S. income tax examinations by tax authorities for
years before 2002.

The Company
adopted the provisions of FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes (FIN 48) on January 1, 2007. As a result of the
implementation of FIN 48, the Company recognized an increase in the liability
for unrecognized tax benefits of approximately $17.9 million, $5.8 million of
which was accounted for as a reduction to the January 1, 2007 retained earnings
balance and $12.1 million of which was accounted for as an increase to
goodwill.

As of January
1, 2007, the Company had a $60.3 million liability recorded for unrecognized
tax benefits principally for U.S. federal and state tax jurisdictions. The
majority of unrecognized tax benefits relate to acquisitions. The total
liabilities for unrecognized tax benefits are carried in other noncurrent
liabilities on the Consolidated Balance Sheets, as payment of cash is not
anticipated within one year of the balance sheet date for any significant
amounts. In addition, the Company recognizes interest and penalties accrued
related to unrecognized tax benefits in tax expenses and had approximately $6.8
million accrued, for the payment of interest and penalties, at January 1, 2007.
The total amount of unrecognized tax benefits at January 1, 2007 that, if recognized, would
favorably impact the effective tax rate was $15.2 million, which includes interest
and penalties of approximately $4 million. The Company does not currently anticipate that the
total amount of unrecognized tax benefits will significantly increase or
decrease by December 31, 2007.

Note 9 - Earnings Per Share Data

Basic earnings
per share are computed based on the weighted-average number of shares of common
stock outstanding during the period. Diluted earnings per share include the
dilutive effect of stock options, warrants and restricted stock awards, as well
as convertible debentures.

14

---



The following
is a reconciliation of the numerator and denominator of the basic and diluted
earnings per share (EPS) computations (in thousands, except per share data):

|                                                   |  |                             |        |                                 |  |                                |  |   |      | 
|-------------------------------------------------- |  | --------------------------- | ------ | ------------------------------- |  | ------------------------------ |  | - | ---- | 
|                                                   |  | Three months ended June 30, |       
|                                                   |  |                             |       
|2007:                                              |  | Income
  (Numerator)        |        | Common
  Shares
  (Denominator) |  | Per
  Common
  Share
  Amounts | 
|                                                  
|Basic EPS                                          |  |                             |        |                                 |  |                                |  |   |      | 
|Net income                                         |  | $                           | 49,241 |                                 |  | 119,389                        |  | $ | 0.41 | 
|                                                   |  |                             |        |                                 |  |                                |  |   |      | 
|Effect of
  Dilutive Securities                    |  |                             |        |                                 |  |                                |  |   |      | 
|4.00% junior subordinated
  convertible debentures |  |                             | 72     |                                 |  | 275                            |  |   |      | 
|Stock options, warrants and
  awards               |  |                             |       |                                 |  | 1,707                          |  |   |      | 
|                                                   |  |                             |        |                                 |  |                                |  |   |      | 
|Diluted
  EPS                                      |  |                             |        |                                 |  |                                |  |   |      | 
|Net income plus assumed
  conversions              |  | $                           | 49,313 |                                 |  | 121,371                        |  | $ | 0.41 | 
|                                                   |  |                             |        |                                 |  |                                |  |   |      | 
|                                                   |  |                             |        |                                 |  |                                |  |   |      | 
|2006:                                              |  |                             |        |                                 |  |                                |  |   |      | 
|                                                  
|Basic EPS                                          |  |                             |        |                                 |  |                                |  |   |      | 
|Net income                                         |  | $                           | 8,379  |                                 |  | 118,544                        |  | $ | 0.07 | 
|                                                   |  |                             |        |                                 |  |                                |  |   |      | 
|Effect of
  Dilutive Securities                    |  |                             |        |                                 |  |                                |  |   |      | 
|4.00% junior subordinated
  convertible debentures |  |                             | 72     |                                 |  | 1,838                          |  |   |      | 
|Stock options, warrants
  and awards               |  |                             |       |                                 |  | 2,634                          |  |   |      | 
|                                                   |  |                             |        |                                 |  |                                |  |   |      | 
|Diluted
  EPS                                      |  |                             |        |                                 |  |                                |  |   |      | 
|Net income plus assumed
  conversions              |  | $                           | 8,451  |                                 |  | 123,016                        |  | $ | 0.07 | 
|                                                   |  |                             |        |                                 |  |                                |  |   |      | 

15

---



|                                                   |  |                           |        |                            |  |                         |  |   |      | 
|-------------------------------------------------- |  | ------------------------- | ------ | -------------------------- |  | ----------------------- |  | - | ---- | 
|                                                   |  | Six months ended June 30, |       
|                                                   |  |                           |       
|2007:                                              |  | Income(Numerator)         |        | Common Shares(Denominator) |  | Per Common ShareAmounts | 
|                                                  
|Basic
  EPS                                        |  |                           |        |                            |  |                         |  |   |      | 
|Net income                                         |  | $                         | 92,228 |                            |  | 119,233                 |  | $ | 0.77 | 
|                                                   |  |                           |        |                            |  |                         |  |   |      | 
|Effect
  of Dilutive Securities                    |  |                           |        |                            |  |                         |  |   |      | 
|4.00% junior
  subordinated convertible debentures |  |                           | 144    |                            |  | 316                     |  |   |      | 
|Stock options,
  warrants and awards               |  |                           |       |                            |  | 1,826                   |  |   |      | 
|                                                   |  |                           |        |                            |  |                         |  |   |      | 
|Diluted
  EPS                                      |  |                           |        |                            |  |                         |  |   |      | 
|Net income plus
  assumed conversions              |  | $                         | 92,372 |                            |  | 121,375                 |  | $ | 0.76 | 
|                                                   |  |                           |        |                            |  |                         |  |   |      | 
|                                                   |  |                           |        |                            |  |                         |  |   |      | 
|2006:                                              |  |                           |        |                            |  |                         |  |   |      | 
|                                                  
|Basic
  EPS                                        |  |                           |        |                            |  |                         |  |   |      | 
|Net income                                         |  | $                         | 61,610 |                            |  | 118,229                 |  | $ | 0.52 | 
|                                                   |  |                           |        |                            |  |                         |  |   |      | 
|Effect
  of Dilutive Securities                    |  |                           |        |                            |  |                         |  |   |      | 
|4.00% junior
  subordinated convertible debentures |  |                           | 144    |                            |  | 2,202                   |  |   |      | 
|Stock options,
  warrants and awards               |  |                           |       |                            |  | 2,872                   |  |   |      | 
|                                                   |  |                           |        |                            |  |                         |  |   |      | 
|Diluted
  EPS                                      |  |                           |        |                            |  |                         |  |   |      | 
|Net income plus
  assumed conversions              |  | $                         | 61,754 |                            |  | 123,303                 |  | $ | 0.50 | 
|                                                   |  |                           |        |                            |  |                         |  |   |      | 

During the three and six months
ended June 30, 2007 and 2006, the anti-dilutive effect associated with certain
stock options, warrants and stock awards was excluded from the computation of
diluted EPS, since the exercise price was greater than the average market price
of the Companys common stock during these periods. The aggregate number of
stock options, warrants and stock awards excluded from the computation of
diluted EPS for the quarters ended June 30, 2007 and 2006 totaled 3.7 million
and 1.6 million, respectively, and for the six months ended June 30, 2007 and
2006, totaled 3.7 million and 1.6 million, respectively.

Note 10 - Restructuring and Other Related Charges

Omnicare Full Potential
Plan

In the second quarter of 2006, the Company commenced
the implementation of the Omnicare Full Potential Plan, a major initiative
designed to re-engineer the Companys pharmacy operating model to increase
efficiency and enhance customer growth. The Omnicare Full Potential Plan is
expected to optimize resources across the entire organization by implementing
best practices and a hub-and-spoke model, whereby certain key support and
production functions will be transferred to regional hubs specifically
designed and managed to perform

16

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these tasks, with local spoke pharmacies focusing on
time-sensitive services and customer-facing processes.

This program is expected to be completed over a
30-month period and is estimated to result in total pretax restructuring and
other related charges of approximately $80 million. The charges primarily include
severance pay, employment agreement buy-outs, excess lease costs, professional fees and other related costs.
The Company recorded restructuring and other related charges for the Omnicare
Full Potential Plan of approximately $8 million and $17 million pretax during
the three and six months ended June 30, 2007, respectively, and approximately
$17 million pretax during the year ended December 31, 2006, (approximately $8
million pretax in the three and six months ended June 30, 2006). The remainder
of the overall restructuring and other related charges will be recognized and
disclosed over the remainder of 2007 and 2008 as various phases of the project
are finalized and implemented. The Company estimates that the initial phase of
the program will lead to a reduction in force of approximately 1,200 positions,
associated primarily with pharmacy operations. Approximately 860 of these
positions have been eliminated as of June 30, 2007.

The restructuring charges primarily include severance
pay, the buy-out of employment agreements, lease terminations, and other
assets, fees and facility exit costs. The other related charges are primarily
comprised of professional fees. Details of the Omnicare Full Potential Plan
restructuring and other related charges follow (pretax, in thousands):

|                                                |  |                            |       |                       |   |                    |  |                        |        |   |   |       | 
|----------------------------------------------- |  | -------------------------- | ----- | --------------------- | - | ------------------ |  | ---------------------- | ------ | - | - | ----- | 
|Restructuring
  charges:                        |  | Balance atDecember 31,2006 |       | 2007Provision/Accrual |   | Utilizedduring2007 |  | Balance atJune 30,2007 |       
|                                                |  |                            |       |                       |   |                    |  |                        |       
|Employee severance                              |  | $                          | 2,690 |                       | $ | 940                |  | $                      | (2,438 | ) | $ | 1,192 | 
|Employment agreement buy-outs                   |  |                            |      |                       |   | 2,250              |  |                        | (215   | ) |   | 2,035 | 
|Lease terminations                              |  |                            | 74    |                       |   | 3,154              |  |                        | (754   | ) |   | 2,474 | 
|Other assets, fees and facility exit costs      |  |                            | 1,169 |                       |   | 5,371              |  |                        | (4,134 | ) |   | 2,406 | 
|                                                |  |                            |       |                       |   |                    |  |                        |        |   |   |       | 
|Total
  restructuring charges                   |  | $                          | 3,933 |                       |   | 11,715             |  | $                      | (7,541 | ) | $ | 8,107 | 
|                                                |  |                            |       |                       |   |                    |  |                        |        |   |   |       | 
|                                                |  |                            |       |                       |   |                    |  |                        |        |   |   |       | 
|Other related charges                           |  |                            |       |                       |   | 5,288              |  |                        |        |   |   |       | 
|                                                |  |                            |       |                       |   |                    |  |                        |        |   |   |       | 
|                                                |  |                            |       |                       |   |                    |  |                        |        |   |   |       | 
|Total
  restructuring and other related charges |  |                            |       |                       | $ | 17,003             |  |                        |        |   |   |       | 
|                                                |  |                            |       |                       |   |                    |  |                        |        |   |   |       | 

As of June 30, 2007, the Company has made cumulative
payments of approximately $6.4 million of severance and other employee-related
costs for the Omnicare Full Potential Plan. The remaining liabilities at June
30, 2007, represent amounts not yet paid relating to actions taken in
connection with the program (primarily severance and employment agreement
buy-out related payments, lease payments and professional fees) and will be
settled as these matters are finalized. The provision/accrual and corresponding
payment amounts relating to employee severance are being accounted for
primarily in accordance with SFAS No. 112 Employers Accounting for
Postemployment Benefits; and the provision/accrual and corresponding payment
amounts relating to employment agreement buy-outs are being accounted for primarily
in accordance with SFAS No. 146 Accounting for Costs Associated
with Exit or Disposal Activities (SFAS 146).

17

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2005 Program

The Company previously disclosed consolidation plans
and other productivity initiatives to streamline pharmacy services (related,
    in part, to the NeighborCare, Inc. acquisition) and contract research organization
operations, including maximizing workforce and operating asset utilization, and
producing a more cost-efficient, operating infrastructure (the 2005 Program).
The Company recorded restructuring and other related charges of approximately
$3 million and $11 million pretax in the three and six months ended June 30,
2006, respectively. The 2005 Program initiatives required cumulative
restructuring and other related charges of approximately $31 million before
taxes through the third quarter of 2006. The restructuring liabilities
associated with the 2005 Program were evaluated by the Company during the
quarter ended June 30, 2007. During this review, it was determined that certain
liabilities are no longer expected to be utilized as part of the activities
remaining under the 2005 Program. In accordance with SFAS 146, the Company recorded
adjustments to reduce the employee severance and employee agreement buy-out
liabilities by approximately $1.2 million and $0.4 million pretax,
respectively, during the three and six months ended June 30, 2007.

The restructuring charges primarily included severance
pay, the buy-out of employment agreements, lease terminations and other assets,
fees and facility exit costs. Details of the remaining 2005 Program
restructuring charge liabilities follow (pretax, in thousands):

|                                           |  |                            |        |                       |   |                    |   |                        |        |   |   |       | 
|------------------------------------------ |  | -------------------------- | ------ | --------------------- | - | ------------------ | - | ---------------------- | ------ | - | - | ----- | 
|Restructuring
  liabilities:               |  | Balance atDecember 31,2006 |        | Adjustmentsduring2007 |   | Utilizedduring2007 |   | Balance atJune 30,2007 |       
|                                           |  |                            |        |                       |   |                    |   |                        |       
|Employee severance                         |  | $                          | 1,590  |                       | $ | (1,218             | ) | $                      | (64    | ) | $ | 308   | 
|Employment agreement buy-outs              |  |                            | 211    |                       |   | (361               | ) |                        | 150    |   |   |      | 
|Lease terminations                         |  |                            | 7,564  |                       |   |                   |   |                        | (1,291 | ) |   | 6,273 | 
|Other assets, fees and facility exit costs |  |                            | 945    |                       |   |                   |   |                        | (912   | ) |   | 33    | 
|                                           |  |                            |        |                       |   |                    |   |                        |        |   |   |       | 
|Total
  restructuring liabilities          |  | $                          | 10,310 |                       | $ | (1,579             | ) | $                      | (2,117 | ) | $ | 6,614 | 
|                                           |  |                            |        |                       |   |                    |   |                        |        |   |   |       | 

As of June 30, 2007, the Company has made cumulative
payments of approximately $7.6 million of severance and other employee-related
costs. The remaining liabilities at June 30, 2007, represent amounts not yet
paid relating to actions taken in connection with the program (primarily lease
payments) and will be settled as these matters are finalized.

Note 11 - Commitments and Contingencies

Omnicare continuously evaluates contingencies based
upon the best available information. The Company believes that liabilities have
been provided to the extent necessary in cases where the outcome is considered
probable and reasonably estimable. To the extent that resolution of
contingencies results in amounts that vary from the Companys recorded
liabilities, future earnings will be charged or credited accordingly.

18

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The Company has received administrative subpoenas from
the United States Attorneys Office, District of Massachusetts, seeking
information arising out of the Companys relationships with certain
manufacturers and distributors of pharmaceutical products and certain
customers, as well as with respect to contracts with certain companies acquired
by the Company. The Company believes that it has complied with all applicable
laws and regulations with respect to these matters.

The federal government and certain states had been
investigating allegations relating to three generic pharmaceuticals provided
    by the Company in connection with the substitution of capsules for tablets
(Ranitidine), tablets for capsules (Fluoxetine) and two 7.5 mg tablets for one
15 mg tablet (Buspirone). On November 14, 2006, the Company entered into a
civil settlement agreement, under which the Company paid the federal government
and participating state governments $51 million to satisfy all of the federal
and state civil claims and related plaintiff legal fees. The Company recorded
    a special litigation charge, for the settlement and related legal fees, of
    $57.5 million pretax, ($45.3 million aftertax) in its financial results for
    2006, including $19.3 million and $53.4 million pretax in the three and six
    months ended June 30, 2006, respectively, to establish a reserve relating
    to the aforementioned investigation. The settlement agreement also resulted
    in the dismissal, with prejudice, of a number of other allegations included
    in complaints filed by two qui tam relators. Another issue alleged
    by one of the qui
tam relators remains under seal and was not resolved by the
settlement. As part of the settlement agreement, on November 9, 2006, the
Company entered into a Corporate Integrity Agreement with the Department of
Health and Human Services Office of the Inspector General with a term of five
years from November 9, 2006. The Corporate Integrity Agreement requires that
the Company maintain its compliance program in accordance with the terms of the
Corporate Integrity Agreement. The agreement contains specific requirements
regarding the development and implementation of therapeutic interchange
programs and the general training of certain Company employees as to the
requirements of the Companys compliance program and the Corporate Integrity
Agreement. The requirements of the Corporate Integrity Agreement have resulted
in increased costs to maintain the Companys compliance program and could
result in greater scrutiny by federal regulatory authorities. Violations of the
Corporate Integrity Agreement could subject the Company to significant monetary
and/or administrative penalties.

On July 11, 2006, the Attorney Generals Office in
Michigan provided the Companys legal counsel with information concerning its
investigation relating to certain billing issues under the Michigan Medicaid
program at Specialized Pharmacy Services, a subsidiary of the Company located
in Michigan. On October 5, 2006, the Company entered into a voluntary
settlement agreement and a two-year Corporate Integrity Agreement with the
State of Michigan to resolve the Michigan Attorney Generals investigation
relating to certain billing issues under the Michigan Medicaid program at
Specialized Pharmacy Services. Under the terms of the settlement agreement, the
Company paid the State of Michigan approximately $43 million, with an
additional amount of approximately $6 million to be paid over the following
three years. The settlement agreement does not include any finding of
wrongdoing or any admission of liability. With respect to claims that
Specialized Pharmacy Services was not billing properly for drugs provided to
hospice patients, which were not covered by the settlement agreement, the
Company has reached an agreement in principle to settle the matter with the
State of Michigan. Although the final details of the agreement with respect to
the hospice claims have not yet been resolved, it

19

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is anticipated that the Company will pay approximately
$3.5 million to settle the matter. The Company recorded a special litigation
charge of $54.0 million pretax ($46.7 million aftertax) in its financial
results for the three and six months ended June 30, 2006 based on the terms of
the settlement agreement. The Corporate Integrity Agreement with the State of
Michigan requires that the Company and Specialized Pharmacy Services maintain
Specialized Pharmacy Services compliance program in accordance with the terms
of the Corporate Integrity Agreement. The agreement contains specific
requirements regarding compliance with Medicaid policies governing access to
pharmacy facilities and records, unit dose billing agreements, consumption
billing, hospice patient terminal illness prescriptions and prescriptions
dispensed after a patients death. The requirements of the Corporate Integrity
Agreement could result in increased costs to maintain Specialized Pharmacy
Services compliance program and greater scrutiny by Michigan regulatory
authorities. Violations of the Corporate Integrity Agreement could subject the
Company to significant monetary and/or administrative penalties.

On February 2 and February 13, 2006, respectively, two substantially
similar putative class action lawsuits, entitled Indiana State Dist. Council of Laborers & HOD Carriers Pension
& Welfare Fund v. Omnicare, Inc., et al., No. 2:06cv26 (HOD Carriers), and Chi v. Omnicare, Inc., et
al., No. 2:06cv31 (Chi),
were filed against Omnicare and two of its officers in the United States
District Court for the Eastern District of Kentucky purporting to assert claims
for violation of §§10(b) and 20(a) of the Securities Exchange Act of 1934 and
Rule 10b-5 promulgated thereunder, and seeking, among other things,
compensatory damages and injunctive relief. The complaints, which purported to
be brought on behalf of all open-market purchasers of Omnicare common stock
from August 3, 2005 through January 27, 2006, alleged that Omnicare had artificially
inflated its earnings by engaging in improper generic drug substitution and
that defendants had made false and misleading statements regarding the
Companys business and prospects. On April 3, 2006, plaintiffs in the HOD Carriers
case formally moved for consolidation and the appointment of lead plaintiff and
lead counsel pursuant to the Private Securities Litigation Reform Act of 1995.
On May 22, 2006, that motion was granted, the cases were consolidated, and a
lead plaintiff and lead counsel were appointed. On July 20, 2006, plaintiffs
filed a consolidated amended complaint, adding a third officer as a defendant
and new factual allegations primarily relating to revenue recognition, the
valuation of receivables and the valuation of inventories. On October 31, 2006,
plaintiffs moved for leave to file a second amended complaint, which was
granted on January 26, 2007, on the condition that no further amendments would
be permitted absent extraordinary circumstances. Plaintiffs thereafter filed
their second amended complaint on January 29, 2007. The second amended
complaint (i) expands the putative class to include all purchasers of Omnicare
common stock from August 3, 2005 through July 27, 2006, (ii) names two members
of the Companys board of directors as additional defendants, (iii) adds a new
plaintiff and a new claim for violation of Section 11 of the Securities Act of
1933 based on alleged false and misleading statements in the registration
statement filed in connection with the Companys December 2005 public offering,
(iv) alleges that the Company failed to timely disclose its contractual dispute
with UnitedHealth, and (v) alleges that the Company failed to timely record
certain special litigation reserves. Defendants filed a motion to dismiss the
second amended complaint on March 12, 2007, claiming that plaintiffs had failed
adequately to plead loss causation, scienter or any actionable misstatement or
omission. That motion was fully briefed as of May 1, 2007. In response to certain arguments
relating to the individual claims of the named plaintiffs that were raised in
defendants pending motion to dismiss, plaintiffs filed a motion to add,
or in the alternative, to intervene an additional named plaintiff, Alaska Electrical
Pension Fund, on July 27, 2007. Oral argument was held on defendants motion
to dismiss on August 2, 2007 and the court reserved decision.

20

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On February
13, 2006, two substantially similar shareholder derivative actions, entitled Isak
v. Gemunder, et al., Case No.
06-CI-390, and Fragnoli v. Hutton, et al.,
Case No. 06-CI-389, were filed in Kentucky State Circuit Court, Kenton Circuit,
against the members of Omnicares board of directors, individually, purporting
to assert claims for breach of fiduciary duty, abuse of control, gross
mismanagement, waste of corporate assets and unjust enrichment arising out of
the Companys alleged violations of federal and state health care laws based
upon the same purportedly improper generic drug substitution that is the
subject of the federal purported class action lawsuits. The complaints seek,
among other things, damages, restitution and injunctive relief. The Isak and Fragnoli
actions were later consolidated by agreement of the parties. On January 12,
2007, the defendants filed a motion to dismiss the consolidated action on the
grounds that the dismissal of the substantially identical shareholder
derivative action, Irwin v. Gemunder, et al., 2:06cv62, by the
United States District Court for the Eastern District of Kentucky on November
20, 2006 should be given preclusive effect and thus bars re-litigation of the
issues already decided in Irwin. Instead
of opposing that motion, on March 16, 2007, the plaintiffs filed an amended
consolidated complaint, which continues to name all of the directors as
defendants and asserts the same claims, but attempts to bolster those claims
by adding nearly all of the substantive allegations from the most recent complaint
in the federal securities class action (seediscussion
of HOD Carriers above) and an
amended complaint in Irwin that added
the same factual allegations that were added to the consolidated amended
complaint in theHOD Carriers
action. On April 16, 2007, defendants filed a supplemental memorandum of law
in further support of their pending motion to dismiss contending that the amended
complaint should be dismissed on the same grounds previously articulated for
dismissal, namely, the preclusive effect of the dismissal of the Irwin action. That motion has been fully briefed and oral argument has been scheduled for August 21, 2007.

The Company
believes the above-described purported class and derivative actions are without
merit and will be vigorously defended.

The three and
six months ended June 30, 2007 included a $9.0 million pretax charge ($5.5
million after taxes) and a $15.9 million pretax charge ($9.8 million after
taxes), respectively, reflected in the Litigation charges line of the
Consolidated Statements of Income, for litigation-related professional expenses
in connection with the administrative subpoenas from the United States Attorneys
Office, District of Massachusetts, the purported class and derivative actions,
the Companys lawsuit against United, the inquiry conducted by the Attorney
Generals Office in Michigan relating to certain billing issues under the
Michigan Medicaid program, the investigation by the federal government and
certain states relating to drug substitutions and the Companys response to
subpoenas it received relating to other legal proceedings to which the Company
is not a party.

During 2006,
the Company experienced certain quality control and product recall issues, as
well as fire damage, at one of its repackaging facilities, Heartland Repack
Services (Heartland). As a precautionary measure, the Company voluntarily and
temporarily suspended operations at Heartland. During the time that the
Heartland facility was closed, the Company conducted certain environmental
tests at the facility. Based on the results of these tests, which showed very
low levels of beta lactam residue, and the time and expense associated with
completing the necessary remediation procedures, as well as the short remaining
term on the lease for the current

21

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facility, the
Company decided not to reopen the Heartland facility. The Company continues to
work to address and resolve all issues, and restore centralized repackaging to
full capacity. In order to temporarily replace the capacity of the Heartland
facility, the Company ramped up production in its other repackaging facility,
as well as onsite in its individual pharmacies for use by their patients. As a
result, the Company has been and continues to be able to meet the needs of all
of its client facilities and their residents. Addressing these issues served to
increase costs and as a result, the three months ended June 30, 2007 included
special charges of approximately $4.9 million pretax ($4.0 million and $0.9
million was recorded in the cost of sales and operating expenses sections of
the Consolidated Statements of Income, respectively) ($3.0 million after taxes)
for costs associated with the quality control, product recall and fire damage
issues at Heartland. The associated costs for the six months ended June 30,
2007 totaled approximately $10.7 million pretax ($8.3 million and $2.4 million
was recorded in the cost of sales and operating expenses sections of the
Consolidated Statements of Income, respectively) ($6.6 million after taxes). Beginning
in the third quarter, the year ended 2006 included special charges of
approximately $33.7 million pretax ($27.7 million and $6.1 million was recorded
in the cost of sales and operating expense sections of the Consolidated
Statements of Income, respectively) ($21.2 million after taxes) for these
increased costs, particularly relating to the write-off of inventory totaling
$18.9 million pretax, as well as $14.8 million pretax for the incremental costs
associated with the quality control, product recall and fire damage issues at
Heartland. The Company maintains product recall, property and casualty and
business interruption insurance, and the extent of insurance recovery for these
expenses is currently being reviewed by its outside advisors. As of June 30,
2007, no receivables for insurance recoveries have been recorded by the
Company. Further, in order to replace the repackaging capacity of the Heartland
facility, on February 27, 2007, Omnicare entered into an agreement for the
Repackaging Services division of Cardinal Health to serve as the contract
repackager for pharmaceutical volumes previously repackaged at the Heartland
facility. The agreement initially extends through October 2010.

Although the
Company cannot predict the ultimate outcome of the matters described in the
preceding paragraphs, there can be no assurance that the resolution of these
matters will not have a material adverse impact on the Companys consolidated
results of operations, financial position or cash flows or, in the case of the
investigations regarding certain drug substitutions and certain billing issues
under the Michigan Medicaid program and the matters relating to the Heartland
facility, that these matters will be resolved in an amount that would not
exceed the amount of the pretax charges recorded by the Company.

As part of its
ongoing operations, the Company is subject to various inspections, audits,
inquiries and similar actions by third parties, as well as
governmental/regulatory authorities responsible for enforcing the laws and
regulations to which the Company is subject. The Company is also involved in
various legal actions arising in the normal course of business. These matters
are continuously being evaluated and, in many cases, are being contested by the
Company and the outcome is not predictable. Consequently, an estimate of the
possible loss or range of loss associated with certain actions cannot be made. Although
occasional adverse outcomes (or settlements) may occur and could possibly have
an adverse effect on the results of operations and cash flows in any one
accounting period, outside of the matters described in the preceding
paragraphs, the Company is not aware of any such matters whereby it is
presently believed that

22

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the final disposition will have a material
adverse affect on the Companys overall consolidated financial position.

The Company
indemnifies the directors and officers of the Company for certain liabilities
that might arise from the performance of their job responsibilities for the Company.
Additionally, in the normal course of business, the Company enters into
contracts that contain a variety of representations and warranties and which
provide general indemnifications. The Companys maximum exposure under these
arrangements is unknown, as this involves the resolution of claims made, or
future claims that may be made, against the Company, its directors and/or
officers, the outcomes of which is unknown and not currently predictable. Accordingly,
no liabilities have been recorded for the indemnifications.

Note 12 - Segment Information

Based on the management
approach, as defined by SFAS No. 131, Disclosures about Segments of an
Enterprise and Related Information, Omnicare has two operating segments. The
Companys larger segment is Pharmacy Services. Pharmacy Services primarily
provides distribution of pharmaceuticals, related pharmacy consulting and other
ancillary services, data management services, medical supplies, and
distribution and patient assistance services for specialty pharmaceuticals. The
Companys customers are primarily skilled nursing, assisted living, hospice and
other providers of healthcare services in 47 states in the United States, the
District of Columbia and in Canada at June 30, 2007. The Companys other
segment is CRO Services, which provides comprehensive product development and
research services to client companies in pharmaceutical, biotechnology, medical
devices and diagnostics industries in 30 countries around the world at June 30,
2007, including the United States.

23

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The table
below presents information about the segments as of and for the three and six
months ended June 30, 2007 and 2006, and should be read in conjunction with the
paragraph that follows(in thousands):

|                                          |  |                             |           |                |   |                               |   |                       |         |   |   |           |  
|----------------------------------------- |  | --------------------------- | --------- | -------------- | - | ----------------------------- | - | --------------------- | ------- | - | - | --------- | -
|                                          |  | Three months ended June 30, |          
|                                          |  |                             |          
|2007:                                     |  | Pharmacy
  Services         |           | CRO
  Services |   | Corporate and
  Consolidating |   | Consolidated
  Totals |        
|                                          | 
|Net sales                                 |  | $                           | 1,498,918 |                | $ | 50,239                        |   | $                     |        |   | $ | 1,549,157 |  
|Depreciation
  and amortization           |  |                             | (27,136   | )              |   | (477                          | ) |                       | (873    | ) |   | (28,486   | )
|Restructuring
  and other related charges |  |                             | (5,004    | )              |   | (252                          | ) |                       | (994    | ) |   | (6,250    | )
|Litigation
  charges                      |  |                             | (9,010    | )              |   |                              |   |                       |        |   |   | (9,010    | )
|Heartland
  matters                       |  |                             | (4,911    | )              |   |                              |   |                       |        |   |   | (4,911    | )
|Operating
  income (expense)              |  |                             | 144,274   |                |   | 2,904                         |   |                       | (26,208 | ) |   | 120,970   |  
|Total assets                              |  |                             | 7,001,157 |                |   | 181,252                       |   |                       | 287,811 |   |   | 7,470,220 |  
|Capital
  expenditures                    |  |                             | (9,629    | )              |   | (388                          | ) |                       | (627    | ) |   | (10,644   | )
|                                          |  |                             |           |                |   |                               |   |                       |         |   |   |           |  
|2006:                                     |  |                             |           |                |   |                               |   |                       |         |   |   |           |  
|                                          | 
|Net sales                                 |  | $                           | 1,598,604 |                | $ | 42,506                        |   | $                     |        |   | $ | 1,641,110 |  
|Depreciation
  and amortization           |  |                             | (28,970   | )              |   | (493                          | ) |                       | (776    | ) |   | (30,239   | )
|Restructuring
  and other related charges |  |                             | (9,562    | )              |   | (1,004                        | ) |                       | (1,323  | ) |   | (11,889   | )
|Litigation
  charges                      |  |                             | (64,482   | )              |   |                              |   |                       |        |   |   | (64,482   | )
|Operating
  income (expense)              |  |                             | 107,225   |                |   | 1,301                         |   |                       | (24,357 | ) |   | 84,169    |  
|Total assets                              |  |                             | 6,975,876 |                |   | 159,086                       |   |                       | 480,709 |   |   | 7,615,671 |  
|Capital
  expenditures                    |  |                             | (8,025    | )              |   | (80                           | ) |                       | (351    | ) |   | (8,456    | )

24

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|                                        |  |                           |           |                |   |                               |   |                       |         |   |   |           |  
|--------------------------------------- |  | ------------------------- | --------- | -------------- | - | ----------------------------- | - | --------------------- | ------- | - | - | --------- | -
|                                        |  | Six months ended June 30, |          
|                                        |  |                           |          
|2007:                                   |  | Pharmacy
  Services       |           | CRO
  Services |   | Corporate and
  Consolidating |   | Consolidated
  Totals |        
|                                        |  |                           |           |                |   |                               |   |                       |        
|Net sales                               |  | $                         | 3,028,561 |                | $ | 97,661                        |   | $                     |        |   | $ | 3,126,222 |  
|Depreciation and amortization           |  |                           | (54,507   | )              |   | (954                          | ) |                       | (1,747  | ) |   | (57,208   | )
|Restructuring and other related charges |  |                           | (9,756    | )              |   | (2,070                        | ) |                       | (3,598  | ) |   | (15,424   | )
|Litigation charges                      |  |                           | (15,917   | )              |   |                              |   |                       |        |   |   | (15,917   | )
|Heartland matters                       |  |                           | (10,703   | )              |   |                              |   |                       |        |   |   | (10,703   | )
|Operating income (expense)              |  |                           | 279,864   |                |   | 3,634                         |   |                       | (52,842 | ) |   | 230,656   |  
|Total assets                            |  |                           | 7,001,157 |                |   | 181,252                       |   |                       | 287,811 |   |   | 7,470,220 |  
|Capital expenditures                    |  |                           | (17,100   | )              |   | (662                          | ) |                       | (1,163  | ) |   | (18,925   | )
|                                        |  |                           |           |                |   |                               |   |                       |         |   |   |           |  
|2006:                                   |  |                           |           |                |   |                               |   |                       |         |   |   |           |  
|                                        |  |                           |           |                |   |                               |   |                       |         |   |   |           |  
|Net sales                               |  | $                         | 3,215,156 |                | $ | 84,552                        |   | $                     |        |   | $ | 3,299,708 |  
|Depreciation and amortization           |  |                           | (58,642   | )              |   | (980                          | ) |                       | (1,515  | ) |   | (61,137   | )
|Restructuring and other related charges |  |                           | (14,878   | )              |   | (1,302                        | ) |                       | (3,422  | ) |   | (19,602   | )
|Litigation charges                      |  |                           | (98,582   | )              |   |                              |   |                       |        |   |   | (98,582   | )
|Operating income (expense)              |  |                           | 257,731   |                |   | 2,464                         |   |                       | (48,666 | ) |   | 211,529   |  
|Total assets                            |  |                           | 6,975,876 |                |   | 159,086                       |   |                       | 480,709 |   |   | 7,615,671 |  
|Capital expenditures                    |  |                           | (13,688   | )              |   | (176                          | ) |                       | (701    | ) |   | (14,565   | )

In accordance
with Emerging Issues Task Force (EITF) Issue No. 01-14, Income Statement
Characterization of Reimbursements Received for Out-of-Pocket Expenses
Incurred (EITF No. 01-14), Omnicare included in its reported CRO segment net
sales amount, for the three and six month periods ended June 30, 2007,
reimbursable out-of-pockets totaling $8.2 million and $15.4 million,
respectively, and $6.1 million and $12.3 million for the three and six months
ended June 30, 2006, respectively.

25

---



Note 13 - Guarantor Subsidiaries

The Companys
6.125% senior subordinated notes due 2013, the 6.75% senior subordinated notes
due 2013 and the 6.875% senior subordinated notes due 2015 are fully and
unconditionally guaranteed on an unsecured, joint and several basis by certain
wholly-owned subsidiaries of the Company (the Guarantor Subsidiaries). The
following condensed consolidating financial data illustrates the composition of
Omnicare, Inc. (Parent), the Guarantor Subsidiaries and the Non-Guarantor
Subsidiaries as of June 30, 2007 and December 31, 2006 for the balance sheets,
the three and six months ended June 30, 2007 and 2006 for the statements of
income and the statements of cash flows for the six months ended June 30, 2007
and 2006. Separate complete financial statements of the respective Guarantor
Subsidiaries would not provide information that would be necessary for
evaluating the sufficiency of the Guarantor Subsidiaries, and thus are not
presented. No consolidating/eliminating adjustment column is presented for the
condensed consolidating statements of cash flows since there were no
significant consolidating/eliminating adjustment amounts during the periods
presented.

Summary Consolidating Statements of Income(in thousands)

|                                                       |  |                             |         |                          |   |                                 |   |                                            |        |                                     |   |         |   |   |           |  
|------------------------------------------------------ |  | --------------------------- | ------- | ------------------------ | - | ------------------------------- | - | ------------------------------------------ | ------ | ----------------------------------- | - | ------- | - | - | --------- | -
|                                                       |  | Three months ended June 30, |        
|                                                       |  |                             |        
|2007:                                                  |  | Parent                      |         | Guarantor
  Subsidiaries |   | Non-
  Guarantor
  Subsidiaries |   | Consolidating/
  Eliminating
  Adjustments |        | Omnicare,
  Inc. and
  Subsidiaries |  
|                                                       |  |                             |         |                          |   |                                 |   |                                            |        |                                     |  
|Net sales                                              |  | $                           |        |                          | $ | 1,491,712                       |   | $                                          | 57,445 |                                     | $ |        |   | $ | 1,549,157 |  
|Cost of sales (COS)                                  |  |                             |        |                          |   | 1,107,178                       |   |                                            | 42,931 |                                     |   |        |   |   | 1,150,109 |  
|Heartland matters - COS                                |  |                             |        |                          |   | 4,015                           |   |                                            |       |                                     |   |        |   |   | 4,015     |  
|                                                       |  |                             |         |                          |   |                                 |   |                                            |        |                                     |   |         |   |   |           |  
|Gross profit                                           |  |                             |        |                          |   | 380,519                         |   |                                            | 14,514 |                                     |   |        |   |   | 395,033   |  
|Selling, general and administrative expenses
(S,G&A) |  |                             | 2,140   |                          |   | 244,767                         |   |                                            | 11,000 |                                     |   |        |   |   | 257,907   |  
|Restructuring and other related charges                |  |                             |        |                          |   | 6,250                           |   |                                            |       |                                     |   |        |   |   | 6,250     |  
|Litigation charges                                     |  |                             |        |                          |   | 9,010                           |   |                                            |       |                                     |   |        |   |   | 9,010     |  
|Heartland matters - S,G&A                              |  |                             |        |                          |   | 896                             |   |                                            |       |                                     |   |        |   |   | 896       |  
|                                                       |  |                             |         |                          |   |                                 |   |                                            |        |                                     |   |         |   |   |           |  
|Operating income (loss)                                |  |                             | (2,140  | )                        |   | 119,596                         |   |                                            | 3,514  |                                     |   |        |   |   | 120,970   |  
|Investment income                                      |  |                             | 764     |                          |   | 1,338                           |   |                                            |       |                                     |   |        |   |   | 2,102     |  
|Interest expense                                       |  |                             | (40,600 | )                        |   | (293                            | ) |                                            | (825   | )                                   |   |        |   |   | (41,718   | )
|                                                       |  |                             |         |                          |   |                                 |   |                                            |        |                                     |   |         |   |   |           |  
|Income (loss) before income taxes                      |  |                             | (41,976 | )                        |   | 120,641                         |   |                                            | 2,689  |                                     |   |        |   |   | 81,354    |  
|Income tax (benefit) expense                           |  |                             | (16,474 | )                        |   | 47,529                          |   |                                            | 1,058  |                                     |   |        |   |   | 32,113    |  
|Equity in net income of subsidiaries                   |  |                             | 74,743  |                          |   |                                |   |                                            |       |                                     |   | (74,743 | ) |   |          |  
|                                                       |  |                             |         |                          |   |                                 |   |                                            |        |                                     |   |         |   |   |           |  
|Net income                                             |  | $                           | 49,241  |                          | $ | 73,112                          |   | $                                          | 1,631  |                                     | $ | (74,743 | ) | $ | 49,241    |  
|                                                       |  |                             |         |                          |   |                                 |   |                                            |        |                                     |   |         |   |   |           |  
|                                                       |  |                             |         |                          |   |                                 |   |                                            |        |                                     |   |         |   |   |           |  
|2006:                                                  |  |                             |         |                          |   |                                 |   |                                            |        |                                     |   |         |   |   |           |  
|                                                       |  |                             |         |                          |   |                                 |   |                                            |        |                                     |   |         |   |   |           |  
|Net sales                                              |  | $                           |        |                          | $ | 1,549,758                       |   | $                                          | 91,352 |                                     | $ |        |   | $ | 1,641,110 |  
|Cost of sales                                          |  |                             |        |                          |   | 1,170,210                       |   |                                            | 70,609 |                                     |   |        |   |   | 1,240,819 |  
|                                                       |  |                             |         |                          |   |                                 |   |                                            |        |                                     |   |         |   |   |           |  
|Gross profit                                           |  |                             |        |                          |   | 379,548                         |   |                                            | 20,743 |                                     |   |        |   |   | 400,291   |  
|Selling, general and administrative
expenses           |  |                             | 2,278   |                          |   | 223,881                         |   |                                            | 13,592 |                                     |   |        |   |   | 239,751   |  
|Restructuring and other related charges                |  |                             |        |                          |   | 11,889                          |   |                                            |       |                                     |   |        |   |   | 11,889    |  
|Litigation charges                                     |  |                             |        |                          |   | 64,482                          |   |                                            |       |                                     |   |        |   |   | 64,482    |  
|                                                       |  |                             |         |                          |   |                                 |   |                                            |        |                                     |   |         |   |   |           |  
|Operating income (loss)                                |  |                             | (2,278  | )                        |   | 79,296                          |   |                                            | 7,151  |                                     |   |        |   |   | 84,169    |  
|Investment income                                      |  |                             | 2,020   |                          |   | 1,029                           |   |                                            |       |                                     |   |        |   |   | 3,049     |  
|Interest expense                                       |  |                             | (41,918 | )                        |   | (504                            | ) |                                            | (647   | )                                   |   |        |   |   | (43,069   | )
|                                                       |  |                             |         |                          |   |                                 |   |                                            |        |                                     |   |         |   |   |           |  
|Income (loss) before income taxes                      |  |                             | (42,176 | )                        |   | 79,821                          |   |                                            | 6,504  |                                     |   |        |   |   | 44,149    |  
|Income tax (benefit) expense                           |  |                             | (15,723 | )                        |   | 49,051                          |   |                                            | 2,442  |                                     |   |        |   |   | 35,770    |  
|Equity in net income of subsidiaries                   |  |                             | 34,832  |                          |   |                                |   |                                            |       |                                     |   | (34,832 | ) |   |          |  
|                                                       |  |                             |         |                          |   |                                 |   |                                            |        |                                     |   |         |   |   |           |  
|Net income                                             |  | $                           | 8,379   |                          | $ | 30,770                          |   | $                                          | 4,062  |                                     | $ | (34,832 | ) | $ | 8,379     |  
|                                                       |  |                             |         |                          |   |                                 |   |                                            |        |                                     |   |         |   |   |           |  

26

---



Note
13 - Guarantor Subsidiaries (Continued)

Summary Consolidating Statements of Income(in thousands)

|                                                       |  |                           |         |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|------------------------------------------------------ |  | ------------------------- | ------- | ------------------------ | - | ------------------------------- | - | ------------------------------------------ | ------- | ----------------------------------- | - | -------- | - | - | --------- | -
|                                                       |  | Six months ended June 30, |        
|                                                       |  |                           |        
|2007:                                                  |  | Parent                    |         | Guarantor
  Subsidiaries |   | Non-
  Guarantor
  Subsidiaries |   | Consolidating/
  Eliminating
  Adjustments |         | Omnicare,
  Inc. and
  Subsidiaries |  
|                                                       |  |                           |         |                          |   |                                 |   |                                            |         |                                     |  
|Net sales                                              |  | $                         |        |                          | $ | 3,011,730                       |   | $                                          | 114,492 |                                     | $ |         |   | $ | 3,126,222 |  
|Cost of sales (COS)                                  |  |                           |        |                          |   | 2,255,878                       |   |                                            | 85,224  |                                     |   |         |   |   | 2,341,102 |  
|Heartland matters - COS                                |  |                           |        |                          |   | 8,311                           |   |                                            |        |                                     |   |         |   |   | 8,311     |  
|                                                       |  |                           |         |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|Gross profit                                           |  |                           |        |                          |   | 747,541                         |   |                                            | 29,268  |                                     |   |         |   |   | 776,809   |  
|Selling, general and administrative expenses
(S,G&A) |  |                           | 4,273   |                          |   | 487,296                         |   |                                            | 20,851  |                                     |   |         |   |   | 512,420   |  
|Restructuring and other related charges                |  |                           |        |                          |   | 14,514                          |   |                                            | 910     |                                     |   |         |   |   | 15,424    |  
|Litigation charges                                     |  |                           |        |                          |   | 15,917                          |   |                                            |        |                                     |   |         |   |   | 15,917    |  
|Heartland matters - S,G&A                              |  |                           |        |                          |   | 2,392                           |   |                                            |        |                                     |   |         |   |   | 2,392     |  
|                                                       |  |                           |         |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|Operating income (loss)                                |  |                           | (4,273  | )                        |   | 227,422                         |   |                                            | 7,507   |                                     |   |         |   |   | 230,656   |  
|Investment income                                      |  |                           | 1,335   |                          |   | 2,688                           |   |                                            |        |                                     |   |         |   |   | 4,023     |  
|Interest expense                                       |  |                           | (81,606 | )                        |   | (569                            | ) |                                            | (1,591  | )                                   |   |         |   |   | (83,766   | )
|                                                       |  |                           |         |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|Income (loss) before income taxes                      |  |                           | (84,544 | )                        |   | 229,541                         |   |                                            | 5,916   |                                     |   |         |   |   | 150,913   |  
|Income tax (benefit) expense                           |  |                           | (32,735 | )                        |   | 89,129                          |   |                                            | 2,291   |                                     |   |         |   |   | 58,685    |  
|Equity in net income of subsidiaries                   |  |                           | 144,037 |                          |   |                                |   |                                            |        |                                     |   | (144,037 | ) |   |          |  
|                                                       |  |                           |         |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|Net income                                             |  | $                         | 92,228  |                          | $ | 140,412                         |   | $                                          | 3,625   |                                     | $ | (144,037 | ) | $ | 92,228    |  
|                                                       |  |                           |         |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|                                                       |  |                           |         |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|2006:                                                  |  |                           |         |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|                                                       |  |                           |         |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|Net sales                                              |  | $                         |        |                          | $ | 3,116,484                       |   | $                                          | 183,224 |                                     | $ |         |   | $ | 3,299,708 |  
|Cost of sales                                          |  |                           |        |                          |   | 2,342,982                       |   |                                            | 139,920 |                                     |   |         |   |   | 2,482,902 |  
|                                                       |  |                           |         |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|Gross profit                                           |  |                           |        |                          |   | 773,502                         |   |                                            | 43,304  |                                     |   |         |   |   | 816,806   |  
|Selling, general and administrative
expenses           |  |                           | 4,259   |                          |   | 456,736                         |   |                                            | 26,098  |                                     |   |         |   |   | 487,093   |  
|Restructuring and other related charges                |  |                           |        |                          |   | 19,602                          |   |                                            |        |                                     |   |         |   |   | 19,602    |  
|Litigation charges                                     |  |                           |        |                          |   | 98,582                          |   |                                            |        |                                     |   |         |   |   | 98,582    |  
|                                                       |  |                           |         |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|Operating income (loss)                                |  |                           | (4,259  | )                        |   | 198,582                         |   |                                            | 17,206  |                                     |   |         |   |   | 211,529   |  
|Investment income                                      |  |                           | 3,011   |                          |   | 1,837                           |   |                                            |        |                                     |   |         |   |   | 4,848     |  
|Interest expense                                       |  |                           | (83,110 | )                        |   | (1,154                          | ) |                                            | (1,217  | )                                   |   |         |   |   | (85,481   | )
|                                                       |  |                           |         |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|Income (loss) before income taxes                      |  |                           | (84,358 | )                        |   | 199,265                         |   |                                            | 15,989  |                                     |   |         |   |   | 130,896   |  
|Income tax (benefit) expense                           |  |                           | (30,951 | )                        |   | 94,371                          |   |                                            | 5,866   |                                     |   |         |   |   | 69,286    |  
|Equity in net income of subsidiaries                   |  |                           | 115,017 |                          |   |                                |   |                                            |        |                                     |   | (115,017 | ) |   |          |  
|                                                       |  |                           |         |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|Net income                                             |  | $                         | 61,610  |                          | $ | 104,894                         |   | $                                          | 10,123  |                                     | $ | (115,017 | ) | $ | 61,610    |  
|                                                       |  |                           |         |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  

27

---



Note 13 - Guarantor Subsidiaries (Continued)

Condensed Consolidating Balance Sheets(in thousands)

|                                                          |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|--------------------------------------------------------- |  | ------ | --------- | ------------------------ | - | ------------------------------- |  | ------------------------------------------ | ------- | ----------------------------------- | - | ---------- | - | - | --------- | 
|As of June
  30, 2007:                                    |  | Parent |           | Guarantor
  Subsidiaries |   | Non-
  Guarantor
  Subsidiaries |  | Consolidating/
  Eliminating
  Adjustments |         | Omnicare,
  Inc. and
  Subsidiaries |  
|                                                          |  |        |           |                          |   |                                 |  |                                            |         |                                     |  
|ASSETS                                                    |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|Cash and cash equivalents                                 |  | $      | 78,675    |                          | $ | 44,379                          |  | $                                          | 28,208  |                                     | $ |           |   | $ | 151,262   | 
|Restricted cash                                           |  |        |          |                          |   | 14,362                          |  |                                            |        |                                     |   |           |   |   | 14,362    | 
|Accounts receivable, net(including
intercompany)          |  |        |          |                          |   | 1,471,610                       |  |                                            | 41,658  |                                     |   | (7,282     | ) |   | 1,505,986 | 
|Unbilled receivables, CRO                                 |  |        |          |                          |   | 29,724                          |  |                                            |        |                                     |   |           |   |   | 29,724    | 
|Inventories                                               |  |        |          |                          |   | 413,901                         |  |                                            | 13,202  |                                     |   |           |   |   | 427,103   | 
|Deferred income tax benefits (liabilities),net-current    |  |        | (4,836    | )                        |   | 96,185                          |  |                                            | (24     | )                                   |   |           |   |   | 91,325    | 
|Other current assets                                      |  |        | 1,295     |                          |   | 210,890                         |  |                                            | 7,329   |                                     |   |           |   |   | 219,514   | 
|                                                          |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|Total current assets                                      |  |        | 75,134    |                          |   | 2,281,051                       |  |                                            | 90,373  |                                     |   | (7,282     | ) |   | 2,439,276 | 
|                                                          |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|Properties and equipment, net                             |  |        |          |                          |   | 186,853                         |  |                                            | 11,502  |                                     |   |           |   |   | 198,355   | 
|Goodwill                                                  |  |        |          |                          |   | 4,175,450                       |  |                                            | 99,313  |                                     |   |           |   |   | 4,274,763 | 
|Identifiable intangible assets, net                       |  |        |          |                          |   | 309,410                         |  |                                            | 5,278   |                                     |   |           |   |   | 314,688   | 
|Other noncurrent assets                                   |  |        | 56,095    |                          |   | 186,665                         |  |                                            | 378     |                                     |   |           |   |   | 243,138   | 
|Investment in subsidiaries                                |  |        | 6,034,971 |                          |   |                                |  |                                            |        |                                     |   | (6,034,971 | ) |   |          | 
|                                                          |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|Total assets                                              |  | $      | 6,166,200 |                          | $ | 7,139,429                       |  | $                                          | 206,844 |                                     | $ | (6,042,253 | ) | $ | 7,470,220 | 
|                                                          |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|                                                          |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|LIABILITIES AND STOCKHOLDERS
EQUITY                      |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|Current liabilities (including
intercompany)              |  | $      | 21,091    |                          | $ | 538,194                         |  | $                                          | 14,777  |                                     | $ | (7,282     | ) | $ | 566,780   | 
|Long-term debt, notes and convertible
debentures          |  |        | 2,805,286 |                          |   | 3,527                           |  |                                            | 49,017  |                                     |   |           |   |   | 2,857,830 | 
|Deferred income tax liabilities (benefits),net-noncurrent |  |        | 62,580    |                          |   | 347,021                         |  |                                            | 8,905   |                                     |   |           |   |   | 418,506   | 
|Other noncurrent liabilities                              |  |        | 17,214    |                          |   | 348,724                         |  |                                            | 1,137   |                                     |   |           |   |   | 367,075   | 
|Stockholders equity                                      |  |        | 3,260,029 |                          |   | 5,901,963                       |  |                                            | 133,008 |                                     |   | (6,034,971 | ) |   | 3,260,029 | 
|                                                          |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|Total liabilities and stockholders
equity                |  | $      | 6,166,200 |                          | $ | 7,139,429                       |  | $                                          | 206,844 |                                     | $ | (6,042,253 | ) | $ | 7,470,220 | 
|                                                          |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 

28

---



Note 13 - Guarantor Subsidiaries (Continued)

Condensed Consolidating Balance Sheets - (Continued)(in thousands)

|                                                          |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|--------------------------------------------------------- |  | ------ | --------- | ------------------------ | - | ------------------------------- |  | ------------------------------------------ | ------- | ----------------------------------- | - | ---------- | - | - | --------- | 
|As of
  December 31, 2006:                                |  | Parent |           | Guarantor
  Subsidiaries |   | Non-
  Guarantor
  Subsidiaries |  | Consolidating/
  Eliminating
  Adjustments |         | Omnicare,
  Inc. and
  Subsidiaries |  
|                                                          |  |        |           |                          |   |                                 |  |                                            |         |                                     |  
|ASSETS                                                    |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|Cash and cash equivalents                                 |  | $      | 43,494    |                          | $ | 74,262                          |  | $                                          | 20,278  |                                     | $ |           |   | $ | 138,034   | 
|Restricted cash                                           |  |        |          |                          |   | 3,777                           |  |                                            |        |                                     |   |           |   |   | 3,777     | 
|Accounts receivable, net(including intercompany)          |  |        |          |                          |   | 1,481,994                       |  |                                            | 45,370  |                                     |   | (5,098     | ) |   | 1,522,266 | 
|Unbilled receivables, CRO                                 |  |        |          |                          |   | 21,949                          |  |                                            |        |                                     |   |           |   |   | 21,949    | 
|Inventories                                               |  |        |          |                          |   | 435,669                         |  |                                            | 14,002  |                                     |   |           |   |   | 449,671   | 
|Deferred income tax benefits (liabilities),net-current    |  |        | (1,095    | )                        |   | 95,255                          |  |                                            | 71      |                                     |   |           |   |   | 94,231    | 
|Other current assets                                      |  |        | 2,516     |                          |   | 188,954                         |  |                                            | 3,430   |                                     |   |           |   |   | 194,900   | 
|                                                          |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|Total current assets                                      |  |        | 44,915    |                          |   | 2,301,860                       |  |                                            | 83,151  |                                     |   | (5,098     | ) |   | 2,424,828 | 
|                                                          |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|Properties and equipment, net                             |  |        |          |                          |   | 187,594                         |  |                                            | 12,831  |                                     |   |           |   |   | 200,425   | 
|Goodwill                                                  |  |        |          |                          |   | 4,129,247                       |  |                                            | 95,764  |                                     |   |           |   |   | 4,225,011 | 
|Identifiable intangible assets, net                       |  |        |          |                          |   | 314,516                         |  |                                            | 5,072   |                                     |   |           |   |   | 319,588   | 
|Other noncurrent assets                                   |  |        | 60,045    |                          |   | 168,166                         |  |                                            | 408     |                                     |   |           |   |   | 228,619   | 
|Investment in subsidiaries                                |  |        | 6,062,799 |                          |   |                                |  |                                            |        |                                     |   | (6,062,799 | ) |   |          | 
|                                                          |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|Total assets                                              |  | $      | 6,167,759 |                          | $ | 7,101,383                       |  | $                                          | 197,226 |                                     | $ | (6,067,897 | ) | $ | 7,398,471 | 
|                                                          |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|                                                          |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|LIABILITIES AND STOCKHOLDERS
EQUITY                      |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|Current liabilities (including
intercompany)              |  | $      | 31,123    |                          | $ | 510,471                         |  | $                                          | 15,905  |                                     | $ | (5,098     | ) | $ | 552,401   | 
|Long-term debt, notes and convertible
debentures          |  |        | 2,903,453 |                          |   | 5,872                           |  |                                            | 45,795  |                                     |   |           |   |   | 2,955,120 | 
|Deferred income tax liabilities (benefits),net-noncurrent |  |        | 50,685    |                          |   | 326,766                         |  |                                            | 7,538   |                                     |   |           |   |   | 384,989   | 
|Other noncurrent liabilities                              |  |        | 19,047    |                          |   | 322,161                         |  |                                            | 1,302   |                                     |   |           |   |   | 342,510   | 
|Stockholders equity                                      |  |        | 3,163,451 |                          |   | 5,936,113                       |  |                                            | 126,686 |                                     |   | (6,062,799 | ) |   | 3,163,451 | 
|                                                          |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|Total liabilities and stockholders
equity                |  | $      | 6,167,759 |                          | $ | 7,101,383                       |  | $                                          | 197,226 |                                     | $ | (6,067,897 | ) | $ | 7,398,471 | 
|                                                          |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 

29

---



Note 13 - Guarantor Subsidiaries (Continued)

Condensed Consolidating Statements of Cash Flows
(in thousands)

|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|-------------------------------------------------------------------------------------------------------- |  | ------------------------- | -------- | ------------------------ | - | ---------------------------- | - | ----------------------------------- | ------ | - | - | -------- | -
|                                                                                                         |  | Six months ended June 30, |         
|                                                                                                         |  |                           |         
|2007:                                                                                                    |  | Parent                    |          | Guarantor
  Subsidiaries |   | Non-Guarantor
  Subsidiaries |   | Omnicare, Inc.
  and
  Subsidiaries |       
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |       
|Cash flows from operating activities:                                                                    |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|Provision for doubtful accounts                                                                          |  | $                         |         |                          | $ | 57,919                       |   | $                                   | 884    |   | $ | 58,803   |  
|Other                                                                                                    |  |                           | (29,750  | )                        |   | 200,016                      |   |                                     | 6,858  |   |   | 177,124  |  
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|Net cash flows from operating activities                                                                 |  |                           | (29,750  | )                        |   | 257,935                      |   |                                     | 7,742  |   |   | 235,927  |  
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|Cash flows from investing activities:                                                                    |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|Acquisition of businesses, net of cash
received                                                          |  |                           |         |                          |   | (69,299                      | ) |                                     |       |   |   | (69,299  | )
|Capital expenditures                                                                                     |  |                           |         |                          |   | (18,179                      | ) |                                     | (746   | ) |   | (18,925  | )
|Transfer of cash to trusts for employee health and
severance costs,
  net of payments out of the trust   |  |                           |         |                          |   | (10,501                      | ) |                                     |       |   |   | (10,501  | )
|Other                                                                                                    |  |                           |         |                          |   | (98                          | ) |                                     | (8     | ) |   | (106     | )
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|Net cash flows from investing activities                                                                 |  |                           |         |                          |   | (98,077                      | ) |                                     | (754   | ) |   | (98,831  | )
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|Cash flows from financing activities:                                                                    |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|Borrowings on line of credit facilities and term A
loan                                                  |  |                           | 74,000   |                          |   |                             |   |                                     |       |   |   | 74,000   |  
|Payments on line of credit facilities and term A
loan                                                    |  |                           | (174,000 | )                        |   |                             |   |                                     |       |   |   | (174,000 | )
|Payments on long-term borrowings and
obligations                                                         |  |                           | (3,631   | )                        |   |                             |   |                                     |       |   |   | (3,631   | )
|Change in cash overdraft balance                                                                         |  |                           | (9,372   | )                        |   | (2,272                       | ) |                                     |       |   |   | (11,644  | )
|Payments for stock awards and exercise of stock
options and warrants,
  net of stock tendered in payment |  |                           | (8,132   | )                        |   |                             |   |                                     |       |   |   | (8,132   | )
|Excess tax benefits from stock-based
compensation                                                        |  |                           | 4,079    |                          |   |                             |   |                                     |        |   |   | 4,079    |  
|Dividends paid                                                                                           |  |                           | (5,482   | )                        |   |                             |   |                                     |       |   |   | (5,482   | )
|Other                                                                                                    |  |                           | 187,469  |                          |   | (187,469                     | ) |                                     |       |   |   |         |  
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|Net cash flows from financing activities                                                                 |  |                           | 64,931   |                          |   | (189,741                     | ) |                                     |       |   |   | (124,810 | )
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|Effect of exchange rate changes on cash                                                                  |  |                           |         |                          |   |                             |   |                                     | 942    |   |   | 942      |  
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|Net increase (decrease) in cash and cash
equivalents                                                     |  |                           | 35,181   |                          |   | (29,883                      | ) |                                     | 7,930  |   |   | 13,228   |  
|Cash and cash equivalents at beginning of
period                                                         |  |                           | 43,494   |                          |   | 74,262                       |   |                                     | 20,278 |   |   | 138,034  |  
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|Cash and cash equivalents at end of
period                                                               |  | $                         | 78,675   |                          | $ | 44,379                       |   | $                                   | 28,208 |   | $ | 151,262  |  
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  

30

---



Note 13 - Guarantor Subsidiaries (Continued)

Condensed Consolidating Statements of Cash Flows -
(Continued)(in thousands)

|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|-------------------------------------------------------------------------------------------------------- |  | ------------------------- | -------- | ------------------------ | - | ---------------------------- | - | ----------------------------------- | ------ | - | - | -------- | -
|                                                                                                         |  | Six months ended June 30, |         
|                                                                                                         |  |                           |         
|2006:                                                                                                    |  | Parent                    |          | Guarantor
  Subsidiaries |   | Non-Guarantor
  Subsidiaries |   | Omnicare, Inc.
  and
  Subsidiaries |       
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |       
|Cash flows from operating activities:                                                                    |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|Provision for doubtful accounts                                                                          |  | $                         |         |                          | $ | 34,617                       |   | $                                   | 543    |   | $ | 35,160   |  
|Other                                                                                                    |  |                           | (95,527  | )                        |   | 197,869                      |   |                                     | (9,445 | ) |   | 92,897   |  
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|Net cash flows from operating activities                                                                 |  |                           | (95,527  | )                        |   | 232,486                      |   |                                     | (8,902 | ) |   | 128,057  |  
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|Cash flows from investing activities:                                                                    |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|Acquisition of businesses, net of cash
received                                                          |  |                           |         |                          |   | (49,772                      | ) |                                     | (1,304 | ) |   | (51,076  | )
|Capital expenditures                                                                                     |  |                           |         |                          |   | (14,340                      | ) |                                     | (225   | ) |   | (14,565  | )
|Transfer of cash to trusts for employee health and
severance costs,
  net of payments out of the trust   |  |                           |         |                          |   | (9,311                       | ) |                                     |       |   |   | (9,311   | )
|Other                                                                                                    |  |                           |         |                          |   | 90                           |   |                                     |       |   |   | 90       |  
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|Net cash flows from investing activities                                                                 |  |                           |         |                          |   | (73,333                      | ) |                                     | (1,529 | ) |   | (74,862  | )
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|Cash flows from financing activities:                                                                    |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|Borrowings on line of credit facilities and term A
loan                                                  |  |                           | 133,000  |                          |   |                             |   |                                     |       |   |   | 133,000  |  
|Payments on line of credit facilities and term A
loan                                                    |  |                           | (133,000 | )                        |   |                             |   |                                     |       |   |   | (133,000 | )
|(Payments on) and proceeds from long-term
borrowings and obligations                                     |  |                           | (1,394   | )                        |   | (70                          | ) |                                     | 70     |   |   | (1,394   | )
|Fees paid for financing arrangements                                                                     |  |                           | (3,212   | )                        |   |                             |   |                                     |       |   |   | (3,212   | )
|Change in cash overdraft balance                                                                         |  |                           | 1,530    |                          |   | 8,757                        |   |                                     |       |   |   | 10,287   |  
|Proceeds from stock offering, net of issuance
costs                                                      |  |                           | 49,239   |                          |   |                             |   |                                     |       |   |   | 49,239   |  
|Payments for stock awards and exercise of stock
options and warrants,
  net of stock tendered in payment |  |                           | (3,295   | )                        |   |                             |   |                                     |       |   |   | (3,295   | )
|Excess tax benefits from stock-based
compensation                                                        |  |                           | 11,472   |                          |   |                             |   |                                     |       |   |   | 11,472   |  
|Dividends paid                                                                                           |  |                           | (5,461   | )                        |   |                             |   |                                     |       |   |   | (5,461   | )
|Other                                                                                                    |  |                           | 127,623  |                          |   | (132,744                     | ) |                                     | 5,121  |   |   |         |  
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|Net cash flows from financing activities                                                                 |  |                           | 176,502  |                          |   | (124,057                     | ) |                                     | 5,191  |   |   | 57,636   |  
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|Effect of exchange rate changes on cash                                                                  |  |                           |         |                          |   |                             |   |                                     | 1,011  |   |   | 1,011    |  
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|Net increase (decrease) in cash and cash
equivalents                                                     |  |                           | 80,975   |                          |   | 35,096                       |   |                                     | (4,229 | ) |   | 111,842  |  
|Cash and cash equivalents at beginning of
period                                                         |  |                           | 143,227  |                          |   | 38,999                       |   |                                     | 33,195 |   |   | 215,421  |  
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  
|Cash and cash equivalents at end of
period                                                               |  | $                         | 224,202  |                          | $ | 74,095                       |   | $                                   | 28,966 |   | $ | 327,263  |  
|                                                                                                         |  |                           |          |                          |   |                              |   |                                     |        |   |   |          |  

31

---



Note 13 - Guarantor Subsidiaries (Continued)

The Companys
3.25% convertible senior debentures due 2035 are fully and unconditionally
guaranteed on an unsecured basis by Omnicare Purchasing Company, LP, a
wholly-owned subsidiary of the Company (the Guarantor Subsidiary). The
following condensed consolidating financial data illustrates the composition of
Omnicare, Inc. (Parent), the Guarantor Subsidiary and the Non-Guarantor
Subsidiaries as of June 30, 2007 and December 31, 2006 for the balance sheets,
the three and six months ended June 30, 2007 and 2006 for the statements of
income and the statements of cash flows for the six months ended June 30, 2007
and 2006. Separate complete financial statements of the respective Guarantor
Subsidiary would not provide information that would be necessary for evaluating
the sufficiency of the Guarantor Subsidiary, and thus are not presented. The
Guarantor Subsidiary does not have any material net cash flows in the condensed
consolidating statements of cash flows. No consolidating/eliminating
adjustments column is presented for the condensed consolidating statements of
cash flows since there were no significant consolidating/eliminating adjustment
amounts during the periods presented.

Summary Consolidating Statements of Income(in thousands)

|                                                       |  |                             |         |                        |   |                                 |   |                                            |           |                                     |   |         |   |   |           |  
|------------------------------------------------------ |  | --------------------------- | ------- | ---------------------- | - | ------------------------------- | - | ------------------------------------------ | --------- | ----------------------------------- | - | ------- | - | - | --------- | -
|                                                       |  | Three months ended June 30, |        
|                                                       |  |                             |        
|2007:                                                  |  | Parent                      |         | Guarantor
  Subsidiary |   | Non-
  Guarantor
  Subsidiaries |   | Consolidating/
  Eliminating
  Adjustments |           | Omnicare,
  Inc. and
  Subsidiaries |  
|                                                       |  |                             |         |                        |   |                                 |   |                                            |           |                                     |  
|Net sales                                              |  | $                           |        |                        | $ |                                |   | $                                          | 1,549,157 |                                     | $ |        |   | $ | 1,549,157 |  
|Cost of sales (COS)                                  |  |                             |        |                        |   |                                |   |                                            | 1,150,109 |                                     |   |        |   |   | 1,150,109 |  
|Heartland matters - COS                                |  |                             |        |                        |   |                                |   |                                            | 4,015     |                                     |   |        |   |   | 4,015     |  
|                                                       |  |                             |         |                        |   |                                 |   |                                            |           |                                     |   |         |   |   |           |  
|Gross profit                                           |  |                             |        |                        |   |                                |   |                                            | 395,033   |                                     |   |        |   |   | 395,033   |  
|Selling, general and administrative expenses
(S,G&A) |  |                             | 2,140   |                        |   | 270                             |   |                                            | 255,497   |                                     |   |        |   |   | 257,907   |  
|Restructuring and other related charges                |  |                             |        |                        |   |                                |   |                                            | 6,250     |                                     |   |        |   |   | 6,250     |  
|Litigation charges                                     |  |                             |        |                        |   |                                |   |                                            | 9,010     |                                     |   |        |   |   | 9,010     |  
|Heartland matters - S,G&A                              |  |                             |        |                        |   |                                |   |                                            | 896       |                                     |   |        |   |   | 896       |  
|                                                       |  |                             |         |                        |   |                                 |   |                                            |           |                                     |   |         |   |   |           |  
|Operating income (loss)                                |  |                             | (2,140  | )                      |   | (270                            | ) |                                            | 123,380   |                                     |   |        |   |   | 120,970   |  
|Investment income                                      |  |                             | 764     |                        |   |                                |   |                                            | 1,338     |                                     |   |        |   |   | 2,102     |  
|Interest expense                                       |  |                             | (40,600 | )                      |   |                                |   |                                            | (1,118    | )                                   |   |        |   |   | (41,718   | )
|                                                       |  |                             |         |                        |   |                                 |   |                                            |           |                                     |   |         |   |   |           |  
|Income (loss) before income taxes                      |  |                             | (41,976 | )                      |   | (270                            | ) |                                            | 123,600   |                                     |   |        |   |   | 81,354    |  
|Income tax (benefit) expense                           |  |                             | (16,474 | )                      |   | (105                            | ) |                                            | 48,692    |                                     |   |        |   |   | 32,113    |  
|Equity in net income of subsidiaries                   |  |                             | 74,743  |                        |   |                                |   |                                            |          |                                     |   | (74,743 | ) |   |          |  
|                                                       |  |                             |         |                        |   |                                 |   |                                            |           |                                     |   |         |   |   |           |  
|Net income (loss)                                      |  | $                           | 49,241  |                        | $ | (165                            | ) | $                                          | 74,908    |                                     | $ | (74,743 | ) | $ | 49,241    |  
|                                                       |  |                             |         |                        |   |                                 |   |                                            |           |                                     |   |         |   |   |           |  

|                                             |  |   |         |   |   |      |   |   |           |   |   |         |   |   |           |  
|-------------------------------------------- |  | - | ------- | - | - | ---- | - | - | --------- | - | - | ------- | - | - | --------- | -
|2006:                                        |  |   |         |   |   |      |   |   |           |   |   |         |   |   |           |  
|                                             |  |   |         |   |   |      |   |   |           |   |   |         |   |   |           |  
|Net sales                                    |  | $ |        |   | $ |     |   | $ | 1,641,110 |   | $ |        |   | $ | 1,641,110 |  
|Cost of sales                                |  |   |        |   |   |     |   |   | 1,240,819 |   |   |        |   |   | 1,240,819 |  
|                                             |  |   |         |   |   |      |   |   |           |   |   |         |   |   |           |  
|Gross profit                                 |  |   |        |   |   |     |   |   | 400,291   |   |   |        |   |   | 400,291   |  
|Selling, general and administrative
expenses |  |   | 2,278   |   |   | 265  |   |   | 237,208   |   |   |        |   |   | 239,751   |  
|Restructuring and other related charges      |  |   |        |   |   |     |   |   | 11,889    |   |   |        |   |   | 11,889    |  
|Litigation charges                           |  |   |        |   |   |     |   |   | 64,482    |   |   |        |   |   | 64,482    |  
|                                             |  |   |         |   |   |      |   |   |           |   |   |         |   |   |           |  
|Operating income (loss)                      |  |   | (2,278  | ) |   | (265 | ) |   | 86,712    |   |   |        |   |   | 84,169    |  
|Investment income                            |  |   | 2,020   |   |   |     |   |   | 1,029     |   |   |        |   |   | 3,049     |  
|Interest expense                             |  |   | (41,918 | ) |   |     |   |   | (1,151    | ) |   |        |   |   | (43,069   | )
|                                             |  |   |         |   |   |      |   |   |           |   |   |         |   |   |           |  
|Income (loss) before income taxes            |  |   | (42,176 | ) |   | (265 | ) |   | 86,590    |   |   |        |   |   | 44,149    |  
|Income tax (benefit) expense                 |  |   | (15,723 | ) |   | (99  | ) |   | 51,592    |   |   |        |   |   | 35,770    |  
|Equity in net income of subsidiaries         |  |   | 34,832  |   |   |     |   |   |          |   |   | (34,832 | ) |   |          |  
|                                             |  |   |         |   |   |      |   |   |           |   |   |         |   |   |           |  
|Net income (loss)                            |  | $ | 8,379   |   | $ | (166 | ) | $ | 34,998    |   | $ | (34,832 | ) | $ | 8,379     |  
|                                             |  |   |         |   |   |      |   |   |           |   |   |         |   |   |           |  

32

---



Note 13 - Guarantor Subsidiaries (Continued)

Summary Consolidating Statements of Income(in thousands)

|                                                       |  |                           |         |                        |   |                                 |   |                                            |           |                                     |   |          |   |   |           |  
|------------------------------------------------------ |  | ------------------------- | ------- | ---------------------- | - | ------------------------------- | - | ------------------------------------------ | --------- | ----------------------------------- | - | -------- | - | - | --------- | -
|                                                       |  | Six months ended June 30, |        
|                                                       |  |                           |        
|2007:                                                  |  | Parent                    |         | Guarantor
  Subsidiary |   | Non-
  Guarantor
  Subsidiaries |   | Consolidating/
  Eliminating
  Adjustments |           | Omnicare,
  Inc. and
  Subsidiaries |  
|                                                       |  |                           |         |                        |   |                                 |   |                                            |           |                                     |  
|Net sales                                              |  | $                         |        |                        | $ |                                |   | $                                          | 3,126,222 |                                     | $ |         |   | $ | 3,126,222 |  
|Cost of sales (COS)                                  |  |                           |        |                        |   |                                |   |                                            | 2,341,102 |                                     |   |         |   |   | 2,341,102 |  
|Heartland matters - COS                                |  |                           |        |                        |   |                                |   |                                            | 8,311     |                                     |   |         |   |   | 8,311     |  
|                                                       |  |                           |         |                        |   |                                 |   |                                            |           |                                     |   |          |   |   |           |  
|Gross profit                                           |  |                           |        |                        |   |                                |   |                                            | 776,809   |                                     |   |         |   |   | 776,809   |  
|Selling, general and administrative expenses
(S,G&A) |  |                           | 4,273   |                        |   | 541                             |   |                                            | 507,606   |                                     |   |         |   |   | 512,420   |  
|Restructuring and other related charges                |  |                           |        |                        |   |                                |   |                                            | 15,424    |                                     |   |         |   |   | 15,424    |  
|Litigation charges                                     |  |                           |        |                        |   |                                |   |                                            | 15,917    |                                     |   |         |   |   | 15,917    |  
|Heartland matters - S,G&A                              |  |                           |        |                        |   |                                |   |                                            | 2,392     |                                     |   |         |   |   | 2,392     |  
|                                                       |  |                           |         |                        |   |                                 |   |                                            |           |                                     |   |          |   |   |           |  
|Operating income (loss)                                |  |                           | (4,273  | )                      |   | (541                            | ) |                                            | 235,470   |                                     |   |         |   |   | 230,656   |  
|Investment income                                      |  |                           | 1,335   |                        |   |                                |   |                                            | 2,688     |                                     |   |         |   |   | 4,023     |  
|Interest expense                                       |  |                           | (81,606 | )                      |   |                                |   |                                            | (2,160    | )                                   |   |         |   |   | (83,766   | )
|                                                       |  |                           |         |                        |   |                                 |   |                                            |           |                                     |   |          |   |   |           |  
|Income (loss) before income taxes                      |  |                           | (84,544 | )                      |   | (541                            | ) |                                            | 235,998   |                                     |   |         |   |   | 150,913   |  
|Income tax (benefit) expense                           |  |                           | (32,735 | )                      |   | (209                            | ) |                                            | 91,629    |                                     |   |         |   |   | 58,685    |  
|Equity in net income of subsidiaries                   |  |                           | 144,037 |                        |   |                                |   |                                            |          |                                     |   | (144,037 | ) |   |          |  
|                                                       |  |                           |         |                        |   |                                 |   |                                            |           |                                     |   |          |   |   |           |  
|Net income (loss)                                      |  | $                         | 92,228  |                        | $ | (332                            | ) | $                                          | 144,369   |                                     | $ | (144,037 | ) | $ | 92,228    |  
|                                                       |  |                           |         |                        |   |                                 |   |                                            |           |                                     |   |          |   |   |           |  

|                                             |  |   |         |   |   |      |   |   |           |   |   |          |   |   |           |  
|-------------------------------------------- |  | - | ------- | - | - | ---- | - | - | --------- | - | - | -------- | - | - | --------- | -
|2006:                                       
|                                             |  |   |         |   |   |      |   |   |           |   |   |          |   |   |           |  
|Net sales                                    |  | $ |        |   | $ |     |   | $ | 3,299,708 |   | $ |         |   | $ | 3,299,708 |  
|Cost of sales                                |  |   |        |   |   |     |   |   | 2,482,902 |   |   |         |   |   | 2,482,902 |  
|                                             |  |   |         |   |   |      |   |   |           |   |   |          |   |   |           |  
|Gross profit                                 |  |   |        |   |   |     |   |   | 816,806   |   |   |         |   |   | 816,806   |  
|Selling, general and administrative
expenses |  |   | 4,259   |   |   | 526  |   |   | 482,308   |   |   |         |   |   | 487,093   |  
|Restructuring and other related charges      |  |   |        |   |   |     |   |   | 19,602    |   |   |         |   |   | 19,602    |  
|Litigation charges                           |  |   |        |   |   |     |   |   | 98,582    |   |   |         |   |   | 98,582    |  
|                                             |  |   |         |   |   |      |   |   |           |   |   |          |   |   |           |  
|Operating income (loss)                      |  |   | (4,259  | ) |   | (526 | ) |   | 216,314   |   |   |         |   |   | 211,529   |  
|Investment income                            |  |   | 3,011   |   |   |     |   |   | 1,837     |   |   |         |   |   | 4,848     |  
|Interest expense                             |  |   | (83,110 | ) |   |     |   |   | (2,371    | ) |   |         |   |   | (85,481   | )
|                                             |  |   |         |   |   |      |   |   |           |   |   |          |   |   |           |  
|Income (loss) before income taxes            |  |   | (84,358 | ) |   | (526 | ) |   | 215,780   |   |   |         |   |   | 130,896   |  
|Income tax (benefit) expense                 |  |   | (30,951 | ) |   | (193 | ) |   | 100,430   |   |   |         |   |   | 69,286    |  
|Equity in net income of subsidiaries         |  |   | 115,017 |   |   |     |   |   |          |   |   | (115,017 | ) |   |          |  
|                                             |  |   |         |   |   |      |   |   |           |   |   |          |   |   |           |  
|Net income (loss)                            |  | $ | 61,610  |   | $ | (333 | ) | $ | 115,350   |   | $ | (115,017 | ) | $ | 61,610    |  
|                                             |  |   |         |   |   |      |   |   |           |   |   |          |   |   |           |  

33

---



Note 13 - Guarantor Subsidiaries (Continued)

Condensed Consolidating Balance Sheets(in thousands)

|                                                          |  |        |           |                        |   |                                 |  |                                            |           |                                     |   |            |   |   |           | 
|--------------------------------------------------------- |  | ------ | --------- | ---------------------- | - | ------------------------------- |  | ------------------------------------------ | --------- | ----------------------------------- | - | ---------- | - | - | --------- | 
|As of June
  30, 2007:                                    |  | Parent |           | Guarantor
  Subsidiary |   | Non-
  Guarantor
  Subsidiaries |  | Consolidating/
  Eliminating
  Adjustments |           | Omnicare,
  Inc. and
  Subsidiaries |  
|                                                          |  |        |           |                        |   |                                 |  |                                            |           |                                     |  
|ASSETS                                                    |  |        |           |                        |   |                                 |  |                                            |           |                                     |   |            |   |   |           | 
|Cash and cash equivalents                                 |  | $      | 78,675    |                        | $ |                                |  | $                                          | 72,587    |                                     | $ |           |   | $ | 151,262   | 
|Restricted cash                                           |  |        |          |                        |   |                                |  |                                            | 14,362    |                                     |   |           |   |   | 14,362    | 
|Accounts receivable, net(including
intercompany)          |  |        |          |                        |   | 12                              |  |                                            | 1,505,986 |                                     |   | (12        | ) |   | 1,505,986 | 
|Unbilled receivables, CRO                                 |  |        |          |                        |   |                                |  |                                            | 29,724    |                                     |   |           |   |   | 29,724    | 
|Inventories                                               |  |        |          |                        |   |                                |  |                                            | 427,103   |                                     |   |           |   |   | 427,103   | 
|Deferred income tax benefits (liabilities),net-current    |  |        | (4,836    | )                      |   |                                |  |                                            | 96,161    |                                     |   |           |   |   | 91,325    | 
|Other current assets                                      |  |        | 1,295     |                        |   |                                |  |                                            | 218,219   |                                     |   |           |   |   | 219,514   | 
|                                                          |  |        |           |                        |   |                                 |  |                                            |           |                                     |   |            |   |   |           | 
|Total current assets                                      |  |        | 75,134    |                        |   | 12                              |  |                                            | 2,364,142 |                                     |   | (12        | ) |   | 2,439,276 | 
|                                                          |  |        |           |                        |   |                                 |  |                                            |           |                                     |   |            |   |   |           | 
|Properties and equipment, net                             |  |        |          |                        |   | 29                              |  |                                            | 198,326   |                                     |   |           |   |   | 198,355   | 
|Goodwill                                                  |  |        |          |                        |   |                                |  |                                            | 4,274,763 |                                     |   |           |   |   | 4,274,763 | 
|Identifiable intangible assets, net                       |  |        |          |                        |   |                                |  |                                            | 314,688   |                                     |   |           |   |   | 314,688   | 
|Other noncurrent assets                                   |  |        | 56,095    |                        |   | 19                              |  |                                            | 187,024   |                                     |   |           |   |   | 243,138   | 
|Investment in subsidiaries                                |  |        | 6,034,971 |                        |   |                                |  |                                            |          |                                     |   | (6,034,971 | ) |   |          | 
|                                                          |  |        |           |                        |   |                                 |  |                                            |           |                                     |   |            |   |   |           | 
|Total assets                                              |  | $      | 6,166,200 |                        | $ | 60                              |  | $                                          | 7,338,943 |                                     | $ | (6,034,983 | ) | $ | 7,470,220 | 
|                                                          |  |        |           |                        |   |                                 |  |                                            |           |                                     |   |            |   |   |           | 
|                                                          |  |        |           |                        |   |                                 |  |                                            |           |                                     |   |            |   |   |           | 
|LIABILITIES AND STOCKHOLDERS
EQUITY                      |  |        |           |                        |   |                                 |  |                                            |           |                                     |   |            |   |   |           | 
|Current liabilities (including
intercompany)              |  | $      | 21,091    |                        | $ | 3                               |  | $                                          | 545,698   |                                     | $ | (12        | ) | $ | 566,780   | 
|Long-term debt, notes and convertible
debentures          |  |        | 2,805,286 |                        |   |                                |  |                                            | 52,544    |                                     |   |           |   |   | 2,857,830 | 
|Deferred income tax liabilities (benefits),net-noncurrent |  |        | 62,580    |                        |   |                                |  |                                            | 355,926   |                                     |   |           |   |   | 418,506   | 
|Other noncurrent liabilities                              |  |        | 17,214    |                        |   |                                |  |                                            | 349,861   |                                     |   |           |   |   | 367,075   | 
|Stockholders equity                                      |  |        | 3,260,029 |                        |   | 57                              |  |                                            | 6,034,914 |                                     |   | (6,034,971 | ) |   | 3,260,029 | 
|                                                          |  |        |           |                        |   |                                 |  |                                            |           |                                     |   |            |   |   |           | 
|Total liabilities and stockholders
equity                |  | $      | 6,166,200 |                        | $ | 60                              |  | $                                          | 7,338,943 |                                     | $ | (6,034,983 | ) | $ | 7,470,220 | 
|                                                          |  |        |           |                        |   |                                 |  |                                            |           |                                     |   |            |   |   |           | 

34

---



Note 13 - Guarantor Subsidiaries (Continued)

Condensed Consolidating Balance Sheets - (Continued)(in thousands)

|                                                          |  |        |           |                        |   |                                 |  |                                            |           |                                     |   |            |   |   |           | 
|--------------------------------------------------------- |  | ------ | --------- | ---------------------- | - | ------------------------------- |  | ------------------------------------------ | --------- | ----------------------------------- | - | ---------- | - | - | --------- | 
|As of
  December 31, 2006:                                |  | Parent |           | Guarantor
  Subsidiary |   | Non-
  Guarantor
  Subsidiaries |  | Consolidating/
  Eliminating
  Adjustments |           | Omnicare,
  Inc. and
  Subsidiaries |  
|                                                          |  |        |           |                        |   |                                 |  |                                            |           |                                     |  
|ASSETS                                                    |  |        |           |                        |   |                                 |  |                                            |           |                                     |   |            |   |   |           | 
|Cash and cash equivalents                                 |  | $      | 43,494    |                        | $ |                                |  | $                                          | 94,540    |                                     | $ |           |   | $ | 138,034   | 
|Restricted cash                                           |  |        |          |                        |   |                                |  |                                            | 3,777     |                                     |   |           |   |   | 3,777     | 
|Accounts receivable, net(including
intercompany)          |  |        |          |                        |   |                                |  |                                            | 1,522,283 |                                     |   | (17        | ) |   | 1,522,266 | 
|Unbilled receivables, CRO                                 |  |        |          |                        |   |                                |  |                                            | 21,949    |                                     |   |           |   |   | 21,949    | 
|Inventories                                               |  |        |          |                        |   |                                |  |                                            | 449,671   |                                     |   |           |   |   | 449,671   | 
|Deferred income tax benefits (liabilities),net-current    |  |        | (1,095    | )                      |   |                                |  |                                            | 95,326    |                                     |   |           |   |   | 94,231    | 
|Other current assets                                      |  |        | 2,516     |                        |   |                                |  |                                            | 192,384   |                                     |   |           |   |   | 194,900   | 
|                                                          |  |        |           |                        |   |                                 |  |                                            |           |                                     |   |            |   |   |           | 
|Total current assets                                      |  |        | 44,915    |                        |   |                                |  |                                            | 2,379,930 |                                     |   | (17        | ) |   | 2,424,828 | 
|                                                          |  |        |           |                        |   |                                 |  |                                            |           |                                     |   |            |   |   |           | 
|Properties and equipment, net                             |  |        |          |                        |   | 31                              |  |                                            | 200,394   |                                     |   |           |   |   | 200,425   | 
|Goodwill                                                  |  |        |          |                        |   |                                |  |                                            | 4,225,011 |                                     |   |           |   |   | 4,225,011 | 
|Identifiable intangible assets, net                       |  |        |          |                        |   |                                |  |                                            | 319,588   |                                     |   |           |   |   | 319,588   | 
|Other noncurrent assets                                   |  |        | 60,045    |                        |   | 19                              |  |                                            | 168,555   |                                     |   |           |   |   | 228,619   | 
|Investment in subsidiaries                                |  |        | 6,062,799 |                        |   |                                |  |                                            |          |                                     |   | (6,062,799 | ) |   |          | 
|                                                          |  |        |           |                        |   |                                 |  |                                            |           |                                     |   |            |   |   |           | 
|Total assets                                              |  | $      | 6,167,759 |                        | $ | 50                              |  | $                                          | 7,293,478 |                                     | $ | (6,062,816 | ) | $ | 7,398,471 | 
|                                                          |  |        |           |                        |   |                                 |  |                                            |           |                                     |   |            |   |   |           | 
|                                                          |  |        |           |                        |   |                                 |  |                                            |           |                                     |   |            |   |   |           | 
|LIABILITIES AND STOCKHOLDERS
EQUITY                      |  |        |           |                        |   |                                 |  |                                            |           |                                     |   |            |   |   |           | 
|Current liabilities (including
intercompany)              |  | $      | 31,123    |                        | $ | 17                              |  | $                                          | 521,278   |                                     | $ | (17        | ) | $ | 552,401   | 
|Long-term debt, notes and convertible
debentures          |  |        | 2,903,453 |                        |   |                                |  |                                            | 51,667    |                                     |   |           |   |   | 2,955,120 | 
|Deferred income tax liabilities (benefits),net-noncurrent |  |        | 50,685    |                        |   |                                |  |                                            | 334,304   |                                     |   |           |   |   | 384,989   | 
|Other noncurrent liabilities                              |  |        | 19,047    |                        |   |                                |  |                                            | 323,463   |                                     |   |           |   |   | 342,510   | 
|Stockholders equity                                      |  |        | 3,163,451 |                        |   | 33                              |  |                                            | 6,062,766 |                                     |   | (6,062,799 | ) |   | 3,163,451 | 
|                                                          |  |        |           |                        |   |                                 |  |                                            |           |                                     |   |            |   |   |           | 
|Total liabilities and stockholders
equity                |  | $      | 6,167,759 |                        | $ | 50                              |  | $                                          | 7,293,478 |                                     | $ | (6,062,816 | ) | $ | 7,398,471 | 
|                                                          |  |        |           |                        |   |                                 |  |                                            |           |                                     |   |            |   |   |           | 

35

---



Note 13 - Guarantor Subsidiaries (Continued)

Condensed Consolidating Statements of Cash Flows(in thousands)

|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|-------------------------------------------------------------------------------------------------------- |  | ------------------------- | -------- | ---------------------- | - | ---------------------------- |  | ----------------------------------- | -------- | - | - | -------- | -
|                                                                                                         |  | Six months ended June 30, |         
|                                                                                                         |  |                           |         
|2007:                                                                                                    |  | Parent                    |          | Guarantor
  Subsidiary |   | Non-Guarantor
  Subsidiaries |  | Omnicare, Inc.
  and
  Subsidiaries |         
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |         
|Cash flows from operating activities:                                                                    |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|Provision for doubtful accounts                                                                          |  | $                         |         |                        | $ |                             |  | $                                   | 58,803   |   | $ | 58,803   |  
|Other                                                                                                    |  |                           | (29,750  | )                      |   |                             |  |                                     | 206,874  |   |   | 177,124  |  
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|Net cash flows from operating activities                                                                 |  |                           | (29,750  | )                      |   |                             |  |                                     | 265,677  |   |   | 235,927  |  
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|Cash flows from investing activities:                                                                    |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|Acquisition of businesses, net of cash received                                                          |  |                           |         |                        |   |                             |  |                                     | (69,299  | ) |   | (69,299  | )
|Capital expenditures                                                                                     |  |                           |         |                        |   |                             |  |                                     | (18,925  | ) |   | (18,925  | )
|Transfer of cash to trusts for employee health and severance costs,
  net of payments out of the trust   |  |                           |         |                        |   |                             |  |                                     | (10,501  | ) |   | (10,501  | )
|Other                                                                                                    |  |                           |         |                        |   |                             |  |                                     | (106     | ) |   | (106     | )
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|Net cash flows from investing activities                                                                 |  |                           |         |                        |   |                             |  |                                     | (98,831  | ) |   | (98,831  | )
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|Cash flows from financing activities:                                                                    |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|Borrowings on line of credit facilities and term A loan                                                  |  |                           | 74,000   |                        |   |                             |  |                                     |         |   |   | 74,000   |  
|Payments on line of credit facilities and term A loan                                                    |  |                           | (174,000 | )                      |   |                             |  |                                     |         |   |   | (174,000 | )
|Payments on long-term borrowings and obligations                                                         |  |                           | (3,631   | )                      |   |                             |  |                                     |         |   |   | (3,631   | )
|Change in cash overdraft balance                                                                         |  |                           | (9,372   | )                      |   |                             |  |                                     | (2,272   | ) |   | (11,644  | )
|Payments for stock awards and exercise of stock options and warrants,
  net of stock tendered in payment |  |                           | (8,132   | )                      |   |                             |  |                                     |         |   |   | (8,132   | )
|Excess tax benefits from stock-based compensation                                                        |  |                           | 4,079    |                        |   |                             |  |                                     |         |   |   | 4,079    |  
|Dividends paid                                                                                           |  |                           | (5,482   | )                      |   |                             |  |                                     |         |   |   | (5,482   | )
|Other                                                                                                    |  |                           | 187,469  |                        |   |                             |  |                                     | (187,469 | ) |   |         |  
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|Net cash flows from financing activities                                                                 |  |                           | 64,931   |                        |   |                             |  |                                     | (189,741 | ) |   | (124,810 | )
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|Effect of exchange rate changes on cash                                                                  |  |                           |         |                        |   |                             |  |                                     | 942      |   |   | 942      |  
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|Net increase (decrease) in cash and cash equivalents                                                     |  |                           | 35,181   |                        |   |                             |  |                                     | (21,953  | ) |   | 13,228   |  
|Cash and cash equivalents at beginning of period                                                         |  |                           | 43,494   |                        |   |                             |  |                                     | 94,540   |   |   | 138,034  |  
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|Cash and cash equivalents at end of period                                                               |  | $                         | 78,675   |                        | $ |                             |  | $                                   | 72,587   |   | $ | 151,262  |  
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  

36

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Note 13 - Guarantor Subsidiaries (Continued)

Condensed Consolidating Statements of Cash Flows -
(Continued)
(in thousands)

|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|-------------------------------------------------------------------------------------------------------- |  | ------------------------- | -------- | ---------------------- | - | ---------------------------- |  | ----------------------------------- | -------- | - | - | -------- | -
|                                                                                                         |  | Six months ended June 30, |         
|                                                                                                         |  |                           |         
|2006:                                                                                                    |  | Parent                    |          | Guarantor
  Subsidiary |   | Non-Guarantor
  Subsidiaries |  | Omnicare, Inc.
  and
  Subsidiaries |         
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |         
|Cash flows from operating activities:                                                                    |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|Provision for doubtful accounts                                                                          |  | $                         |         |                        | $ |                             |  | $                                   | 35,160   |   | $ | 35,160   |  
|Other                                                                                                    |  |                           | (95,527  | )                      |   |                             |  |                                     | 188,424  |   |   | 92,897   |  
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|Net cash flows from operating activities                                                                 |  |                           | (95,527  | )                      |   |                             |  |                                     | 223,584  |   |   | 128,057  |  
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|Cash flows from investing activities:                                                                    |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|Acquisition of businesses, net of cash received                                                          |  |                           |         |                        |   |                             |  |                                     | (51,076  | ) |   | (51,076  | )
|Capital expenditures                                                                                     |  |                           |         |                        |   |                             |  |                                     | (14,565  | ) |   | (14,565  | )
|Transfer of cash to trusts for employee health and severance costs,
  net of payments out of the trust   |  |                           |         |                        |   |                             |  |                                     | (9,311   | ) |   | (9,311   | )
|Other                                                                                                    |  |                           |         |                        |   |                             |  |                                     | 90       |   |   | 90       |  
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|Net cash flows from investing activities                                                                 |  |                           |         |                        |   |                             |  |                                     | (74,862  | ) |   | (74,862  | )
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|Cash flows from financing activities:                                                                    |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|Borrowings on line of credit facilities and term A loan                                                  |  |                           | 133,000  |                        |   |                             |  |                                     |         |   |   | 133,000  |  
|Payments on line of credit facilities and term A loan                                                    |  |                           | (133,000 | )                      |   |                             |  |                                     |         |   |   | (133,000 | )
|Payments on long-term borrowings and obligations                                                         |  |                           | (1,394   | )                      |   |                             |  |                                     |         |   |   | (1,394   | )
|Fees paid for financing arrangements                                                                     |  |                           | (3,212   | )                      |   |                             |  |                                     |         |   |   | (3,212   | )
|Change in cash overdraft balance                                                                         |  |                           | 1,530    |                        |   |                             |  |                                     | 8,757    |   |   | 10,287   |  
|Proceeds from stock offering, net of issuance costs                                                      |  |                           | 49,239   |                        |   |                             |  |                                     |         |   |   | 49,239   |  
|Payments for stock awards and exercise of stock options and warrants,
  net of stock tendered in payment |  |                           | (3,295   | )                      |   |                             |  |                                     |         |   |   | (3,295   | )
|Excess tax benefits from stock-based compensation                                                        |  |                           | 11,472   |                        |   |                             |  |                                     |         |   |   | 11,472   |  
|Dividends paid                                                                                           |  |                           | (5,461   | )                      |   |                             |  |                                     |         |   |   | (5,461   | )
|Other                                                                                                    |  |                           | 127,623  |                        |   |                             |  |                                     | (127,623 | ) |   |         |  
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|Net cash flows from financing activities                                                                 |  |                           | 176,502  |                        |   |                             |  |                                     | (118,866 | ) |   | 57,636   |  
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|Effect of exchange rate changes on cash                                                                  |  |                           |         |                        |   |                             |  |                                     | 1,011    |   |   | 1,011    |  
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|Net increase in cash and cash equivalents                                                                |  |                           | 80,975   |                        |   |                             |  |                                     | 30,867   |   |   | 111,842  |  
|Cash and cash equivalents at beginning of period                                                         |  |                           | 143,227  |                        |   |                             |  |                                     | 72,194   |   |   | 215,421  |  
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  
|Cash and cash equivalents at end of period                                                               |  | $                         | 224,202  |                        | $ |                             |  | $                                   | 103,061  |   | $ | 327,263  |  
|                                                                                                         |  |                           |          |                        |   |                              |  |                                     |          |   |   |          |  

37

---



|         |                                                                                                 
|-------- | ------------------------------------------------------------------------------------------------
|ITEM 2 - | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
  RESULTS OF OPERATIONS (MD&A)

The following
discussion should be read in conjunction with the Consolidated Financial
Statements, related notes and other financial information appearing elsewhere
in this report. In addition, see Safe Harbor Statement under the Private
Securities Litigation Reform Act of 1995 Regarding Forward-Looking
Information. The reader should also refer to the Consolidated Financial
Statements and notes thereto and MD&A, including critical accounting
policies, for the year ended December 31, 2006, which appear in the Companys
Annual Report on Form 10-K, (Omnicares 2006 Annual Report), which was filed
with the Securities and Exchange Commission on March 1, 2007.

|                                                                                
|--------------------------------------------------------------------------------
|Overview of
  Three and Six Months Ended June 30, 2007 and Results of Operations
|                                                                                

Omnicare, Inc.
(Omnicare or the Company) is a leading geriatric pharmaceutical services
company. Omnicare is the nations largest provider of pharmaceuticals and
related pharmacy and ancillary services to long-term healthcare institutions.
Omnicares clients include primarily skilled nursing facilities (SNFs),
assisted living facilities, retirement centers, independent living communities,
hospitals, hospice, and other healthcare settings and service providers.
Omnicare provides its pharmacy services to long-term care facilities and other
chronic care settings comprising approximately 1,389,000 beds in 47 states in
the United States, the District of Columbia and Canada at June 30, 2007. As
well, Omnicare provides operational software and support systems to long-term
care pharmacy providers across the United States. Omnicares pharmacy services
also include distribution and patient assistance services for specialty
pharmaceuticals. Omnicare provides comprehensive product development and
research services for the pharmaceutical, biotechnology, medical device and
diagnostic industries in 30 countries worldwide.

The following
summary table presents consolidated net sales and results of operations of
Omnicare for the three and six months ended June 30, 2007 and 2006 (in
thousands, except per share amounts). In accordance with the Securities and
Exchange Commission (SEC) release entitled Conditions for Use of Non-GAAP
Financial Measures, the Company has disclosed in this MD&A, with the
exception of EBITDA (discussed below), only those measures that are in
accordance with U.S. Generally Accepted Accounting Principles (GAAP).

38

---



|                                                                                   |  |                               |           |                             |   |           |   |      |           |   |   |           |  
|---------------------------------------------------------------------------------- |  | ----------------------------- | --------- | --------------------------- | - | --------- | - | ---- | --------- | - | - | --------- | -
|                                                                                   |  | Three months ended
  June 30, |           | Six months ended
  June 30, |  
|                                                                                   |  |                               |           |                             |  
|                                                                                   |  | 2007                          |           | 2006                        |   | 2007      |   | 2006 |          
|                                                                                   |  |                               |           |                             |   |           |   |      |          
|                                                                                  
|Net sales                                                                          |  | $                             | 1,549,157 |                             | $ | 1,641,110 |   | $    | 3,126,222 |   | $ | 3,299,708 |  
|                                                                                   |  |                               |           |                             |   |           |   |      |           |   |   |           |  
|                                                                                   |  |                               |           |                             |   |           |   |      |           |   |   |           |  
|Net income                                                                         |  | $                             | 49,241    |                             | $ | 8,379     |   | $    | 92,228    |   | $ | 61,610    |  
|                                                                                   |  |                               |           |                             |   |           |   |      |           |   |   |           |  
|                                                                                   |  |                               |           |                             |   |           |   |      |           |   |   |           |  
|Earnings per share:                                                                |  |                               |           |                             |   |           |   |      |           |   |   |           |  
|Basic                                                                              |  | $                             | 0.41      |                             | $ | 0.07      |   | $    | 0.77      |   | $ | 0.52      |  
|                                                                                   |  |                               |           |                             |   |           |   |      |           |   |   |           |  
|Diluted                                                                            |  | $                             | 0.41      |                             | $ | 0.07      |   | $    | 0.76      |   | $ | 0.50      |  
|                                                                                   |  |                               |           |                             |   |           |   |      |           |   |   |           |  
|                                                                                   |  |                               |           |                             |   |           |   |      |           |   |   |           |  
|EBITDA(a)                                                                          |  | $                             | 149,456   |                             | $ | 114,408   |   | $    | 287,864   |   | $ | 272,666   |  
|                                                                                   |  |                               |           |                             |   |           |   |      |           |   |   |           |  
|                                                                                   |  |                               |           |                             |   |           |   |      |           |   |   |           |  
|EBITDA reconciliation to net cash flows from operating
activities:                 |  |                               |           |                             |   |           |   |      |           |   |   |           |  
|EBITDA(a)                                                                          |  | $                             | 149,456   |                             | $ | 114,408   |   | $    | 287,864   |   | $ | 272,666   |  
|(Subtract)/Add:                                                                    |  |                               |           |                             |   |           |   |      |           |   |   |           |  
|Interest expense, net of investment income                                         |  |                               | (39,616   | )                           |   | (40,020   | ) |      | (79,743   | ) |   | (80,633   | )
|Income tax provision                                                               |  |                               | (32,113   | )                           |   | (35,770   | ) |      | (58,685   | ) |   | (69,286   | )
|Changes in assets and liabilities, net of effects from acquisition of
  businesses |  |                               | (68,655   | )                           |   | (19,857   | ) |      | (7,736    | ) |   | (46,766   | )
|Provision for doubtful accounts                                                    |  |                               | 29,899    |                             |   | 18,066    |   |      | 58,803    |   |   | 35,160    |  
|Deferred tax provision                                                             |  |                               | 22,167    |                             |   | 8,453     |   |      | 35,424    |   |   | 16,916    |  
|                                                                                   |  |                               |           |                             |   |           |   |      |           |   |   |           |  
|                                                                                  
|Net cash flows from operating activities                                           |  | $                             | 61,138    |                             | $ | 45,280    |   | $    | 235,927   |   | $ | 128,057   |  
|                                                                                   |  |                               |           |                             |   |           |   |      |           |   |   |           |  

(a) EBITDA
represents earnings before interest (net of investment income), income taxes,
depreciation and amortization. The Company believes that certain investors find
EBITDA to be a useful tool for measuring a companys ability to service its
debt, which is also the primary purpose for which management uses this
financial measure. However, EBITDA does not represent net cash flows from
operating activities, as defined by U.S. GAAP, and should not be considered as
a substitute for operating cash flows as a measure of liquidity. The Companys
calculation of EBITDA may differ from the calculation of EBITDA by others.

|                                           
|-------------------------------------------
|Three Months
  Ended June 30, 2007 vs. 2006
|                                           

Total net
sales for the three months ended June 30, 2007 decreased to $1,549.2 million
from $1,641.1 million in the comparable prior-year period. Net income for the
three months ended June 30, 2007 was $49.2 million versus $8.4 million earned
in the comparable 2006 period. Diluted earnings per share for the three months
ended June 30, 2007 were $0.41 versus $0.07 in the same prior-year period.
EBITDA totaled $149.5 million for the three months ended June 30, 2007 as
compared with $114.4 million for the same period of 2006.

39

---



The Company
continues to be impacted by the unilateral reduction by UnitedHealth Group,
Inc. and its Affiliates (United) in the reimbursement rates paid by United to
Omnicare by switching to its PacifiCare pharmacy network contract for services
rendered by Omnicare to beneficiaries of Uniteds drug benefit plans under the
Medicare Part D program. The differential in rates that resulted from Uniteds
action reduced sales and operating profit in the second quarter of 2007 by
approximately $32.3 million (approximately $19.9 million aftertax). The
unilateral reduction in reimbursement rates began in April 2006; the impact on
the second quarter of 2006 was approximately $22 million (approximately $13.8
million aftertax). This matter is currently the subject of litigation initiated
by Omnicare and is before the federal court in the Northern District of
Illinois. See further discussion at the Legal Proceedings section at Part II,
Item 1 of this Filing.

Financial
results for the second quarter of 2007 also reflect a change to the equity
method of accounting for certain pharmacy joint venture operations in which the
Company owns less than a 100% interest, which was effective in the third
quarter of 2006. Accordingly, the deconsolidation of these operations excluded
net sales of approximately $28 million for the 2007 second quarter but had no
impact on earnings.

Net sales for
the quarter were unfavorably impacted by the United Part D contract, the deconsolidation of
the pharmacy joint-venture operations, a lower number of beds served and the
impact of generic drugs, partially offset by the favorable impact of drug price
inflation, acquisitions and growth in hospice pharmacy and specialty pharmacy
services and CRO Services revenues. See discussion of sales and operating profit results
in more detail at the Pharmacy Services Segment and CRO Services Segment
captions below.

The Companys
consolidated gross profit of $395.0 million decreased $5.3 million for the
three months ended June 30, 2007, from the same prior-year period amount of
$400.3 million. Gross profit as a percentage of total net sales of 25.5% in the
three months ended June 30, 2007, was higher than the 24.4% experienced during
the comparable 2006 period. Gross profit was favorably impacted in the 2007
period largely as a result of the increased availability and utilization of
higher margin generic drugs, drug purchasing improvements and the continued
integration of prior-period acquisitions. Offsetting these factors was the
gross profit impact of the aforementioned reduction in net sales, including the
reduction in reimbursement under the United Part D contract and a lower number
of beds served, as well as a special charge in the 2007 second quarter relating
    to the incremental costs associated with the closure of the Companys
Heartland repackaging facility as further described below.

Omnicares
consolidated selling, general and administrative (operating) expenses for the
three months ended June 30, 2007 of $257.9 million were higher than the
comparable prior-year amount of $239.8 million by $18.1 million. Operating
expenses as a percentage of net sales amounted to 16.6% in the second quarter
of 2007, representing an increase from the 14.6% experienced in the comparable
prior-year period. Operating expenses for the quarter ended June 30, 2007 were
unfavorably impacted primarily by an $11.8 million increase in the provision
for doubtful accounts and a $3.3 million increase in periodic pension costs.
Partially offsetting the increased operating expenses were the favorable impact
of the Companys continued integration of prior-period acquisitions, and
productivity enhancements, including the restructuring program

40

---



relating to
the NeighborCare, Inc. (NeighborCare) acquisition and the Omnicare Full
Potential Plan, as further discussed in the Restructuring and Other Related
Charges section of this MD&A.

Investment
income for the three months ended June 30, 2007 of $2.1 million was lower than
the $3.0 million earned in the comparable prior-year period, primarily due to
lower average invested cash balances versus the prior year.

Interest
expense for the three months ended June 30, 2007 of $41.7 million is lower than
the $43.1 million in the comparable prior-year period, primarily due to lower
debt outstanding resulting from payments aggregating $200 million on the Term
Loans in the latter half of 2006 and the first half of 2007, partially offset
by increased interest rates for variable rate loans.

The effective
income tax rate was 39.5% for the three months ended June 30, 2007, as compared
    to the second quarter of 2006 rate of 81.0%. The effective tax rates in 2007
    and 2006 are higher than the federal statutory rate largely as a result of
    the impact of state and local income taxes and various nondeductible expenses
    (primarily litigation costs in 2006).

Special Items:

The three
months ended June 30, 2007 included the following charges/(credits), which
primarily impacted the Pharmacy Services segment, that management considers to
be special items, and not related to Omnicares ordinary course of business:

(i) Operating
income included restructuring and other related charges of approximately $6.3
million pretax ($3.8 million aftertax), $7.8 million of which related to the
implementation of the Omnicare Full Potential Plan, a major initiative
designed to re-engineer the pharmacy operating model to increase efficiency and
enhance customer growth, partially offset by a ($1.6) million credit adjustment
to the previously disclosed consolidation and productivity initiatives related,
in part, to the integration of the NeighborCare acquisition and other related
activities. See further discussion at the Restructuring and Other Related
Charges note of the Notes to Consolidated Financial Statements and the
Restructuring and Other Related Charges section of this MD&A.

(ii) During
2006, the Company experienced certain quality control and product recall
issues, as well as fire damage, at one of its repackaging facilities, Heartland
Repack Services (Heartland), as described in further detail at the
Commitments and Contingencies note of the Notes to Consolidated Financial
Statements. In addressing and resolving these issues, the Company continues to
experience increased costs and as a result, the three months ended June 30,
2007 included special charges of $4.9 million pretax (approximately $4.0 million
and $0.9 million was recorded in the cost of sales and operating expense
sections of the Consolidated Statements of Income, respectively) ($3.0 million
aftertax) for these increased costs. The Company maintains product recall,
property and casualty and business interruption insurance, and the extent of
insurance recovery for these expenses is currently being reviewed by its
outside advisors. As of June 30, 2007, no receivables for insurance recoveries
have been recorded by the Company.

41

---



(iii) Operating
income included a special litigation charge of $9.0 million pretax ($5.5
million aftertax) for litigation-related professional expenses in connection
with the administrative subpoenas from the United States Attorneys Office,
District of Massachusetts, the purported class and derivative actions, the
Companys lawsuit against United, the inquiry conducted by the Attorney
Generals office in Michigan relating to certain billing issues under the
Michigan Medicaid program, the investigation by the federal government and
certain states relating to drug substitutions and the Companys response
to subpoenas it received relating to other legal proceedings to which the Company
is not a party. With respect to these proceedings to which the Company is
a party, see further discussion at the Commitments and Contingencies note
of the Notes to Consolidated Financial Statements, and the Legal Proceedings
section at Part II, Item 1 of this Filing.

The three
months ended June 30, 2006 included the following charges, which primarily
impacted the Pharmacy Services segment, that management considers to be special
items, and not related to Omnicares ordinary course of business:

(i) Operating income included a special
litigation charge of $19.3 million pretax ($18.6 million aftertax) to increase
the previously established settlement reserve relating to previously disclosed
inquiries by the federal government and certain states concerning the
substitution of three generic pharmaceuticals by the Company. This special litigation
charge represented the Companys estimate of the additional settlement amounts
and associated costs under Statement of Financial Accounting Standards (SFAS)
No. 5, Accounting for Contingencies (SFAS 5). See further discussion at the
Commitments and Contingencies note of the Notes to Consolidated Financial
Statements, and the Legal Proceedings section at Part II, Item 1 of this
Filing.

(ii) As previously disclosed, the Company
recorded a special litigation charge of $54.0 million pretax, including $10.3
million and $43.7 million recorded in the net sales and litigation charges
lines of the Consolidated Statements of Income, respectively ($46.7 million
aftertax), in its financial results for the quarter ended June 30, 2006. This
special litigation charge related to the inquiry conducted by the Attorney
Generals Office in Michigan in connection with certain billing issues under
the Michigan Medicaid program, based on discussions between the Attorney
Generals Office, the Company and its legal counsel. This special litigation
charge represented the Companys best estimate of the settlement amounts
and associated costs under SFAS 5. See further discussion at the Commitments
and Contingencies notes of the Notes to Consolidated Financial Statements,
and the
Legal Proceedings section at Part II, Item 1 of this Filing.

(iii) Operating income included a special
litigation charge of $1.5 million pretax ($1.0 million aftertax) for
litigation-related professional expenses in connection with the Companys
lawsuit against United.

(iv) Operating income included
restructuring and other related charges of approximately $11.9 million pretax
($7.5 million aftertax) in connection with the Omnicare Full Potential Plan, as well as the previously disclosed consolidation and productivity
initiatives related, in part, to the integration of the NeighborCare
acquisition and other related activities. See

42

---



further
discussion at the Restructuring
and Other Related Charges section of this MD&A.

Pharmacy Services Segment

|                   |  |                               |           |      |   |           | 
|------------------ |  | ----------------------------- | --------- | ---- | - | --------- | 
|                   |  | Three months ended
  June 30, |          
|                   |  |                               |          
|                   |  | 2007                          |           | 2006 |  
|                   |  |                               |           |      |  
|                  
|Net sales          |  | $                             | 1,498,918 |      | $ | 1,598,604 | 
|                   |  |                               |           |      |   |           | 
|                  
|Operating
  income |  | $                             | 144,274   |      | $ | 107,225   | 
|                   |  |                               |           |      |   |           | 

Three Months Ended June 30, 2007 vs. 2006

Omnicares
Pharmacy Services segment recorded sales of $1,498.9 million for the three
months ended June 30, 2007, down from the 2006 amount of $1,598.6 million by
$99.7 million, or 6.2%. At June 30, 2007, Omnicare served long-term care
facilities and other chronic care settings comprising approximately 1,389,000
beds as compared with approximately 1,419,000 beds served at June 30, 2006.
Pharmacy Services sales were unfavorably impacted by a lower number of beds
served, the effects of the reduction in reimbursement under the United Part D
contract, the increased availability and utilization of generic drugs, the
aforementioned deconsolidation of the pharmacy joint-venture operations and the
impact of a bed mix shift toward assisted living. Partially offsetting these
factors were drug price inflation, the impact of acquisitions and
year-over-year growth in hospice pharmacy and specialty pharmacy services.
While the Company is focused on reducing its costs to mitigate the impact of
drug pricing and reimbursement issues, there can be no assurance that such
issues or other pricing and reimbursement pressures will not adversely impact
the Pharmacy Services segment.

Operating
income of the Pharmacy Services segment was $144.3 million in the second
quarter of 2007, a $37.1 million increase as compared with the $107.2 million
earned in the comparable period of 2006. As a percentage of the segments
sales, operating income was 9.6% for the second quarter of 2007, compared with
6.7% in 2006. Operating income in 2007 was impacted favorably by the
year-over-year impact of the aforementioned special items, increased
availability and utilization of higher margin generic drugs, drug purchasing
improvements, as well as the Companys continued integration of prior-period
acquisitions and productivity enhancements, including the restructuring program
relating, in part, to the NeighborCare acquisition and the Omnicare Full
Potential Plan, as further discussed in the Restructuring and Other Related
Charges section of this MD&A. Partially offsetting these factors was
the unfavorable impact of a lower number of beds served, the aforementioned
increase in the provision for doubtful accounts and the aforementioned
reduction in the reimbursement rates under the United Part D contract.

The Company
derives a significant portion of its revenues directly or indirectly from
government-sponsored programs, principally the federal Medicare program and to
a lesser extent state Medicaid programs. As part of ongoing operations, the
Company and its customers are

43

---



subject to
regulatory changes in the level of reimbursement received from the Medicare and
Medicaid programs. Since 1997, Congress has passed a number of federal laws
that have effected major changes in the healthcare system.

The Balanced
Budget Act of 1997 (the BBA) mandated a prospective payment system (PPS)
for Medicare-eligible residents of skilled nursing facilities (SNFs). Under
PPS, Medicare pays SNFs a fixed fee per patient per day based upon the acuity
level of the resident, covering substantially all items and services furnished
during a Medicare-covered stay, including pharmacy services. PPS initially
resulted in a significant reduction of reimbursement to SNFs. Congress
subsequently sought to restore some of the reductions in reimbursement
resulting from PPS. One provision gave SNFs a temporary rate increase for
certain specific high-acuity patients beginning April 1, 2000, and ending when
the Centers for Medicare & Medicaid Services (CMS) implemented a refined
patient classification system under PPS. For several years, CMS did not
implement such refinements, thus continuing the additional rate increase for
certain high-acuity patients through federal fiscal year 2005.

On August 4,
2005, CMS issued its final SNF PPS rule for fiscal year 2006. Under the rule,
CMS added nine patient classification categories to the PPS patient
classification system, thus triggering the expiration of the high-acuity
payments add-ons. However, CMS estimated that the rule would have a slightly
positive financial impact on SNFs in fiscal year 2006 because the $1.02 billion
reduction from the expiration of the add-on payments would be more than offset
by a $510 million increase in the nursing case-mix weight for all of the
resource utilization group categories and a $530 million increase associated
with various updates to the payment rates (including updates to the wage and
market basket indexes), resulting in a $20 million overall increase in payments
for fiscal year 2006. The new patient classification refinements became
effective on January 1, 2006, and the market basket increase became effective
October 1, 2005. On July 31, 2006, CMS issued the update to the SNF PPS rates
for fiscal year 2007. Effective October 1, 2006, SNFs receive the full 3.1
percent market basket increase to rates, increasing payments to SNFs by
approximately $560 million for fiscal year 2007. On August 3, 2007, CMS
published its final SNF PPS update for fiscal year 2008. Effective October 1,
2007 SNFs will receive a 3.3 percent market basket increase, which will
increase Medicare payments to SNFs by approximately $690 million in fiscal year
    2008. The final rule also includes several policy and payment provisions,
    which were included in the proposed rule, including rebasing the market basket,
    which currently reflects data from fiscal 1997, to a base year of fiscal
    year 2004; revisions to calculate the SNF market basket (including revising
    the pharmacy component); changing the threshold for forecast error adjustments
    from the current 0.25 percentage point to 0.5 percentage point; and continuing
    a special adjustment made to cover the additional services required by nursing
    home residents with HIV/AIDS. While the fiscal year 2007 and 2008 SNF PPS
    rates do not decrease payments to SNFs, the loss of revenues associated with
    future changes in SNF payments could, in the future, have an adverse effect
    on the financial condition of the Companys SNF clients which could,
    in turn, adversely affect the timing or level of their payments to Omnicare.

Moreover, on
February 8, 2006, the President signed into law the Deficit Reduction Act
(DRA), which will reduce net Medicare and Medicaid spending by approximately
$11 billion over five years. Among other things, the legislation reduces Medicare
SNF bad debt payments by 30 percent for those individuals who are not dually
eligible for Medicare and Medicaid. This

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provision is
expected to reduce payments to SNFs by $100 million over 5 years (fiscal years
2006-2010). On February 5, 2007, the Bush Administration released its fiscal
year 2008 budget proposal, which includes legislative and administrative
proposals that would reduce Medicare spending by approximately $5.3 billion in
fiscal year 2008 and $75.8 billion over 5 years. Among other things, the budget
would provide no annual update for SNFs in 2008 and a -0.65 percent adjustment
to the update annually thereafter. The budget also would move toward
site-neutral post-hospital payments to limit perceived inappropriate incentives
for five conditions commonly treated in both SNFs and inpatient rehabilitation
facilities. The budget proposal also would eliminate all bad debt
reimbursements for unpaid beneficiary cost-sharing over four years. Congress
may yet consider these and other proposals in the future that would further
restrict Medicare funding for SNFs.

In December
2003, Congress enacted the Medicare Prescription Drug, Improvement, and
Modernization Act of 2003 (MMA), which includes a major expansion of the
Medicare prescription drug benefit under a new Medicare Part D.

Under the new
prescription drug benefit, Medicare beneficiaries may enroll in prescription
drug plans offered by private entities (or in a fallback plan offered on
behalf of the government through a contractor, to the extent private entities
fail to offer a plan in a given area), which provide coverage of outpatient
prescription drugs (collectively, Part D Plans). Part D Plans include both
plans providing the drug benefit on a stand-alone basis and Medicare Advantage
plans providing drug coverage as a supplement to an existing medical benefit
under that Medicare Advantage plan, most commonly a health maintenance
organization plan. Medicare beneficiaries generally have to pay a premium to
enroll in a Part D Plan, with the premium amount varying from plan to plan,
although CMS provides various federal subsidies to Part D Plans to reduce the
cost to beneficiaries. Medicare beneficiaries who are also entitled to benefits
under a state Medicaid program (so-called dual eligibles) now have their
prescription drug costs covered by the new Medicare drug benefit, including the
nursing home residents Omnicare serves, whose drug costs were previously
covered by state Medicaid programs. In 2006, approximately 41% of Omnicares revenue
was derived from beneficiaries covered under the federal Medicare Part D
program.

CMS provides
premium and cost-sharing subsidies to Part D Plans with respect to dual
eligible residents of nursing homes. Such dual eligibles are not required to
pay a premium for enrollment in a Part D Plan, so long as the premium for the
Part D Plan in which they are enrolled is at or below the premium subsidy, nor
are they required to meet deductibles or pay copayment amounts. Further, all
dual eligibles who had not affirmatively enrolled in a Part D Plan as of
December 31, 2005 were automatically enrolled into a Prescription Drug Plan
(PDP) by CMS on a random basis from among those PDPs meeting CMS criteria for
low-income premiums in the PDP region. As is the case for any nursing home
beneficiary, such dual eligible beneficiaries may select a different Part D
Plan at any time through the Part D enrollment process. In sum, dual eligible
residents of nursing homes are entitled to have their prescription drug costs covered
by a Part D Plan, provided that the prescription drugs which they are taking
are either on the Part D Plans formulary, or an exception to the plans
formulary is granted. CMS requires the formularies of Part D Plans to include
the types of drugs most commonly needed by Medicare beneficiaries and an
exceptions process to provide coverage for medically necessary drugs.

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Pursuant to
the final Part D rule, effective January 1, 2006, the Company obtains
reimbursement for drugs it provides to enrollees of a given Part D Plan in
accordance with the terms of agreements negotiated between it and that Part D
Plan. The Company has entered into such agreements with nearly all Part D Plan
sponsors under which it will provide drugs and associated services to their
enrollees. The Company continues to have ongoing discussions with Part D Plans
in the ordinary course and may, as appropriate, renegotiate agreements.
Further, the proportion of the Companys Part D business serviced under
specific agreements may change over time. Consequently, there can be no
assurance that the reimbursement terms which currently apply to the Companys
Part D business will not change. Moreover, as expected in the transition to a
new program of this magnitude, certain administrative and payment issues have
arisen, resulting in higher operating expenses, as well as outstanding gross
accounts receivable (net of allowances for contractual adjustments, and prior
to allowance for doubtful accounts) for copays and rejected claims. As of June
30, 2007, copays outstanding from Part D Plans were approximately $29 million,
of which approximately $20 million relates to 2006. Additionally, as of June
30, 2007, Part D rejected claims outstanding from Part D Plans for the 2006 transitional
year were approximately $21 million. Until all administrative and payment issues
are fully resolved, there can be no assurance that the impact of the Part D Drug
Benefit on the Companys results of operations, financial position or cash
flows will not change based on the outcome of any unforeseen future
developments.

The MMA does
not change the manner in which Medicare pays for drugs for Medicare
beneficiaries covered under a Medicare Part A stay. The Company continues to
receive reimbursement for drugs provided to such residents from the SNFs, in accordance
with the terms of the agreements it has negotiated with each SNF. The Company
also continues to receive reimbursement from the state Medicaid programs,
albeit to a greatly reduced extent, for those Medicaid beneficiaries not
eligible for the Part D program, including those under age 65, and for certain
drugs specifically excluded from Medicare Part D.

CMS has issued
subregulatory guidance on many aspects of the final Part D rule, including the
provision of pharmaceutical services to long-term care residents. CMS has also
expressed some concerns about pharmacies receipt of discounts, rebates and
other price concessions from drug manufacturers. Specifically, in a finalized
Call Letter for the 2007 calendar year, CMS indicated that for 2007, CMS is
requiring Part D sponsors to have policies and systems in place, as part of
their drug utilization management programs, to protect beneficiaries and reduce
costs when long-term care pharmacies are subject to incentives to move market
share through access/performance rebates from drug manufacturers. For the
purposes of managing and monitoring drug utilization, especially where such
rebates exist, CMS instructs Part D Plan sponsors to require pharmacies to
disclose to the Part D Plan sponsor any discounts, rebates and other direct or
indirect remuneration designed to directly or indirectly influence or impact
utilization of Part D drugs. CMS stated that Plan sponsors should provide
assurances that such information will remain confidential. CMS has recently issued
subregulatory guidelines specifying the information that CMS is requiring from
Plan sponsors with respect to rebates paid to long-term care pharmacies. CMS
has also issued draft reporting requirements for 2008 which would, among other
things, require disclosure of rebates provided to long-term care pharmacies at
a more detailed level. CMS has not yet issued final reporting requirements for
2008. The

46

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Company is
working with Plan sponsors with respect to the format, terms and conditions
under which information would be provided.

CMS has
indicated it will continue to issue guidance on the Part D program as it is
implemented. The Company is continuing to monitor issues relating to
implementation of the Part D benefit, and until further agency guidance is
known and until all administrative and payment issues associated with the
transition to this massive program are fully resolved, there can be no
assurance that the impact of the final rule or the outcome of other potential
developments relating to its implementation on our business, results of
operations, financial position or cash flows will not change based on the
outcome of any unforeseen future developments.

The MMA also
changed the Medicare payment methodology and conditions for coverage of certain
items of durable medical equipment prosthetics, orthotics, and supplies
(DMEPOS) under Medicare Part B. In 2006, approximately 1% of the Companys
revenue was derived from beneficiaries covered under Medicare Part B. The
changes include a temporary freeze in annual increases in payments for durable
medical equipment from 2004 through 2008, new clinical conditions for payment,
quality standards (applied by CMS-approved accrediting organizations), and
competitive bidding requirements. On April 10, 2007, CMS issued a final rule
establishing the Medicare competitive bidding program. Enteral nutrients,
equipment and supplies and oxygen equipment and supplies are among the 10
categories of DMEPOS included in the first round of the competitive bidding
program for 10 geographic areas beginning July 1, 2008 ( a delay from the
previously-announced implementation date of April 1, 2008). Additional types of
DMEPOS may be included in subsequent rounds of competitive bidding when the
program is expanded in 2009. The Company has submitted bids for nine
competitive bidding areas. Awards are expected to be announced in February
2008.

The MMA also
includes administrative reforms designed to improve Medicare program
operations. It is uncertain at this time the impact that the MMAs legislative
reforms ultimately will have on the Company.

With respect
to Medicaid, the BBA repealed the Boren Amendment federal payment standard
for Medicaid payments to nursing facilities, giving states greater latitude in
setting payment rates for such facilities. The law also granted states greater
flexibility to establish Medicaid managed care programs without the need to obtain
a federal waiver. Although these waiver programs generally exempt institutional
care, including nursing facilities and institutional pharmacy services, some
states do use managed care principles in their long-term care programs.
Likewise, the DRA includes several changes to the Medicaid program designed to
rein in program spending. These include, among others, strengthening the
Medicaid asset transfer restrictions for persons seeking to qualify for
Medicaid long-term care coverage, which could, due to the timing of the penalty
period, increase facilities exposure to uncompensated care. This provision is
expected to reduce Medicaid spending by an estimated $2.4 billion over 5 years.
The law also gives states greater flexibility to expand access to home and
community based services by allowing states to provide these services as an
optional benefit without undergoing the waiver approval process, and includes a
new demonstration to encourage states to provide long-term care services in a
community setting to individuals who currently receive Medicaid services in
nursing homes.

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Together,
these provisions could increase state funding for home and community-based
services, while prompting states to cut funding for nursing facilities. No
assurances can be given that state Medicaid programs ultimately will not change
the reimbursement system for long-term care or pharmacy services.

The DRA also
changed the so-called federal upper limit payment rules for multiple source
prescription drugs covered under Medicaid. Like the current upper limit, it
only applies to drug ingredient costs and does not include dispensing fees,
which will continue to be determined by the states. First, the DRA redefined a
multiple source drug subject to the upper limit rules to be a covered
outpatient drug that has at least one other drug product that is
therapeutically equivalent. Thus, the federal upper limit is triggered when
there are two or more therapeutic equivalents, instead of three or more as was
previously the case. Second, effective January 1, 2007, the DRA changed the
federal upper payment limit from 150 percent of the lowest published price for
a drug (which is usually the average wholesale price) to 250 percent of the
lowest average manufacturer price (AMP). Congress expected these
DRA provisions to reduce federal and state Medicaid spending by $8.4 billion
over five years. On July 17, 2007, CMS issued a final rule to implement changes
to the upper limit rules. Among other things, the final rule: establishes a new
federal upper limit calculation for multiple source drugs that is based on 250
percent of the lowest AMP in a drug class; promotes transparency in drug pricing
by requiring CMS to post AMP amounts on its web site; and establishes a uniform
definition for AMP. Among other things, the final rule provides that sales of
drugs to long-term care pharmacies for supply to nursing homes and assisted
living facilities (as well as associated rebates and other price concessions)
are not to be taken into account in determining AMP where such sales can be
identified with adequate documentation, and that any AMPs which are not at
least 40% of the next highest AMP will not be taken into account in determining
the upper limit amount (the so-called outlier test). While final, CMS will
accept comments on the AMP definition and outlier test portions of the rule for
a period of 180 days. With the advent of Medicare Part D, the Companys
revenues from state Medicaid programs are substantially lower than has been the
case previously. However, some of the Companys agreements with Part D Plans
and other payors have incorporated the Medicaid upper limit rules into the
pricing mechanisms for its prescription drugs. Until the new upper limit
amounts are published by CMS, the Company cannot predict the impact of the
final rule on the Companys business. There can be no assurance, however, that
the changes under the DRA or other efforts by payors to limit reimbursement for
certain drugs will not have an adverse impact on the Companys business.

President
Bushs fiscal year 2008 budget proposal includes a series of proposals
impacting Medicaid, including legislative and administrative changes that would
reduce Medicaid payments by almost $26 billion over five years. Among other
things, the proposed budget would further reduce the federal upper limit
reimbursement for multiple source drugs to 150 percent of the AMP of the lowest
priced drug in the group, and allow states to use private sector formulary
management techniques to leverage greater discounts through negotiations with
drug manufacturers. Many of the proposed policy changes would require
congressional approval to implement. While the Company has endeavored to adjust
to these types of funding pressures in the past, there can be no assurance that
these or future changes in Medicaid payments to nursing facilities, pharmacies,
or managed care systems, or their potential impact on payments under agreements
with Part D Plans, will not have an adverse impact on its business.

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Two recent actions
at the federal level could impact Medicaid payments to nursing facilities. The
Tax Relief and Health Care Act of 2006 modified several Medicaid policies
including, among other things, reducing the limit on Medicaid provider taxes
from 6 percent (now in regulations) to 5.5 percent from January 1, 2008 through
September 30, 2011. The Bush Administration had been expected to issue
regulations calling for deeper cuts in this funding. Second, on January 18,
2007, CMS published a proposed rule designated to ensure that Medicaid payments
to governmentally-operated nursing facilities and certain other health care
providers are based on actual costs and that state financing arrangements are
consistent with the Medicaid statute. CMS estimates that the rule, if finalized,
would save $120 million during the first year and $3.87 billion over five
years. On March 23, 2007, CMS published a proposed rule that would implement
this legislation, and make other clarifications to the standards for
determining the permissibility of provider tax arrangements.

On October 4,
2006, the plaintiffs in New England
Carpenters Health Benefits Fund et al. v. First DataBank, Inc. and McKesson
Corporation, CA No. 1:05-CV-11148-PBS (United District Court for the
District of Massachusetts) and defendant First DataBank, Inc. (First
DataBank) entered into a settlement agreement relating to First DataBanks
publication of average wholesale price (AWP). AWP is a pricing benchmark that
is widely used to calculate a portion of the reimbursement payable to pharmacy
providers for the drugs and biologicals they provide, including under State
Medicaid programs, Medicare Part D Plans and certain of the Companys contracts
with long-term care facilities. The settlement agreement would require First
DataBank to cease publishing AWP two years after the settlement becomes
effective unless a competitor of First DataBank is then publishing AWP, and
would require that First DataBank modify the manner in which it calculates AWP
until First DataBank ceases publishing same. On June 6, 2007 the Court granted
preliminary approval to an amended settlement agreement. Although the
settlement agreement is yet subject to final approval of the court, the Company
is evaluating the potential impact of the settlement in the context of certain
of the contracts that it has with various payors and the actions that may be
taken, if necessary, to offset or otherwise mitigate such impact. In addition,
the government and private health insurance programs could discontinue or modify
the use of AWP or otherwise implement payment methods that reduce the
reimbursement for drugs and biologicals. There can be no assurance, however,
that the First DataBank settlement, if approved, or actions, if any, by the
government or private health insurance programs relating to AWP would not have
an adverse impact on the Companys reimbursement for drugs and biologicals and
have implications for the use of AWP as a benchmark from which pricing in the
pharmaceutical industry is negotiated, which could adversely affect the
Company. In a related case, District Council
37 Health and Security Plan v. Medi-Span,CA No. 1:07-CV-10988-PBS
(United States District Court for the District of Massachusetts), in which
Medi-Span is accused of misrepresenting pharmaceutical prices by relying on and
publishing First Databanks price list, the parties entered into a similar
settlement agreement, and the Court granted preliminary approval of the
agreement on June 21, 2007.

Longer term,
funding for federal and state healthcare programs must consider the aging of
the population and the growth in enrollees as eligibility is expanded; the
escalation in drug costs owing to higher drug utilization among seniors and the
introduction of new, more efficacious but also more expensive medications; and
the long-term financing of the Medicare and Medicaid programs. Given competing
national priorities, it remains difficult to predict the outcome and impact on
the

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Company of any
changes in healthcare policy relating to the future funding of the Medicare and
Medicaid programs.

Demographic
trends indicate that demand for long-term care will increase well into the
middle of this century as the elderly population grows significantly. Moreover,
those over 65 consume a disproportionately high level of healthcare services,
including prescription drugs, when compared with the under-65 population. There
is widespread consensus that appropriate pharmaceutical care is generally
considered the most cost-effective form of treatment for the chronic ailments
afflicting the elderly and also one that is able to improve the quality of
life. Further, new drug development is yielding promising new drugs targeted at
the diseases of the elderly. These new drugs may be more expensive than older,
less effective drug therapies due to rising research costs. However, they are
more effective in curing or ameliorating illness and in lowering overall
healthcare costs by reducing, among other things, hospitalizations, physician
visits, nursing time and lab tests. These trends not only support long-term
growth for the geriatric pharmaceutical industry but also containment of
healthcare costs and the well-being of the nations growing elderly population.

In order to
fund this growing demand, the Company anticipates that the government and the
private sector will continue to review, assess and possibly alter healthcare
delivery systems and payment methodologies. While it cannot at this time
predict the ultimate effect of the Medicare Part D drug benefit or any further
initiatives on Omnicares business, management believes that the Companys
expertise in geriatric pharmaceutical care and pharmaceutical cost management
position Omnicare to help meet the challenges of todays healthcare
environment. Further, while volatility can occur from time to time in the
contract research business owing to factors such as the success or failure of
its clients compounds, the timing or budgetary constraints of its clients, or
consolidation within our client base, new drug discovery remains an important
priority of drug manufacturers. Drug manufacturers, in order to optimize their
research and development efforts, will continue to turn to contract research
organizations to assist them in accelerating drug research development and
commercialization.

CRO Services Segment

|                   |  |                                |        |      |   |        | 
|------------------ |  | ------------------------------ | ------ | ---- | - | ------ | 
|                   |  | Three months ended 
  June 30, |       
|                   |  |                                |       
|                   |  | 2007                           |        | 2006 |  
|                   |  |                                |        |      |  
|                  
|Revenues           |  | $                              | 50,239 |      | $ | 42,506 | 
|                   |  |                                |        |      |   |        | 
|                  
|Operating
  income |  | $                              | 2,904  |      | $ | 1,301  | 
|                   |  |                                |        |      |   |        | 

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Three Months Ended June 30, 2007 vs. 2006

Omnicares CRO
Services segment recorded revenues of $50.2 million for the three months ended
June 30, 2007, which increased by $7.7 million, or 18.2% from the $42.5 million
recorded in the same prior-year period. In accordance with Emerging Issues Task
Force (EITF) Issue No. 01-14, Income Statement Characterization of
Reimbursements Received for Out-of-Pocket Expenses Incurred (EITF No.
01-14), the Company included $8.2 million and $6.1 million of reimbursable
out-of-pockets in its CRO Services segment reported revenue and direct cost
amounts for the three months ended June 30, 2007 and 2006, respectively.
Revenues for 2007 were higher than in the same prior-year period primarily due
to the commencement and ramp-up of projects that were awarded in 2006 and in
the first quarter of 2007, exceeding project terminations and cancellations.

Operating income in the CRO
Services segment was $2.9 million in the second quarter of 2007 compared with $1.3
million in 2006, an increase of $1.6 million. As a percentage of the segments
revenue, operating income was 5.8% in the second quarter of 2007 compared with
3.1% in the same period of 2006. This increase is primarily attributable to the
year-over-year decline in pretax restructuring and other related charges of
approximately $0.8 million, as well as the favorable impact of the increase in
revenues discussed above. Backlog at June 30, 2007 was $315.5 million,
representing an increase of $13.6 million from the December 31, 2006 backlog of
$301.9 million, and an increase of $28.0 million from the June 30, 2006 backlog
of $287.5 million.

|                                         
|-----------------------------------------
|Six Months
  Ended June 30, 2007 vs. 2006
|                                         

Total net
sales for the six months ended June 30, 2007 decreased to $3,126.2 million from
$3,299.7 million in the comparable prior-year period. Net income for the six
months ended June 30, 2007 was $92.2 million versus $61.6 million earned in the
comparable 2006 period. Diluted earnings per share for the six months ended June
30, 2007 were $0.76 versus $0.50 in the same prior-year period. EBITDA totaled
$287.9 million for the six months ended June 30, 2007 as compared with $272.7
million for the same period of 2006.

The Company
continues to be impacted by the unilateral reduction by United in the reimbursement
    rates paid by United to Omnicare by switching to its PacifiCare pharmacy
    network contract for services rendered by Omnicare to beneficiaries of Uniteds
    drug benefit plans under the Medicare Part D program. The differential in
    rates that resulted from Uniteds
action reduced sales and operating profit in the first six months of 2007 by
approximately $63 million (approximately $39 million aftertax). The unilateral
reduction in reimbursement rates began in April 2006; the impact on the first
half of 2006 was approximately $22 million (approximately $14 million
aftertax). This matter is currently the subject of litigation initiated by
Omnicare and is before the federal court in the Northern District of Illinois.
See further discussion at the Legal Proceedings section at Part II,
Item 1 of this Filing.

Financial
results for the first six months of 2007 also reflect a change to the equity
method of accounting for certain pharmacy joint venture operations in which the
Company owns less than a 100% interest, which was effective in the third
quarter of 2006. Accordingly, the

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deconsolidation
of these operations excluded net sales of approximately $56 million for the
first six months of 2007 but had no impact on earnings.

Net sales for
the six months were unfavorably impacted by a lower number of beds served, the
    United Part D contract, the deconsolidation of the pharmacy joint-venture
    operations and the impact of generic drugs, partially offset by the favorable
    impact of drug price inflation, acquisitions and growth in hospice pharmacy
    and specialty pharmacy services and CRO Services revenues. See discussion
    of sales and operating profit results in more detail at the Pharmacy
    Services Segment and CRO Services
Segment captions below.

The Companys
consolidated gross profit of $776.8 million decreased $40.0 million for the six
months ended June 30, 2007 from the same prior-year period amount of $816.8
million. Gross profit as a percentage of total net sales of 24.8% in the six
months ended June 30, 2007, was consistent with the 24.8% experienced during
the comparable 2006 period. Gross profit was favorably impacted in the 2007
period largely as a result of the increased availability and utilization of
higher margin generic drugs, drug purchasing improvements, the continued
integration of prior-period acquisitions and year-over-year growth in hospice
pharmacy and specialty pharmacy services. Offsetting these factors was the
gross profit impact of the aforementioned reduction in net sales, including the
reduction in reimbursement under the United Part D contract and a lower number
of beds served, as well as a special charge relating to the
incremental costs associated with the closure of the Companys Heartland
repackaging facility as further described below.

Omnicares
consolidated operating expenses for the six months ended June 30, 2007 of
$512.4 million were higher than the comparable prior-year amount of $487.1
million by $25.3 million. Operating expenses as a percentage of net sales
amounted to 16.4% in the first six months of 2007, representing an increase
from the 14.8% experienced in the comparable prior-year period. Operating
expenses for the six months ended June 30, 2007 were unfavorably impacted primarily
by a $23.6 million increase in the provision for doubtful accounts and a $6.7
million increase in periodic pension costs. Partially offsetting the increased
operating expenses were the favorable impact of the Companys continued
integration of prior-period acquisitions, and productivity enhancements,
including the restructuring program relating to the NeighborCare acquisition
and the Omnicare Full Potential Plan, as further discussed in the
Restructuring and Other Related Charges section of this MD&A.

Investment
income for the six months ended June 30, 2007 of $4.0 million was slightly
lower than the $4.8 million earned in the comparable prior-year period,
primarily due to lower average invested cash balances versus the prior year.

Interest
expense for the six months ended June 30, 2007 of $83.8 million is lower than
the $85.5 million in the comparable prior-year period, primarily due to lower
debt outstanding resulting from payments aggregating $200 million on the Term
Loans in the latter half of 2006 and the first half of 2007, partially offset
by increased interest rates for variable rate loans.

The effective
income tax rate was 38.9% for the six months ended June 30, 2007, as compared
    to the rate of 52.9% for the same prior year period. The effective tax rates
    in 2007 and 2006 are higher than the federal statutory rate largely as a

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result of the
impact of state and local income taxes and various nondeductible expenses
(primarily litigation costs in 2006).

Special Items:

The six months
ended June 30, 2007 included the following charges/(credits), which primarily
impacted the Pharmacy Services segment, that management considers to be special
items, and not related to Omnicares ordinary course of business:

(i) Operating
income included restructuring and other related charges of approximately $15.4
million pretax ($9.5 million aftertax), $17.0 million of which related to the
implementation of the Omnicare Full Potential Plan, a major initiative
designed to re-engineer the pharmacy operating model to increase efficiency and
enhance customer growth, partially offset by a ($1.6) million credit adjustment
to the previously disclosed consolidation and productivity initiatives related,
in part, to the integration of the NeighborCare acquisition and other related
activities. See further discussion at the Restructuring and Other Related
Charges note of the Notes to Consolidated Financial Statements and the
Restructuring and Other Related Charges section of this MD&A.

(ii) During
2006, the Company experienced certain quality control and product recall
issues, as well as fire damage, at its Heartland repackaging facility, as described
    in further detail at the
Commitments and Contingencies note of the Notes to Consolidated Financial
Statements. In addressing and resolving these issues, the Company continues to
experience increased costs and as a result, the six months ended June 30, 2007
included special charges of $10.7 million pretax (approximately $8.3 million
and $2.4 million was recorded in the cost of sales and operating expense
sections of the Consolidated Statements of Income, respectively) ($6.6 million
aftertax) for these increased costs. The Company maintains product recall,
property and casualty and business interruption insurance, and the extent of
insurance recovery for these expenses is currently being reviewed by its
outside advisors. As of June 30, 2007, no receivables for insurance recoveries
have been recorded by the Company.

(iii)
Operating income included a special litigation charge of $15.9 million pretax
($9.8 million aftertax) for litigation-related professional expenses in
connection with the administrative subpoenas from the United States Attorneys
Office, District of Massachusetts, the purported class and derivative actions,
the Companys lawsuit against United, the inquiry conducted by the Attorney
Generals office in Michigan relating to certain billing issues under the
Michigan Medicaid program, the investigation by the federal government and
certain states relating to drug substitutions and the Companys response to
subpoenas it received relating to other legal proceedings to which the Company
is not a party. With respect to these proceedings to which the Company is a
party, see further discussion at the Commitments and Contingencies note of
the Notes to Consolidated Financial Statements, and the Legal Proceedings
section at Part II, Item 1 of this Filing.

53

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The six months
ended June 30, 2006 included the following charges, which primarily impacted
the Pharmacy Services segment, that management considers to be special items,
and not related to Omnicares ordinary course of business:

(i) Operating income included a special
litigation charge of $53.4 million pretax ($42.6 million aftertax) to establish
a settlement reserve relating to previously disclosed inquiries by the federal
government and certain states concerning the substitution of three generic
pharmaceuticals by the Company. This special litigation charge represented the
Companys estimate of the settlement amounts and associated costs under SFAS 5.
See further discussion at the Commitments and Contingencies note of the Notes
to Consolidated Financial Statements, and the Legal Proceedings section at
Part II, Item 1 of this Filing.

(ii) As previously disclosed, the Company
recorded a special litigation charge of $54.0 million pretax, including $10.3
million and $43.7 million recorded in the net sales and litigation charges
lines of the Consolidated Statements of Income, respectively ($46.7 million
aftertax), in its financial results for the six months ended June 30, 2006. This
special litigation charge related to the inquiry conducted by the Attorney
Generals Office in Michigan in connection with certain billing issues under
the Michigan Medicaid program, based on discussions between the Attorney
Generals Office, the Company and its legal counsel. This special litigation
charge represented the Companys best estimate of the settlement amounts
and associated costs under SFAS 5. See further discussion at the Commitments
and Contingencies note of the Notes to Consolidated Financial Statements,
and the
Legal Proceedings section at Part II, Item 1 of this Filing.

(iii) Operating income included a special
litigation charge of $1.5 million pretax ($1.0 million aftertax) for
litigation-related professional expenses in connection with the Companys
lawsuit against United.

(iv) Operating income included
restructuring and other related charges of approximately $19.6 million pretax
($12.4 million aftertax) in connection with the Omnicare Full Potential Plan,
as well as the previously disclosed consolidation and productivity initiatives
related, in part, to the integration of the NeighborCare acquisition and other
related activities. See further discussion at the Restructuring and Other Related Charges
section of this MD&A.

(v) Operating income
    included a special charge of approximately $6.1 million pretax ($3.9 million
    aftertax) associated with retention payments for certain NeighborCare employees
as required under the acquisition agreement.

54

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Pharmacy Services Segment

|                   |  |                             |           |      |   |           | 
|------------------ |  | --------------------------- | --------- | ---- | - | --------- | 
|                   |  | Six months ended
  June 30, |          
|                   |  |                             |          
|                   |  | 2007                        |           | 2006 |  
|                   |  |                             |           |      |  
|                   |  |                             |           |      |  
|Net sales          |  | $                           | 3,028,561 |      | $ | 3,215,156 | 
|                   |  |                             |           |      |   |           | 
|                  
|Operating
  income |  | $                           | 279,864   |      | $ | 257,731   | 
|                   |  |                             |           |      |   |           | 

Six Months Ended June 30, 2007 vs. 2006

Omnicares Pharmacy
Services segment recorded sales of $3,028.6 million for the six months ended
June 30, 2007, down from the 2006 amount of $3,215.2 million by $186.6 million,
or 5.8%. At June 30, 2007, Omnicare served long-term care facilities and other
chronic care settings comprising approximately 1,389,000 beds as compared with
approximately 1,419,000 beds served at June 30, 2006. Pharmacy Services sales
were unfavorably impacted by a lower number of beds served, the increased
availability and utilization of generic drugs, the effects of the reduction in
reimbursement under the United Part D contract, the aforementioned
deconsolidation of the pharmacy joint-venture operations and the impact of a
bed mix shift toward assisted living. Partially offsetting these factors were
drug price inflation, the impact of acquisitions, and year-over-year growth in
hospice pharmacy and specialty pharmacy services. While the Company is focused
on reducing its costs to mitigate the impact of drug pricing and reimbursement
issues, there can be no assurance that such issues or other pricing and
reimbursement pressures will not adversely impact the Pharmacy Services
segment.

Operating
income of the Pharmacy Services segment was $279.9 million in the first six
months of 2007, a $22.2 million increase as compared with the $257.7 million
earned in the comparable period of 2006. As a percentage of the segments
sales, operating income was 9.2% for the first six months of 2007, compared
with 8.0% in 2006. Operating income in 2007 was impacted favorably by the
year-over-year impact of the aforementioned special items, the increased
availability and utilization of higher margin generic drugs, drug purchasing
improvement, as well as the Companys continued integration of prior-period
acquisitions and productivity enhancements, including the restructuring program
relating, in part, to the NeighborCare acquisition and the Omnicare Full
Potential Plan, as further discussed in the Restructuring and Other Related
Charges section of this MD&A. Partially offsetting these factors was a
lower number of beds served, the unfavorable impact of the aforementioned
reduction in the reimbursement rates under the United Part D contract and the
aforementioned increase in the provision for doubtful accounts.

55

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CRO Services Segment

|                   |  |                             |        |      |   |        | 
|------------------ |  | --------------------------- | ------ | ---- | - | ------ | 
|                   |  | Six months ended
  June 30, |       
|                   |  |                             |       
|                   |  | 2007                        |        | 2006 |  
|                   |  |                             |        |      |  
|                  
|Revenues           |  | $                           | 97,661 |      | $ | 84,552 | 
|                   |  |                             |        |      |   |        | 
|                  
|Operating
  income |  | $                           | 3,634  |      | $ | 2,464  | 
|                   |  |                             |        |      |   |        | 

Six Months Ended June 30, 2007 vs. 2006

Omnicares CRO
Services segment recorded revenues of $97.7 million for the six months ended
June 30, 2007, which increased by $13.1 million, or 15.5% from the $84.6
million recorded in the same prior-year period. In accordance with EITF Issue
No. 01-14, the Company included $15.4 million and $12.3 million of reimbursable
out-of-pockets in its CRO Services segment reported revenue and direct cost
amounts for the six months ended June 30, 2007 and 2006, respectively. Revenues
for 2007 were higher than in the same prior-year period primarily due to the
commencement and ramp-up of projects that were awarded in 2006 and in the first
quarter of 2007, exceeding project terminations and cancellations.

Operating
income in the CRO Services segment was $3.6 million in the first six months of
2007 compared with $2.5 million in 2006, an increase of $1.1 million. As a
percentage of the segments revenue, operating income was 3.7% in the first six
months of 2007 compared with 2.9% in the same period of 2006. This increase is
primarily attributable to the favorable impact of the aforementioned increase
in revenues; offset in part by an increase in pretax restructuring and other
related charges of approximately $0.8 million.

Restructuring and Other Related Charges

Omnicare Full Potential Plan

In the second
quarter of 2006, the Company commenced the implementation of the Omnicare Full
Potential Plan, a major initiative designed to re-engineer the Companys
pharmacy operating model to increase efficiency and enhance customer growth.
The Omnicare Full Potential Plan is expected to optimize resources across the
entire organization by implementing best practices and a hub-and-spoke model
whereby certain key support and production functions will be transferred to
regional hubs specifically designed and managed to perform these tasks, with
local spoke pharmacies focusing on time-sensitive services and
customer-facing processes.

This program
is expected to be completed over a 30-month period and is estimated to generate
pretax savings in the range of $100 million to $120 million annually upon
completion of the

56

---



initiative. It
is anticipated that approximately one-half of these savings will be realized
    in cost of sales, with the remainder being realized in operating expenses.
    The program is estimated to result in total pretax restructuring and other
    related charges of approximately $80 million over this 30-month period. The
    charges primarily include severance pay, employment agreement buy-outs, excess
    lease costs, professional fees and other related costs. The Company recorded
    restructuring and other related charges for the Omnicare
Full Potential Plan of approximately $17 million pretax (approximately
$10.5 million aftertax) during the six months ended June 30, 2007 and approximately
$17 million pretax (approximately $11 million aftertax) during the year ended
December 31, 2006, (approximately $8 million pretax  in the six months ended
June 30, 2006). The remainder of the overall restructuring and other related
charges will be recognized and disclosed over the remainder of 2007 and 2008
as various phases of the project are finalized and implemented. Incremental capital
expenditures related to this program are expected to total approximately $40
million to $45 million over the 30-month period. The Company estimates that the
initial phase of the program will lead to a reduction in force of approximately
1,200 positions, associated primarily with pharmacy operations. Approximately
860 of these positions have been eliminated as of June 30, 2007.

See further
discussion at the Restructuring and Other Related Charges note of the Notes
to Consolidated Financial Statements.

2005 Program

In connection
with the previously disclosed consolidation plans and other productivity
initiatives to streamline pharmacy services (related, in part, to the
NeighborCare acquisition) and contract research organization operations,
including maximizing workforce and operating asset utilization, and producing a
more cost-efficient, operating infrastructure (the 2005 Program), the Company
recorded restructuring and other related charges of approximately $11 million
pretax (approximately $7 million aftertax) in the six months ended June 30,
2006. The 2005 Program initiatives required cumulative restructuring and other
related charges of approximately $31 million before taxes through the third
quarter of 2006. The restructuring liabilities associated with the 2005 Program
were evaluated by the Company during the quarter ended June 30, 2007. During
this review, it was determined that certain liabilities are no longer expected
to be utilized as part of the activities remaining under the 2005 Program. In
accordance with SFAS No. 146 Accounting for Costs Associated with Exit or
Disposal Activities, the Company recorded adjustments to reduce the employee
severance and employee agreement buy-out liabilities by approximately $1.2 million
and $0.4 million pretax, respectively, during the three and six months ended
June 30, 2007.

See further
discussion at the Restructuring and Other Related Charges note of the Notes
to Consolidated Financial Statements.

57

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|                                                      
|------------------------------------------------------
|Financial
  Condition, Liquidity and Capital Resources
|                                                      

Cash and cash
equivalents at June 30, 2007 were $165.6 million compared with $141.8 million
at December 31, 2006 (including restricted cash amounts of $14.4 million and
$3.8 million, respectively).

The Company
generated positive net cash flows from operating activities of $235.9 million
during the six months ended June 30, 2007, compared with net cash flows from
operating activities of $128.1 million during the six months ended June 30,
2006. Compared to the same prior-year period, cash flow from operating
activities was largely impacted by the favorable year-over-year trend in
accounts receivable and accounts payable on operating cash flows. Cash flow for
the first six months of 2006 was favorably impacted by the return of a deposit
of approximately $38.3 million from one of the Companys drug wholesalers.
Operating cash flows were used primarily for debt payments, acquisition-related
payments, capital expenditures, dividend payments, and to increase the
Companys cash position as compared with December 31, 2006.

Net cash used
in investing activities was $98.8 million and $74.9 million for the six months
ended June 30, 2007 and 2006, respectively. Acquisitions of businesses required
cash payments of $69.3 million (including amounts payable pursuant to
acquisition agreements relating to pre-2007 acquisitions) in 2007, which were
primarily funded by operating cash flows. Acquisitions of businesses during the
first six months of 2006 required $51.1 million of cash payments (including
amounts payable pursuant to acquisition agreements relating to pre-2006
acquisitions) which were primarily funded by proceeds from the issuance of
common stock and operating cash flows. Omnicares capital requirements, in
addition to the payment of debt and dividends, are primarily comprised of its
acquisition program and capital expenditures, largely relating to investments
in the Companys information technology systems.

Net cash used
in financing activities was $124.8 million for the six months ended June 30,
2007 as compared to cash provided by financing activities of $57.6 million for
the comparable prior-year period. During the first six months of 2007, the
Company paid down $100 million on the Companys senior term A loan facility,
maturing on July 28, 2010. Borrowings on the revolving credit facility totaled
approximately $74 million during the first six months of 2007 and were
completely repaid prior to the end of the period. In January 2006, the
underwriters of the common stock offering completed by the Company in December
2005 exercised their option, in part, to purchase an additional 850,000 shares
of common stock at $59.72 per share, for gross cash proceeds of approximately
$51 million.

At June 30,
2007, there were no outstanding borrowings under the $800 million revolving
credit facility, and $500 million in borrowings were outstanding under the
senior term A loan facility due 2010. As of June 30, 2007, the Company had
approximately $22.6 million outstanding relating to standby letters of credit,
substantially all of which are subject to automatic annual renewals.

On May 25,
2007, the Companys Board of Directors declared a quarterly cash dividend of
2.25 cents per common share for an indicated annual rate of 9 cents per common
share for 2007,

58

---



which is
consistent with the dividends paid in 2006. Aggregate dividends of $5.5 million
were paid during each of the six month periods ended June 30, 2007 and 2006.

There were no
known material commitments and contingencies outstanding at June 30, 2007,
other than the contractual obligations summarized in the Disclosures About
Aggregate Contractual Obligations and Off-Balance Sheet Arrangements section
of Omnicares 2006 Annual Report, and as updated for significant changes in the
six months ended June 30, 2007 in the caption below; certain acquisition-related
payments potentially due in the future, including deferred payments,
indemnification payments and payments originating from earnout and other
provisions that may become payable; as well as the matters discussed in the
Commitments and Contingencies note of the Notes to Consolidated Financial
Statements, and the Legal Proceedings section at Part II, Item 1 of this
Filing.

The Company
believes that net cash flows from operating activities, credit facilities and
other short- and long-term debt financings will be sufficient to satisfy its
future working capital needs, acquisition contingency commitments, debt
servicing, capital expenditures and other financing requirements for the
foreseeable future. The Company believes that external sources of financing are
readily available and will access them as deemed appropriate (although no
assurances can be given regarding the Companys ability to obtain additional
financing in the future).

Disclosures About Aggregate Contractual Obligations and Off-Balance
Sheet Arrangements

Aggregate Contractual Obligations:

The following
summarizes the Companys aggregate contractual obligations as of June 30, 2007,
and the effect such obligations are expected to have on the Companys liquidity
and cash flows in future periods (in thousands):

|                                                                  |  |       |           |                    |   |           |  |           |         |               |   |         |  |   |           | 
|----------------------------------------------------------------- |  | ----- | --------- | ------------------ | - | --------- |  | --------- | ------- | ------------- | - | ------- |  | - | --------- | 
|                                                                  |  | Total |           | Less Than 1
  Year |   | 1-3 Years |  | 4-5 Years |         | After 5 Years |  
|                                                                  |  |       |           |                    |   |           |  |           |         |               |  
|                                                                  |  |       |           |                    |   |           |  |           |         |               |   |         |  |   |           | 
|Debt obligations(a)                                               |  | $     | 2,869,519 |                    | $ |          |  | $         | 47,019  |               | $ | 500,000 |  | $ | 2,322,500 | 
|Capital lease obligations(a)                                      |  |       | 10,496    |                    |   | 4,971     |  |           | 3,128   |               |   | 1,899   |  |   | 498       | 
|Operating lease obligations                                       |  |       | 162,621   |                    |   | 42,586    |  |           | 60,970  |               |   | 26,239  |  |   | 32,826    | 
|Purchase obligations(b)                                           |  |       | 55,685    |                    |   | 55,685    |  |           |        |               |   |        |  |   |          | 
|Other current obligations(c)                                      |  |       | 294,769   |                    |   | 294,769   |  |           |        |               |   |        |  |   |          | 
|Other long-term obligations(d)                                    |  |       | 367,075   |                    |   |          |  |           | 148,694 |               |   | 24,243  |  |   | 194,138   | 
|                                                                  |  |       |           |                    |   |           |  |           |         |               |   |         |  |   |           | 
|Subtotal                                                          |  |       | 3,760,165 |                    |   | 398,011   |  |           | 259,811 |               |   | 552,381 |  |   | 2,549,962 | 
|Future interest relating to debt and capital lease
obligations(e) |  |       | 1,866,750 |                    |   | 148,697   |  |           | 295,265 |               |   | 227,292 |  |   | 1,195,496 | 
|                                                                  |  |       |           |                    |   |           |  |           |         |               |   |         |  |   |           | 
|Total contractual cash obligations                                |  | $     | 5,626,915 |                    | $ | 546,708   |  | $         | 555,076 |               | $ | 779,673 |  | $ | 3,745,458 | 
|                                                                  |  |       |           |                    |   |           |  |           |         |               |   |         |  |   |           | 

59

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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | The noted
  obligation amounts represent the principal portion of the associated debt obligations.
  Details of the Companys outstanding debt instruments can be found in the
  Debt note of the Notes to Consolidated Financial Statements.                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(b) | Purchase
  obligations primarily consist of open inventory purchase orders, as well as
  obligations for other goods and services, at period end.                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(c) | Other
  current obligations primarily consist of accounts payable at period end.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(d) | Other
  long-term obligations are largely comprised of pension and excess benefit
  plan obligations, acquisition-related liabilities, the obligation associated
  with the interest rate Swap Agreement discussed below, as well as $17.9
  million relating to the Companys adoption of Financial Accounting Standards
  Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income
  Taxes (FIN 48).                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|(e) | Represents
  estimated future interest costs based on the stated fixed interest rate of
  the debt, or the variable interest rate in effect at period end for variable
  interest rate debt. The estimated future interest costs presented in this
  table do not include any amounts potentially payable associated with the
  contingent interest and interest reset provisions of the Companys
  convertible debentures. To the extent that any debt would be paid off by
  Omnicare prior to the stated due date or refinanced, the estimated future
  interest costs would change accordingly.

As of June 30,
2007, the Company had approximately $22.6 million outstanding relating to
standby letters of credit, substantially all of which are subject to automatic
annual renewals.

Off-Balance Sheet Arrangements:

As of June 30,
2007, the Company had two unconsolidated entities, Omnicare Capital Trust I, a
statutory trust formed by the Company (the Old Trust) and Omnicare Capital
Trust II (the New Trust), which were established for the purpose of
facilitating the offerings of the 4.00% Trust Preferred Income Equity
Redeemable Securities due 2033 (the Old Trust PIERS) and the Series B 4.00%
Trust Preferred Income Equity Redeemable Securities (the New Trust PIERS),
respectively. For financial reporting purposes, the Old Trust and New Trust are
treated as equity method investments of the Company. The Old Trust and New
Trust are 100%-owned finance subsidiaries of the Company. The Company has fully
and unconditionally guaranteed the securities of the Old Trust and New Trust.
The Old 4.00% Debentures issued by the Company to the Old Trust and the New
4.00% Debentures issued by the Company to the New Trust in connection with the
issuance of the Old Trust PIERS and the New Trust PIERS, respectively, are
presented as a single line item in Omnicares consolidated balance sheets and
debt footnote disclosures. Additionally, the related disclosures concerning the
Old Trust PIERS and the New Trust PIERS, the guarantees, and the Old 4.00%
Debentures and New 4.00% Debentures are included in the Debt note of the
Notes to Consolidated Financial Statements in Omnicares 2006 Annual Report.
Omnicare records interest payable to the Old Trust and New Trust as interest
expense in its consolidated statements of income.

As of June 30,
2007, the Company had no other unconsolidated entities, or any financial
partnerships, such as entities often referred to as structured finance or
special purpose entities, which might have been established for the purpose of
facilitating off-balance sheet arrangements.

60

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Critical Accounting Policies

Allowance for Doubtful Accounts

Collection of
accounts receivable from customers is the Companys primary source of operating
cash flow and is critical to Omnicares operating performance and financial
condition. Omnicares primary collection risk relates to facility, private pay
and Part D customers. The Company provides a reserve for accounts receivable
that could become uncollectible by establishing an allowance to reduce the
carrying value of such receivables to their estimated net realizable value.
Omnicare establishes this allowance for doubtful accounts using the specific
identification approach, and considering such factors as historical collection
experience (i.e., payment history and credit losses) and creditworthiness,
specifically identified credit risks, aging of accounts receivable by payor
category, current and expected economic conditions and other relevant factors.
Management reviews this allowance on an ongoing basis for appropriateness.
Judgment is used to assess the collectibility of account balances and the
economic ability of customers to pay.

The Company
computes and monitors its accounts receivable days sales outstanding (DSO)
in order to evaluate the liquidity and collection patterns of its accounts
receivable. DSO is calculated by averaging the beginning and end of quarter
accounts receivable, less contractual allowances and the allowance for doubtful
accounts, to derive average accounts receivable, and dividing average
accounts receivable by the sales amount (excluding reimbursable out-of-pockets)
for the related quarter. The resultant percentage is multiplied by 92 days to
derive the DSO amount. Omnicares DSO approximated 91 days at June 30, 2007,
which was higher than the December 31, 2006 DSO of approximately 86 days, partially
as a result of the averaging method the Company uses in the calculation, considering
that net accounts receivable at June 30, 2007 was $16.3 million lower than at
December 31, 2006. As previously disclosed, the Company has experienced
on-going administrative and payment issues associated with the Medicare Part
D implementation, resulting in outstanding gross accounts receivable (net of
allowances for contractual adjustments, and prior to allowances for doubtful
accounts) for copays and rejected claims. As of June 30, 2007, copays
outstanding from Part D Plans were approximately $29 million, of which approximately
$20 million relates to  2006. Additionally, as of June 30,
2007, Part D rejected claims outstanding from Part D Plans for the 2006 transitional
year were approximately $21 million. Also impacting the overall DSO is the aging
in accounts receivable relating to several of the Companys larger nursing
home chain customers. On July 16, 2007, the Company commenced legal action against
a group of its customers for, among other things, the collection of past-due
receivables that are owed to the Company. Specifically, approximately $85 million
is owed to the Company by this group of customers as of June 30, 2007, of which
approximately $72 million is past due based on applicable payment terms.

The allowance for
doubtful accounts as of June 30, 2007 was $205.2 million, compared with $191.0
million at December 31, 2006. These allowances for doubtful accounts
represented 12.0% and 11.2% of gross receivables (net of contractual
allowances) as of June 30, 2007 and December 31, 2006, respectively. Unforeseen
future developments could lead to changes in the Companys bad debt expense
levels and future allowance for doubtful accounts percentages,

61

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which could
materially impact the overall financial results, financial position or cash
flows of the Company. For example, a one percentage point increase in the
allowance for doubtful accounts as a percentage of gross receivables (net of
allowances for contractual adjustments, and prior to allowances for doubtful
accounts) as of June 30, 2007 would result in an increase to the allowance for
doubtful accounts, as well as bad debt expense, of approximately $17.1 million
pretax.

The following
table is an aging of the Companys June 30, 2007 and December 31, 2006 gross
accounts receivable (net of allowances for contractual adjustments, and prior
to allowances for doubtful accounts), aged based on payment terms and
categorized based on the four primary overall types of accounts receivable
characteristics (in thousands):

|                                                                             |  |                                     |           |                                |   |         |  |   |           | 
|---------------------------------------------------------------------------- |  | ----------------------------------- | --------- | ------------------------------ | - | ------- |  | - | --------- | 
|                                                                             |  | June 30, 2007                       |          
|                                                                             |  |                                     |          
|                                                                             |  | Current and
  0-180 Days
  Past Due |           | 181 Days and
  Over
  Past Due |   | Total   | 
|                                                                             |  |                                     |           |                                |   |         | 
|Medicare
  (Part D and Part B), Medicaid and Third-Party payors              |  | $                                   | 453,343   |                                | $ | 138,566 |  | $ | 591,909   | 
|Facility
  payors                                                            |  |                                     | 553,564   |                                |   | 290,494 |  |   | 844,058   | 
|Private Pay
  payors                                                         |  |                                     | 137,619   |                                |   | 115,528 |  |   | 253,147   | 
|CRO                                                                          |  |                                     | 22,091    |                                |   |        |  |   | 22,091    | 
|                                                                             |  |                                     |           |                                |   |         |  |   |           | 
|Total gross accounts receivable (net of contractual allowance
  adjustments) |  | $                                   | 1,166,617 |                                | $ | 544,588 |  | $ | 1,711,205 | 
|                                                                             |  |                                     |           |                                |   |         |  |   |           | 

|                                                                             |  |                                     |           |                                |   |         |  |   |           | 
|---------------------------------------------------------------------------- |  | ----------------------------------- | --------- | ------------------------------ | - | ------- |  | - | --------- | 
|                                                                             |  | December 31, 2006                   |          
|                                                                             |  |                                     |          
|                                                                             |  | Current and
  0-180 Days
  Past Due |           | 181 Days and
  Over
  Past Due |   | Total   | 
|                                                                             |  |                                     |           |                                |   |         | 
|Medicare
  (Part D and Part B), Medicaid and Third-Party payors              |  | $                                   | 538,950   |                                | $ | 95,910  |  | $ | 634,860   | 
|Facility
  payors                                                            |  |                                     | 556,881   |                                |   | 244,731 |  |   | 801,612   | 
|Private Pay
  payors                                                         |  |                                     | 160,503   |                                |   | 98,179  |  |   | 258,682   | 
|CRO                                                                          |  |                                     | 18,160    |                                |   |        |  |   | 18,160    | 
|                                                                             |  |                                     |           |                                |   |         |  |   |           | 
|Total gross accounts receivable (net of contractual allowance
  adjustments) |  | $                                   | 1,274,494 |                                | $ | 438,820 |  | $ | 1,713,314 | 
|                                                                             |  |                                     |           |                                |   |         |  |   |           | 

Income Taxes

In July 2006,
the FASB issued FIN 48, which clarifies the accounting for uncertainty in
income taxes recognized in an enterprises financial statements in accordance
with FASB Statement No. 109, Accounting for Income Taxes, by prescribing a
minimum recognition threshold that a tax position is required to meet before
being recognized in the financial statements. FIN 48 also provides guidance on
derecognition, measurement, classification, interest and penalties,

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accounting in
interim periods, disclosure and transition. FIN 48 is effective for fiscal
years beginning after December 15, 2006. The Company adopted FIN 48 as of
January 1, 2007, as required. As a result, the Company recognized an increase
in the liability for unrecognized tax benefits of approximately $17.9 million,
$5.8 million of which was accounted for as a reduction to the January 1, 2007
retained earnings balance and $12.1 million of which was accounted for as an
increase to goodwill.

Legal Contingencies

The status of
certain legal proceedings has been updated at the Commitments and
Contingencies note of the Notes to Consolidated Financial Statements, and the
Legal Proceedings section at Part II, Item 1 of this Filing.

Recently Issued Accounting Standards

Information
pertaining to recently issued accounting standards is further discussed at the
Recently Issued Accounting Standards section of the Interim Financial Data,
Description of Business and Summary of Significant Accounting Policies note of
the Notes to Consolidated Financial Statements of this Filing.

|                                                                                                                      
|----------------------------------------------------------------------------------------------------------------------
|Safe Harbor
Statement under the Private Securities Litigation Reform Act of 1995
Regarding Forward-Looking Information
|                                                                                                                      

In addition to
historical information, this report contains certain statements that constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements include, but
are not limited to, all statements regarding the intent, belief or current
expectations regarding the matters discussed or incorporated by reference in
this document (including statements as to beliefs, expectations,
anticipations, intentions or similar words) and all statements which are
not statements of historical fact. Such forward-looking statements, together
with other statements that are not historical, are based on managements
current expectations and involve known and unknown risks, uncertainties,
contingencies and other factors that could cause results, performance or
achievements to differ materially from those stated. The most significant of
these risks and uncertainties are described in the Companys Form 10-K, Form
10-Q and Form 8-K reports filed with the Securities and Exchange Commission and
include, but are not limited to: overall economic, financial, political and
business conditions; trends in the long-term healthcare, pharmaceutical and
contract research industries; the ability to attract new clients and service
contracts and retain existing clients and service contracts; the ability to
consummate pending acquisitions; trends for the continued growth of the
Companys businesses; trends in drug pricing; delays and reductions in
reimbursement by the government and other payors to customers and to the
Company; the overall financial condition of the Companys customers and the
ability of the Company to assess and react to such financial condition of its
customers; the ability of vendors and business partners to continue to provide
products and services to the Company; the continued successful integration of
acquired companies; the continued availability of suitable acquisition
candidates; the ability to attract and retain needed management; competition
for qualified staff in the healthcare industry; the demand for the Companys

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products and
services; variations in costs or expenses; the ability to implement
productivity, consolidation and cost reduction efforts and to realize
anticipated benefits; the ability of clinical research projects to produce
revenues in future periods; the potential impact of legislation, government
regulations, and other government action and/or executive orders, including
those relating to Medicare Part D, including its implementing regulations and
any subregulatory guidance, reimbursement and drug pricing policies and changes
in the interpretation and application of such policies; government budgetary
pressures and shifting priorities; federal and state budget shortfalls; efforts
by payors to control costs; changes to or termination of the Companys
contracts with Medicare Part D plan sponsors or to the proportion of the
Companys Part D business covered by specific contracts; the outcome of
litigation; potential liability for losses not covered by, or in excess of,
insurance; the impact of differences in actuarial assumptions and estimates as
compared to eventual outcomes; events or circumstances which result in an
impairment of assets, including but not limited to, goodwill; market
conditions; the outcome of audit, compliance, administrative or investigatory
reviews; volatility in the market for the Companys stock and in the financial
markets generally; access to adequate capital and financing; changes in
international economic and political conditions and currency fluctuations
between the U.S. dollar and other currencies; changes in tax laws and
regulations; changes in accounting rules and standards; and costs to comply
with our Corporate Integrity Agreements. Should one or more of these risks or
uncertainties materialize or should underlying assumptions prove incorrect, the
Companys actual results, performance or achievements could differ materially
from those expressed in, or implied by, such forward-looking statements.
Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. Except as otherwise
required by law, the Company does not undertake any obligation to publicly
release any revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

ITEM 3 - QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK

Omnicares
primary market risk exposure relates to variable interest rate risk through its
borrowings. Accordingly, market risk loss is primarily defined as the potential
loss in earnings due to higher interest rates on variable-rate debt of the
Company. The modeling technique used by Omnicare for evaluating interest rate
risk exposure involves performing sensitivity analysis on the variable-rate
debt, assuming a change in interest rates of 100 basis-points. The Companys
debt obligations at June 30, 2007 include $500.0 million outstanding under the
variable-rate term A loan, due 2010, at an interest rate of 6.57% at June 30,
2007 (a 100 basis-point change in the interest rate would increase or decrease
pretax interest expense by approximately $5.0 million per year); $47.0 million
borrowed on a variable-rate term loan, due 2010, at an interest rate of 6.47%
at June 30, 2007 (a 100 basis-point change in the interest rate would increase
or decrease pretax interest expense by approximately $0.5 million per year);
$250.0 million outstanding under its fixed-rate 6.125% Senior Notes, due 2013;
$225.0 million outstanding under its fixed-rate 6.75% Senior Notes, due 2013;
$525 million outstanding under its fixed-rate 6.875% Senior Notes, due 2015;
$345.0 million outstanding under its fixed-rate 4.00% Convertible Debentures,
due 2033; and $977.5 million outstanding under its fixed-rate 3.25% Convertible
Debentures, due 2035 (with an optional repurchase right of holders on December
15, 2015). In connection with its offering of $250.0 million of 6.125% Senior
Notes, during the second quarter of 2003,

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the Company
entered into a Swap Agreement on all $250.0 million of its aggregate principal
amount of the 6.125% Senior Notes. Under the Swap Agreement, which hedges
against exposure to long-term U.S. dollar interest rates, the Company receives
a fixed rate of 6.125% and pays a floating rate based on LIBOR with a maturity
of six months, plus a spread of 2.27%. The estimated LIBOR-based floating rate
(including the 2.27% spread) was 7.66% at June 30, 2007 (a 100 basis-point
change in the interest rate would increase or decrease pretax interest expense
by approximately $2.5 million per year). The Swap Agreement, which matches the
terms of the 6.125% Senior Notes, is designated and accounted for as a fair
value hedge. The Company is accounting for the Swap Agreement in accordance
with SFAS No. 133, as amended, so changes in the fair value of the Swap
Agreement are offset by changes in the recorded carrying value of the related
6.125% Senior Notes. The fair value of the Swap Agreement of approximately
$17.2 million at June 30, 2007 is recorded as a noncurrent liability and a
reduction to the book carrying value of the related 6.125% Senior Notes. At
June 30, 2007, the fair value of Omnicares variable rate debt facilities
approximates the carrying value, as the effective interest rates fluctuate with
changes in market rates.

The fair value
of the Companys fixed-rate debt facilities is based on quoted market prices
and is summarized as follows (in thousands):

Fair Value of Financial Instruments

|                                                             |  |               |            |                   |              |         |            |   |              |  |   |         |  | 
|------------------------------------------------------------ |  | ------------- | ---------- | ----------------- | ------------ | ------- | ---------- | - | ------------ |  | - | ------- |  | 
|                                                             |  | June 30, 2007 |            | December 31, 2006 |             
|                                                             |  |               |            |                   |             
|Financial
  Instrument:                                      |  |               | Book Value |                   | Market Value |         | Book Value |   | Market Value | 
|                                                             |  |               |            |                   |              |         |            |   |              | 
|                                                            
|6.125% senior subordinated
  notes, due 2013, gross          |  | $             | 250,000    |                   | $            | 232,500 |            | $ | 250,000      |  | $ | 241,300 | 
|6.75% senior subordinated
  notes, due 2013                  |  |               | 225,000    |                   |              | 213,750 |            |   | 225,000      |  |   | 221,900 | 
|6.875% senior subordinated
  notes, due 2015                 |  |               | 525,000    |                   |              | 498,750 |            |   | 525,000      |  |   | 520,400 | 
|4.00% junior subordinated
  convertible debentures, due 2033 |  |               | 345,000    |                   |              | 348,154 |            |   | 345,000      |  |   | 372,200 | 
|3.25% convertible senior
  debentures, due 2035              |  |               | 977,500    |                   |              | 822,879 |            |   | 977,500      |  |   | 830,900 | 
|                                                             |  |               |            |                   |              |         |            |   |              |  |  

Embedded in
the Old Trust PIERS, the New Trust PIERS and the 3.25% Convertible Debentures
are two derivative instruments, specifically, a contingent interest provision
and a contingent conversion parity provision. In addition, the 3.25%
Convertible Debentures include an interest reset provision. The embedded
derivatives are periodically valued by a third-party advisor, and at period
end, the values of the derivatives embedded in the Old Trust PIERS, the New
Trust PIERS and the 3.25% Convertible Debentures were not material. However,
the values are subject to change, based on market conditions, which could
affect the Companys future results of operations, financial position or cash
flows.

The Company
has operations and revenue that occur outside of the U.S. and transactions that
are settled in currencies other than the U.S. dollar, exposing it to market
risk related to changes in foreign currency exchange rates. However, the
substantial portion of the Companys operations and revenues and the
substantial portion of the Companys cash settlements are exchanged in U.S.
dollars. Therefore, changes in foreign currency exchange rates do not represent
a substantial market risk exposure to the Company.

The Company
does not have any financial instruments held for trading purposes.

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ITEM 4 - CONTROLS AND PROCEDURES

(a) Under
applicable SEC regulations, management of a reporting company, with the
participation of the principal executive officer and principal financial
officer, must periodically evaluate the Companys disclosure controls and
procedures, which are defined generally as controls and other procedures of a
reporting company designed to ensure that information required to be disclosed
by the reporting company in its periodic reports filed with the SEC (such as
this Form 10-Q) is recorded, processed, accumulated and communicated to the
Companys management as appropriate to allow timely decisions regarding
disclosure. Omnicare is an acquisitive company that continuously acquires and
integrates new businesses. Throughout and following an acquisition, Omnicare
focuses on analyzing the acquirees procedures and controls to determine their
effectiveness and, where appropriate, implements changes to conform them to the
Companys disclosure controls and procedures. The Companys Chief Executive
Officer and Chief Financial Officer evaluated the Companys disclosure controls
and procedures as of the end of the period covered by this Quarterly Report on
Form 10-Q and concluded that they are effective.

(b) There were
no changes in the Companys internal control over financial reporting that
occurred during the Companys fiscal quarter ended June 30, 2007 that have
materially affected, or are reasonably likely to materially affect, the
Companys internal control over financial reporting.

PART II - OTHER INFORMATION:

ITEM 1 - LEGAL PROCEEDINGS

On May 18,
2006, an antitrust and fraud action entitled Omnicare,
Inc. v. UnitedHealth Group, Inc., et al., 2:06-cv-00103-WOB, was
filed by the Company in the United States District Court for the Eastern
District of Kentucky against UnitedHealth Group, Inc., PacifiCare Health
Systems, Inc., and RxSolutions, Inc. d/b/a Prescription Solutions, asserting
claims of violations of federal and state antitrust laws, civil conspiracy and
common law fraud arising out of an alleged conspiracy by defendants to
illegally and fraudulently coordinate their negotiations with the Company for
Medicare Part D contracts as part of an effort to defraud the Company and fix
prices. The complaint seeks, among other things, damages, injunctive relief and
reformation of certain contracts. On June 5, 2006, the Company filed a first
supplemental and amended complaint in which it asserted the identical claims.
In an order dated November 9, 2006, a motion by defendants to transfer
venue to the United States District Court for the Northern District of Illinois
was granted, but a motion to dismiss the antitrust claims was denied without
prejudice, with leave to refile in the transferee court. On December 13, 2006,
the Company and defendants submitted a joint status report in the United States
District Court for the Northern District of Illinois, and the Court held a status
conference on December 18, 2006. Defendants renewed their motion to dismiss the
Companys
antitrust claims on December 22, 2006. The Companys opposition to the motion

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was filed with
the court on January 22, 2007 and defendants reply papers were filed on
January 29, 2007. The motion is now pending before the court. On March 7, 2007,
the Court entered a Minute Order setting a discovery schedule for the
litigation. Under the Order, fact discovery is to be completed by January 31,
2008, and expert discovery is to be completed by May 1, 2008. At the present
time, both parties are engaged in fact discovery and related motion practice.
The parties have engaged in extensive documentary discovery. The Court has scheduled
a status conference for August 28, 2007 and on May 22, 2007 the Court entered
a Minute Order setting a trial date of October 14, 2008.

The Company
has received administrative subpoenas from the United States Attorneys Office,
District of Massachusetts, seeking information arising out of the Companys
relationships with certain manufacturers and distributors of pharmaceutical
products and certain customers, as well as with respect to contracts with
certain companies acquired by the Company. The Company believes that it has
complied with all applicable laws and regulations with respect to these
matters.

On July 11, 2006,
the Attorney Generals Office in Michigan provided the Companys legal counsel
with information concerning its investigation relating to certain billing
issues under the Michigan Medicaid program at Specialized Pharmacy Services, a
subsidiary of the Company located in Michigan. On October 5, 2006, the Company
entered into a voluntary settlement agreement and a two-year Corporate
Integrity Agreement with the State of Michigan to resolve the Michigan Attorney
Generals investigation relating to certain billing issues under the Michigan
Medicaid program at Specialized Pharmacy Services. The settlement agreement
does not include any finding of wrongdoing or any admission of liability. With
respect to claims that Specialized Pharmacy Services was not billing properly
for drugs provided to hospice patients, which were not covered by the
settlement agreement, the Company has reached an agreement in principle to
settle the matter with the State of Michigan. Although the final details of the
agreement with respect to the hospice claims have not yet been resolved, it is
anticipated that the Company will pay approximately $3.5 million to settle the
matter. Please see the Commitments and Contingencies note of the Notes to
Consolidated Financial Statements included in this Filing for a description of
our Corporate Integrity Agreements.

On February 2
and February 13, 2006, respectively, two substantially similar putative class
action lawsuits, entitled Indiana State
Dist. Council of Laborers & HOD Carriers Pension & Welfare Fund v.
Omnicare, Inc., et al., No. 2:06cv26 (HOD Carriers), and Chi v. Omnicare, Inc., et al., No.
2:06cv31 (Chi), were filed against Omnicare and two of its officers in the
United States District Court for the Eastern District of Kentucky purporting to
assert claims for violation of §§10(b) and 20(a) of the Securities Exchange Act
of 1934 and Rule 10b-5 promulgated thereunder, and seeking, among other things,
compensatory damages and injunctive relief. The complaints, which purported to
be brought on behalf of all open-market purchasers of Omnicare common stock
from August 3, 2005 through January 27, 2006, alleged that Omnicare had
artificially inflated its earnings by engaging in improper generic drug
substitution and that defendants had made false and misleading statements
regarding the Companys business and prospects. On April 3, 2006, plaintiffs in
the HOD Carriers case formally
moved for consolidation and the appointment of lead plaintiff and lead counsel
pursuant to the Private Securities Litigation Reform Act of 1995. On May 22,
2006, that motion was granted, the cases were consolidated, and a lead
plaintiff and lead counsel were appointed. On July 20, 2006, plaintiffs filed a
consolidated amended complaint, adding a third officer as a defendant and new
factual allegations primarily relating to revenue recognition, the valuation of
receivables and the

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valuation of
inventories. On October 31, 2006, plaintiffs moved for leave to file a second
amended complaint, which was granted on January 26, 2007, on the condition that
no further amendments would be permitted absent extraordinary circumstances.
Plaintiffs thereafter filed their second amended complaint on January 29, 2007.
The second amended complaint (i) expands the putative class to include all
purchasers of Omnicare common stock from August 3, 2005 through July 27, 2006,
(ii) names two members of the Companys board of directors as additional
defendants, (iii) adds a new plaintiff and a new claim for violation of Section
11 of the Securities Act of 1933 based on alleged false and misleading
statements in the registration statement filed in connection with the Companys
December 2005 public offering, (iv) alleges that the Company failed to timely
disclose its contractual dispute with UnitedHealth Group (see discussion of the
UnitedHealth Group matter above),
and (v) alleges that the Company failed to timely record certain special
litigation reserves. Defendants filed a motion to dismiss the second amended
complaint on March 12, 2007, claiming that plaintiffs had failed adequately to
plead loss causation, scienter or any actionable misstatement or omission. That motion was fully
briefed as of May 1, 2007. In response to certain arguments relating to the individual claims of the named
plaintiffs that were raised in defendants pending motion to dismiss, plaintiffs filed a motion to add,
or in the alternative, to intervene an additional named plaintiff, Alaska Electrical Pension Fund, on July 27, 2007.
Oral argument was held on defendants motion to dismiss on August 2, 2007 and the court reserved decision.

On February
13, 2006, two substantially similar shareholder derivative actions, entitled Isak
v. Gemunder, et al., Case No.
06-CI-390, and Fragnoli v. Hutton, et al.,
Case No. 06-CI-389, were filed in Kentucky State Circuit Court, Kenton Circuit,
against the members of Omnicares board of directors, individually, purporting
to assert claims for breach of fiduciary duty, abuse of control, gross
mismanagement, waste of corporate assets and unjust enrichment arising out of
the Companys alleged violations of federal and state health care laws based
upon the same purportedly improper generic drug substitution that is the
subject of the federal purported class action lawsuits. The complaints seek,
among other things, damages, restitution and injunctive relief. The Isak and Fragnoli
actions were later consolidated by agreement of the parties. On January 12,
2007, the defendants filed a motion to dismiss the consolidated action on the
grounds that the dismissal of the substantially identical shareholder
derivative action, Irwin v. Gemunder, et al., 2:06cv62, by the
United States District Court for the Eastern District of Kentucky on November
20, 2006 should be given preclusive effect and thus bars re-litigation of the
issues already decided in Irwin.
Instead of opposing that motion, on March 16, 2007, the plaintiffs filed an
amended consolidated complaint, which continues to name all of the directors
as defendants and asserts the same claims, but attempts to bolster those claims
by adding nearly all of the substantive allegations from the most recent complaint
in the federal securities class action (seediscussion
of HOD Carriers above) and an
amended complaint in Irwin that
added the same factual allegations that were added to the consolidated amended
complaint in the HOD Carriers
action. On April 16, 2007, defendants filed a supplemental memorandum of law
in further support of their pending motion to dismiss contending that the amended
complaint should be dismissed on the same grounds previously articulated for
dismissal, namely, the preclusive effect of the dismissal of the Irwin action. That motion has been fully briefed and oral argument has been scheduled for August 21, 2007.

The Company
believes the above-described purported class and derivative actions are without
merit and will be vigorously defended.

Although the Company
cannot predict the ultimate outcome of the matters described in the preceding
paragraphs, there can be no assurance that the resolution of these matters will
not have

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a material
adverse impact on the Companys consolidated results of operations, financial
position or cash flows.

As part of its
ongoing operations, the Company is subject to various inspections, audits,
inquiries and similar actions by governmental/regulatory authorities
responsible for enforcing the laws and regulations to which the Company is
subject, including reviews of individual Omnicare pharmacys reimbursement
documentation and administrative practices.

ITEM 1A - RISK FACTORS

The Omnicare
2006 Annual Report on Form 10-K includes a detailed discussion of our risk
factors. The information presented below updates and should be read in
conjunction with the risk factors and information disclosed in that Form 10-K.

Risks Relating to Our Business

Federal and state
healthcare legislation has significantly impacted our business, and future
legislation and regulations are likely to affect us.

In recent
years, federal legislation has resulted in major changes in the healthcare
system, which significantly affected healthcare providers. The Balanced Budget
Act of 1997 (the BBA) mandated a prospective payment system (PPS) for
Medicare-eligible residents of skilled nursing facilities (SNFs). Under PPS,
Medicare pays SNFs a fixed fee per patient per day based upon the acuity level
of the resident, covering substantially all items and services furnished during
a Medicare-covered stay, including pharmacy services. PPS initially resulted in
a significant reduction of reimbursement to SNFs. Congress subsequently sought
to restore some of the reductions in reimbursement resulting from PPS. One
provision gave SNFs a temporary rate increase for certain specific high-acuity
patients beginning April 1, 2000, and ending when the Centers for Medicare
& Medicaid Services (CMS) implemented a refined patient classification
system under PPS. For several years, CMS did not implement such refinements,
thus continuing the additional rate increase for certain high-acuity patients
through federal fiscal year 2005.

On August 4,
2005, CMS issued its final SNF PPS rule for fiscal year 2006. Under the rule,
CMS added nine patient classification categories to the PPS patient
classification system, thus triggering the expiration of the high-acuity
payments add-ons. However, CMS estimated that the rule would have a slightly
positive financial impact on SNFs in fiscal year 2006 because the $1.02 billion
reduction from the expiration of the add-on payments would be more than offset
by a $510 million increase in the nursing case-mix weight for all of the
resource utilization group categories and a $530 million increase associated
with various updates to the payment rates (including updates to the wage and
market basket indexes), resulting in a $20 million overall increase in payments
for fiscal year 2006. The new patient classification refinements became effective
on January 1, 2006, and the market basket increase became effective October 1,
2005. On July 31, 2006, CMS issued the update to the SNF PPS rates for fiscal
year 2007. Effective October 1, 2006, SNFs receive the full 3.1 percent market
basket increase to rates, increasing payments to SNFs by approximately $560
million for fiscal year 2007. On August 3, 2007, CMS published its final SNF
PPS update for fiscal year 2008. Effective October 1, 2007 SNFs will receive
    a 3.3 percent market basket increase, which will increase Medicare payments
to SNFs by approximately $690 million in fiscal year

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2008. The
final rule also includes several policy and payment provisions, which were
included in the proposed rule, including rebasing the market basket, which
currently reflects data from fiscal 1997, to a base year of fiscal year 2004;
    revisions to calculate the SNF market basket (including revising the pharmacy
    component); changing the threshold for forecast error adjustments from the
    current 0.25 percentage point to 0.5 percentage point; and continuing a special
    adjustment made to cover the additional services required by nursing home
    residents with HIV/AIDS. While the fiscal year 2007 and 2008 SNF PPS rates
    do not decrease payments to SNFs, the loss of revenues associated with future
    changes in SNF payments could, in the future, have an adverse effect on the
    financial condition of the Companys SNF clients which could, in turn,
    adversely affect the timing or level of their payments to Omnicare.

Moreover, on
February 8, 2006, the President signed into law the Deficit Reduction Act
(DRA), which will reduce net Medicare and Medicaid spending by approximately
$11 billion over five years. Among other things, the legislation reduces
Medicare SNF bad debt payments by 30 percent for those individuals who are not
dually eligible for Medicare and Medicaid. This provision is expected to reduce
payments to SNFs by $100 million over 5 years (fiscal years 2006-2010). On
February 5, 2007, the Bush Administration released its fiscal year 2008 budget
proposal, which includes legislative and administrative proposals that would
reduce Medicare spending by approximately $5.3 billion in fiscal year 2008 and
$75.8 billion over 5 years. Among other things, the budget would provide no
annual update for SNFs in 2008 and a -0.65 percent adjustment to the update
annually thereafter. The budget also would move toward site-neutral
post-hospital payments to limit perceived inappropriate incentives for five
conditions commonly treated in both SNFs and inpatient rehabilitation
facilities. The budget proposal also would eliminate all bad debt
reimbursements for unpaid beneficiary cost-sharing over four years. Congress
may yet consider these and other proposals in the future that would further
restrict Medicare funding for SNFs.

In December
2003, Congress enacted the Medicare Prescription Drug, Improvement and
Modernization Act of 2003 (MMA) which includes a major expansion of the
Medicare prescription drug benefit under a new Medicare Part D.

Under the new
prescription drug benefit, Medicare beneficiaries may enroll in prescription
drug plans offered by private entities (or in a fallback plan offered on
behalf of the government through a contractor, to the extent private entities
fail to offer a plan in a given area), which provide coverage of outpatient
prescription drugs (collectively, Part D Plans). Part D Plans include both
plans providing the drug benefit on a stand alone basis and Medicare Advantage
plans providing drug coverage as a supplement to an existing medical benefit
under that Medicare Advantage plan, most commonly a health maintenance
organization plan. Medicare beneficiaries generally have to pay a premium to
enroll in a Part D Plan, with the premium amount varying from plan to plan,
although CMS provides various federal subsidies to Part D Plans to reduce the
cost to beneficiaries. Medicare beneficiaries who are also entitled to benefits
under a state Medicaid program (so-called dual eligibles) now have their
prescription drug costs covered by the new Medicare drug benefit, including the
nursing home residents Omnicare serves, whose drug costs were previously
covered by state Medicaid programs. In 2006, approximately 41% of Omnicares
revenue was derived from beneficiaries covered under the federal Medicare Part
D program.

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CMS provides premium and cost-sharing subsidies to
Part D Plans with respect to dual eligible residents of nursing homes. Such
dual eligibles are not required to pay a premium for enrollment in a Part D
Plan, so long as the premium for the Part D Plan in which they are enrolled is
at or below the premium subsidy, nor are they required to meet deductibles or
pay copayment amounts. Further, all dual eligibles who had not affirmatively
enrolled in a Part D Plan as of December 31, 2005 were automatically enrolled
into a Prescription Drug Plan (PDP) by CMS on a random basis from among those
PDPs meeting CMS criteria for low-income premiums in the PDP region. As is the
case for any nursing home beneficiary, such dual eligible beneficiaries may
select a different Part D Plan at any time through the Part D enrollment
process. In sum, dual eligible residents of nursing homes are entitled to have
their prescription drug costs covered by a Part D Plan, provided that the
prescription drugs which they are taking are either on the Part D Plans
formulary, or an exception to the plans formulary is granted. CMS requires the
formularies of Part D Plans to include the types of drugs most commonly needed
by Medicare beneficiaries and an exceptions process to provide coverage for
medically necessary drugs.

Pursuant to the Part D final rule, effective January
1, 2006, we obtain reimbursement for drugs we provide to enrollees of a given
Part D Plan in accordance with the terms of agreements negotiated between us
and that Part D Plan. We have entered into such agreements with nearly all Part
D Plan sponsors under which we provide drugs and associated services to their
enrollees. We continue to have ongoing discussions with Part D Plans in the
ordinary course and may, as appropriate, renegotiate agreements. Further, the
proportion of the Companys Part D business serviced under specific agreements
may change over time. Consequently, there can be no assurance that the
reimbursement terms which currently apply to the Companys Part D business
will not change. Moreover, as expected in the transition to a new program of
this magnitude, certain administrative and payment issues have arisen, resulting
in higher operating expenses, as well as outstanding gross accounts receivable
(net of allowances for contractual adjustments, and prior to allowance for
doubtful accounts) for copays and rejected claims. As of June 30, 2007, copays
outstanding from Part D Plans were approximately $29 million, of which approximately
$20 million relates to 2006. Additionally, as of June 30, 2007, Part D rejected
claims outstanding from Part D Plans for the 2006 transitional year were approximately
$21 million. Until all administrative and payment issues are fully resolved,
there can be no assurance that the impact of the Part D Drug Benefit on the Companys
results of operations, financial position or cash flows will not change based
on the outcome of any unforeseen future developments.

The MMA does not change the manner in which Medicare
pays for drugs for Medicare beneficiaries covered under a Medicare Part A stay.
We continue to receive reimbursement for drugs provided to such residents from
the SNFs, in accordance with the terms of the agreements we have negotiated
with each SNF. We also continue to receive reimbursement from the state
Medicaid programs, albeit to a greatly reduced extent, for those Medicaid
beneficiaries not eligible for the Part D program, including those under age
65, and for certain drugs specifically excluded from Medicare Part D.

CMS has issued subregulatory guidance on many aspects
of the final Part D rule, including the provision of pharmaceutical services to
long-term care residents. CMS has also expressed some concerns about
pharmacies receipt of discounts, rebates and other price concessions from drug
manufacturers. Specifically, in a finalized Call Letter for the 2007 calendar
year, CMS

71

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indicated that for 2007, CMS is requiring Part D
sponsors to have policies and systems in place, as part of their drug
utilization management programs, to protect beneficiaries and reduce costs when
long-term care pharmacies are subject to incentives to move market share
through access/performance rebates from drug manufacturers. For the purposes
    of managing and monitoring drug utilization, especially where such rebates
    exist, CMS instructs Part D Plan sponsors to require pharmacies to disclose
    to the Part D Plan sponsor any discounts, rebates and other direct or indirect
remuneration designed to directly or indirectly influence or impact utilization
of Part D drugs. CMS stated that Plan sponsors should provide assurances that
such information will remain confidential. CMS has recently issued
subregulatory guidelines specifying the information that CMS is requiring from
Plan sponsors with respect to rebates paid to long-term care pharmacies. CMS
has also issued draft reporting requirements for 2008 which would, among other
things, require disclosure of rebates provided to long-term care pharmacies at
a more detailed level. CMS has not yet issued final reporting requirements for
2008. The Company is working with Plan sponsors with respect to the format,
terms and conditions under which information would be provided.

CMS has indicated it will continue to issue guidance
on the Part D program as it is implemented. We are continuing to monitor issues
relating to implementation of the Part D benefit, and until further agency
guidance is known and until all administrative and payment issues associated
with the transition to this massive program are fully resolved, there can be no
assurance that the impact of the final rule or the outcome of other potential
developments relating to its implementation on our business, results of
operations, financial position or cash flows will not change based on the outcome
of any unforeseen future developments.

The MMA also changed the Medicare payment methodology
and conditions for coverage of certain items of durable medical equipment
prosthetics, orthotics, and supplies (DMEPOS) under Medicare Part B. In 2006,
approximately 1% of the Companys revenue was derived from beneficiaries
covered under Medicare Part B. The changes include a temporary freeze in annual
increases in payments for durable medical equipment from 2004 through 2008, new
clinical conditions for payment, quality standards (applied by CMS-approved
accrediting organizations), and competitive bidding requirements. On April 10,
2007, CMS issued a final rule establishing the Medicare competitive bidding
program. Enteral nutrients, equipment and supplies and oxygen equipment and
supplies are among the 10 categories of DMEPOS included in the first round of
the competitive bidding program for 10 geographic areas beginning July 1, 2008
(a delay from the previously-announced implementation date of April 1, 2008).
Additional types of DMEPOS may be included in subsequent rounds of competitive
bidding when the program is expanded in 2009. The Company has submitted bids
for nine competitive bidding areas. Awards are expected to be announced in
February 2008.

With respect to Medicaid, the BBA repealed the Boren
Amendment federal payment standard for Medicaid payments to nursing
facilities, giving states greater latitude in setting payment rates for such
facilities. The law also granted states greater flexibility to establish
Medicaid managed care programs without the need to obtain a federal waiver.
Although these waiver programs generally exempt institutional care, including
nursing facilities and institutional pharmacy services, some states do use
managed care principles in their long-term care programs. Likewise,

72

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the DRA includes several changes to the Medicaid
program designed to rein in program spending. These include, among others,
strengthening the Medicaid asset transfer restrictions for persons seeking to
qualify for Medicaid long-term care coverage, which could, due to the timing of
the penalty period, increase facilities exposure to uncompensated care. This
provision is expected to reduce Medicaid spending by an estimated $2.4 billion
over 5 years. The law also gives states greater flexibility to expand access to
home and community based services by allowing states to provide these services
as an optional benefit without undergoing the waiver approval process, and
includes a new demonstration to encourage states to provide long-term care
services in a community setting to individuals who currently receive Medicaid
services in nursing homes. Together, these provisions could increase state
funding for home and community based services, while prompting states to cut
funding for nursing facilities. No assurances can be given that state Medicaid
programs ultimately will not change the reimbursement system for long-term care
or pharmacy services.

The DRA also changed the so-called federal upper limit
payment rules for multiple source prescription drugs covered under Medicaid.
Like the current upper limit, it only applies to drug ingredient costs and does
not include dispensing fees, which will continue to be determined by the
states. First, the DRA redefined a multiple source drug subject to the upper
limit rules to be a covered outpatient drug that has at least one other drug
product that is therapeutically equivalent. Thus, the federal upper limit is
triggered when there are two or more therapeutic equivalents, instead of three
or more as was previously the case. Second, effective January 1, 2007, the DRA
changed the federal upper payment limit from 150 percent of the lowest
published price for a drug (which is usually the average wholesale price) to
250 percent of the lowest average manufacturer price (AMP). Congress expected
these DRA provisions to reduce the federal and state Medicaid spending by $8.4
billion over five years. On July 17, 2007, CMS issued a final rule to implement
changes to the upper limit rules. Among other things, the final rule:
establishes a new federal upper limit calculation for multiple source drugs
that is based on 250 percent of the lowest AMP in a drug class; promotes
transparency in drug pricing by requiring CMS to post AMP amounts on its web
site; and establishes a uniform definition for AMP. Among other things, the
final rule provides that sales of drugs to long-term care pharmacies for supply
to nursing homes and assisted living facilities (as well as associated rebates
and other price concessions) are not to be taken into account in determining
AMP where such sales can be identified with adequate documentation, and that
any AMPs which are not at least 40% of the next highest AMP will not be taken
into account in determining the upper limit amount (the so-called outlier
test). While final, CMS will accept comments on the AMP definition and outlier
test portions of the rule for a period of 180 days. With the advent of Medicare
Part D, our revenues from state Medicaid programs are substantially lower than
has been the case previously. However, some of our agreements with Part D Plans
and other payors have incorporated the Medicaid upper limit rules into the
pricing mechanisms for our prescription drugs. Until the new upper limit
amounts are published by CMS, we cannot predict the impact of the final rule on
our business. There can be no assurance, however, that the changes under the
DRA or other efforts by payors to limit reimbursement for certain drugs will
not have an adverse impact on our business.

President Bushs fiscal year 2008 budget proposal
includes a series of proposals impacting Medicaid, including legislative and
administrative changes that would reduce Medicaid

73

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payments by almost $26 billion over five years. Among
other things, the proposed budget would further reduce the federal upper limit
reimbursement for multiple source drugs to 150 percent of the AMP of the lowest
priced drug in the group, and allow states to use private sector formulary
management techniques to leverage greater discounts through negotiations with
drug manufacturers. Many of the proposed policy changes would require
congressional approval to implement. While we have endeavored to adjust to
these types of funding pressures in the past, there can be no assurance that
these or future changes in Medicaid payments to nursing facilities, pharmacies,
or managed care systems, or their potential impact on payments under agreements
with Part D Plans, will not have an adverse impact on our business.

Two recent actions at the federal level could impact
Medicaid payments to nursing facilities. The Tax Relief and Health Care Act of
2006 modified several Medicaid policies including, among other things, reducing
the limit on Medicaid provider taxes from 6 percent (now in regulations) to 5.5
percent from January 1, 2008 through September 30, 2011. The Bush Administration
had been expected to issue regulations calling for deeper cuts in this funding.
Second, on January 18, 2007, CMS published a proposed rule designated to ensure
that Medicaid payments to governmentally-operated nursing facilities and
certain other health care providers are based on actual costs and that state
financing arrangements are consistent with the Medicaid statute. CMS estimates
that the rule, if finalized, would save $120 million during the first year and
$3.87 billion over five years. On March 23, 2007, CMS published a proposed rule
that would implement this legislation, and make other clarifications to the
standards for determining the permissibility of provider tax arrangements.

Further, in order to rein in healthcare costs, we
anticipate that federal and state governments will continue to review and
assess alternate healthcare delivery systems, payment methodologies and
operational requirements for healthcare providers, including long-term care
facilities and pharmacies. Given the continuous debate regarding the cost of
healthcare, managed care, universal healthcare coverage, and other healthcare
issues, we cannot predict with any degree of certainty what additional
healthcare initiatives, if any, will be implemented or the effect any future
legislation or regulation will have on our business. Further, the Company
receives discounts, rebates and other price concessions from pharmaceutical
manufacturers pursuant to contracts for the purchase of their products. There
can be no assurance that any changes in legislation or regulations, or
interpretations of current law, that would eliminate or significantly reduce
the discounts, rebates and other price concessions that the Company receives
from manufacturers would not have a material adverse impact on the Companys
overall consolidated results of operations, financial position or cash flows.
Longer term, funding for federal and state healthcare programs must consider
the aging of the population and the growth in enrollees as eligibility is expanded;
the escalation in drug costs owing to higher drug utilization among seniors and
the introduction of new, more efficacious but also more expensive medications;
the impact of the Medicare Part D benefit for seniors; and the long-term
financing of the entire Medicare program. Given competing national priorities,
it remains difficult to predict the outcome and impact on us of any changes in
healthcare policy relating to the future funding of the Medicare and Medicaid
programs. Further, Medicare, Medicaid and/or private payor rates for
pharmaceutical supplies and services may not continue to be based on current
methodologies or remain comparable to present levels. Any future healthcare
legislation or regulation may adversely affect our business.

74

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ITEM 2 -
UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS

A summary of the Companys repurchases of Omnicare, Inc. common stock
during the quarter ended June 30, 2007 is as follows (in thousands, except per
share data):

|                   |  |                                           |   |                                  |   |                                                                                                  |  |                                                                                                                           |   |  |  |   | 
|------------------ |  | ----------------------------------------- | - | -------------------------------- | - | ------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------------------------------------------------------- | - |  |  | - | 
|Period             |  | Total
  Number of
  Shares
  Purchased(a) |   | Average
  Price Paid
  per Share |   | Total
  Number
  of Shares
  Purchased as
  Part of
  Publicly
  Announced
  Plans or
  Programs |  | Maximum
  Number (or
  Approximate Dollar
  Value) of Shares that
  Must Yet Be Purchased
  Under the Plans or
  Programs |  
|                   |  |                                           |   |                                  |   |                                                                                                  |  |                                                                                                                           |  
|April 1 - 30, 2007 |  |                                           | 0 |                                  | $ |                                                                                                 |  |                                                                                                                           |  |  |  |  | 
|May 1 - 31, 2007   |  |                                           | 6 |                                  |   | 36.66                                                                                            |  |                                                                                                                           |  |  |  |  | 
|June 1 - 30, 2007  |  |                                           | 1 |                                  |   | 36.15                                                                                            |  |                                                                                                                           |  |  |  |  | 
|                   |  |                                           |   |                                  |   |                                                                                                  |  |                                                                                                                           |   |  |  |   | 
|Total              |  |                                           | 7 |                                  | $ | 36.63                                                                                            |  |                                                                                                                           |  |  |  |  | 
|                   |  |                                           |   |                                  |   |                                                                                                  |  |                                                                                                                           |   |  |  |   | 

|    |                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | During the second quarter of 2007, the Company
  purchased 7 shares of Omnicare common stock in connection with its employee
  benefit plans, including purchases associated with the vesting of restricted
  stock awards. These purchases were not made pursuant to a publicly announced
  repurchase plan or program.

ITEM 4. - SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS

|    |                                                                    
|--- | -------------------------------------------------------------------
|(a) | Omnicare held its Annual Meeting of Stockholders on
  May 25, 2007.

75

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|    |                                                                                                                                                                 
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | The names of each director elected at this Annual
  Meeting, as well as the corresponding number of shares voted for, and
  withheld from, each nominee follows:

|                             |  |           |            |                |  |  |            |  | 
|---------------------------- |  | --------- | ---------- | -------------- |  |  | ---------- |  | 
|                             |  | Votes For |            | Votes Withheld | 
|                             |  |           |            |                | 
|Edward L. Hutton             |  |           | 95,934,946 |                |  |  | 6,176,853  |  | 
|Joel F. Gemunder             |  |           | 95,868,210 |                |  |  | 6,243,589  |  | 
|John T. Crotty               |  |           | 90,108,186 |                |  |  | 12,003,613 |  | 
|Charles H. Erhart, Jr.       |  |           | 88,582,194 |                |  |  | 13,529,605 |  | 
|Sandra E. Laney              |  |           | 90,520,047 |                |  |  | 11,591,752 |  | 
|Andrea R. Lindell, Ph.D., RN |  |           | 88,082,368 |                |  |  | 14,029,431 |  | 
|John H. Timoney              |  |           | 97,280,607 |                |  |  | 4,831,192  |  | 
|Amy Wallman                  |  |           | 97,323,612 |                |  |  | 4,788,187  |  | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(c) | The Stockholders ratified the appointment by the
  Audit Committee of the Board of Directors of PricewaterhouseCoopers LLP as
  independent registered public accountants for the Company and its
  consolidated subsidiaries for the 2007 year. A total of 100,164,869 votes
  were cast in favor of the proposal; 567,892 votes were cast against it;
  1,379,038 votes abstained; and there were no Broker non-votes.

ITEM 6 - EXHIBITS

See Index of Exhibits.

76

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SIGNATURE

Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.

| |               
| | --------------
| | Omnicare, Inc.
| |               
| | Registrant    

|                     |     |                            
|-------------------- | --- | ---------------------------
|Date: August 9, 2007 | By: | /s/ David W. Froesel, Jr.  
|                     |     |                            
|                     |     | David W. Froesel, Jr.      
|                     |     | Senior Vice President
  and
|                     |     | Chief Financial Officer    
|                     |     | (Principal Financial
  and 
|                     |     | Accounting Officer)        

77

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INDEX OF EXHIBITS

|                                                                                         |  |                                                                                                                                                |  |                              
|---------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------
|Number and
  Description of Exhibit
  (Numbers Coincide with Item 601 of Regulation S-K) |  | Document
  Incorporated by Reference from a Previous Filing, Filed Herewith or Furnished
  Herewith, as Indicated Below                       
|                                                                                         |  |                                                                                                                                               
|                                                                                         |  |                                                                                                                                               
|(3.1)                                                                                    |  | Restated Certificate of Incorporation of Omnicare,
  Inc. (as amended)                                                                         |  | Form 10-K
  March 27, 2003   
|                                                                                         |  |                                                                                                                                                |  |                              
|(3.3)                                                                                    |  | Second Amended and Restated By-Laws of Omnicare,
  Inc.                                                                                        |  | Form 10-Q
  November 14, 2003
|                                                                                         |  |                                                                                                                                                |  |                              
|(12)                                                                                     |  | Statement of Computation of Ratio of Earnings to
  Fixed Charges                                                                               |  | Filed Herewith               
|                                                                                         |  |                                                                                                                                                |  |                              
|(31.1)                                                                                   |  | Rule 13a-14(a) Certification of Chief Executive
  Officer of Omnicare, Inc. in accordance with Section 302 of the
  Sarbanes-Oxley Act of 2002 |  | Filed Herewith               
|                                                                                         |  |                                                                                                                                                |  |                              
|(31.2)                                                                                   |  | Rule 13a-14(a) Certification of Chief Financial
  Officer of Omnicare, Inc. in accordance with Section 302 of the Sarbanes-Oxley
  Act of 2002 |  | Filed Herewith               
|                                                                                         |  |                                                                                                                                                |  |                              
|(32.1)                                                                                   |  | Section 1350 Certification of Chief Executive
  Officer of Omnicare, Inc. in accordance with Section 906 of the
  Sarbanes-Oxley Act of 2002** |  | Furnished Herewith           
|                                                                                         |  |                                                                                                                                                |  |                              
|(32.2)                                                                                   |  | Section 1350 Certification of Chief Financial
  Officer of Omnicare, Inc. in accordance with Section 906 of the
  Sarbanes-Oxley Act of 2002** |  | Furnished Herewith           

** A signed original of this written statement
required by Section 906 has been provided to Omnicare, Inc. and will be retained
by Omnicare, Inc. and furnished to the Securities and Exchange Commission or
its staff upon request.

E-1

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EXHIBIT 12

Statement of Computation of Ratio of Earnings
to Fixed ChargesOmnicare, Inc. and Subsidiary CompaniesUnaudited(in thousands, except ratio)

|                                        |  |                               |         |                             |   |        |      |  |      |         |     |   |         |     | 
|--------------------------------------- |  | ----------------------------- | ------- | --------------------------- | - | ------ | ---- |  | ---- | ------- | --- | - | ------- | --- | 
|                                        |  | Three months ended
  June 30, |         | Six months ended
  June 30, |  
|                                        |  |                               |         |                             |  
|                                        |  | 2007                          |         | 2006                        |   |        | 2007 |  | 2006 |         |    
|                                        |  |                               |         |                             |   |        |      |  |      |         |    
|Income
  before income taxes            |  | $                             | 81,354  | (1)                         | $ | 44,149 | (1)  |  | $    | 150,913 | (1) | $ | 130,896 | (1) | 
|Add fixed
  charges:                    |  |                               |         |                             |   |        |      |  |      |         |     |   |         |     | 
|Interest expense                        |  |                               | 39,682  |                             |   | 41,082 |      |  |      | 79,693  |     |   | 81,514  |     | 
|Amortization of debt expense            |  |                               | 2,036   |                             |   | 1,987  |      |  |      | 4,073   |     |   | 3,967   |     | 
|Interest portion of rent expense        |  |                               | 6,223   |                             |   | 5,470  |      |  |      | 12,254  |     |   | 11,199  |     | 
|                                        |  |                               |         |                             |   |        |      |  |      |         |     |   |         |     | 
|                                       
|Adjusted income                         |  | $                             | 129,295 |                             | $ | 92,688 |      |  | $    | 246,933 |     | $ | 227,576 |     | 
|                                        |  |                               |         |                             |   |        |      |  |      |         |     |   |         |     | 
|                                       
|Fixed
  charges:                        |  |                               |         |                             |   |        |      |  |      |         |     |   |         |     | 
|Interest expense                        |  | $                             | 39,682  |                             | $ | 41,082 |      |  | $    | 79,693  |     | $ | 81,514  |     | 
|Amortization of debt expense            |  |                               | 2,036   |                             |   | 1,987  |      |  |      | 4,073   |     |   | 3,967   |     | 
|Interest portion of rent expense        |  |                               | 6,223   |                             |   | 5,470  |      |  |      | 12,254  |     |   | 11,199  |     | 
|                                        |  |                               |         |                             |   |        |      |  |      |         |     |   |         |     | 
|                                       
|Fixed charges                           |  | $                             | 47,941  |                             | $ | 48,539 |      |  | $    | 96,020  |     | $ | 96,680  |     | 
|                                        |  |                               |         |                             |   |        |      |  |      |         |     |   |         |     | 
|                                       
|Ratio of
  earnings to fixed charges(2) |  |                               | 2.7     | x                           |   | 1.9    | x    |  |      | 2.6     | x   |   | 2.4     | x   | 
|                                        |  |                               |         |                             |   |        |      |  |      |         |     |   |         |     | 

|    |                                                                            
|--- | ---------------------------------------------------------------------------
|(1) | Income
  before income taxes includes the following special pretax charges:

|                                              |  |                               |       |                             |   |        |  |      |        |  |   |         | 
|--------------------------------------------- |  | ----------------------------- | ----- | --------------------------- | - | ------ |  | ---- | ------ |  | - | ------- | 
|                                              |  | Three months ended
  June 30, |       | Six months ended
  June 30, |  
|                                              |  |                               |       |                             |  
|                                              |  | 2007                          |       | 2006                        |   | 2007   |  | 2006 |       
|                                              |  |                               |       |                             |   |        |  |      |       
|Restructuring
  and other related charges (a) |  | $                             | 6,250 |                             | $ | 11,889 |  | $    | 15,424 |  | $ | 19,602  | 
|Litigation
  charges (b)                      |  |                               | 9,010 |                             |   | 74,832 |  |      | 15,917 |  |   | 108,932 | 
|Heartland
  matters (b)                       |  |                               | 4,911 |                             |   |       |  |      | 10,703 |  |   |        | 

|    |                                                                                                              
|--- | -------------------------------------------------------------------------------------------------------------
|(a) | See the
Restructuring and Other Related Charges note of the Notes to the Consolidated
Financial Statements.
|   
|(b) | See the Commitments and
Contingencies note of the Notes to the Consolidated Financial Statements.          

|    |                                                                                                                                                                                                                                                                                                                                                                                                 
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The ratio of
  earnings to fixed charges has been computed by adding income before income
  taxes and fixed charges to derive adjusted income, and dividing adjusted
  income by fixed charges. Fixed charges consist of interest expense on debt
  (including the amortization of debt expense) and one-third (the proportion
  deemed representative of the interest portion) of rent expense.

E-2

---