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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-Q

|                                                                                                                                                   
|---------------------------------------------------------------------------------------------------------------------------------------------------
|(Mark
 One)                                                                                                                                        
|xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
 THE SECURITIES EXCHANGE ACT OF 1934For the quarterly
 period ended September 30, 2007 or     
|oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
 THE SECURITIES EXCHANGE ACT OF 1934For 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 | 121,716,586      |  | September
 30, 2007 | 

---

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OMNICARE, INC. AND

SUBSIDIARY COMPANIES

FORM 10-Q QUARTERLY REPORT SEPTEMBER 30, 2007

INDEX

|         |  |                                                                                                |     
|-------- |  | ---------------------------------------------------------------------------------------------- | ----
|         |  |                                                                                                | PAGE
|         |  |                                                                                                |     
|         |  | PART I - FINANCIAL
 INFORMATION:                                                               |     
|         |  |                                                                                                |     
|ITEM 1.  |  | FINANCIAL STATEMENTS (UNAUDITED)                                                               |     
|         |  |                                                                                                |     
|         |  | Consolidated Statements of Income  Three and nine months ended 
 September 30, 2007 and 2006 | 3   
|         |  |                                                                                                |     
|         |  | Consolidated Balance Sheets  September 30, 2007 and December 31,
 2006                        | 4   
|         |  |                                                                                                |     
|         |  | Consolidated Statements of Cash Flows  Nine months ended  September
 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                                                                        | 65  
|         |  |                                                                                                |     
|         |  | 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 6.  |  | EXHIBITS                                                                                       | 75  

---



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,
 September 30, |           | Nine months ended,
 September 30, |  
|                                                      |  |                                    |           |                                   |  
|                                                      |  | 2007                               |           | 2006                              |   | 2007      |   | 2006 |          
|                                                      |  |                                    |           |                                   |   |           |   |      |          
|Net sales                                             |  | $                                  | 1,536,989 |                                   | $ | 1,593,866 |   | $    | 4,663,211 |   | $ | 4,893,574 |  
|                                                     
|Cost of sales                                         |  |                                    | 1,151,327 |                                   |   | 1,193,234 |   |      | 3,492,429 |   |   | 3,676,136 |  
|Heartland matters (Note 11)                           |  |                                    | 3,320     |                                   |   | 22,769    |   |      | 11,631    |   |   | 22,769    |  
|                                                      |  |                                    |           |                                   |   |           |   |      |           |   |   |           |  
|                                                     
|Gross profit                                          |  |                                    | 382,342   |                                   |   | 377,863   |   |      | 1,159,151 |   |   | 1,194,669 |  
|                                                     
|Selling, general and administrative expenses          |  |                                    | 260,045   |                                   |   | 236,099   |   |      | 772,465   |   |   | 723,192   |  
|Restructuring and other related charges (Note 10)     |  |                                    | 4,957     |                                   |   | 5,119     |   |      | 20,381    |   |   | 24,721    |  
|Litigation charges (Note 11)                          |  |                                    | 9,192     |                                   |   | 9,886     |   |      | 25,109    |   |   | 108,468   |  
|Heartland matters (Note 11)                           |  |                                    | 328       |                                   |   | 2,216     |   |      | 2,720     |   |   | 2,216     |  
|                                                      |  |                                    |           |                                   |   |           |   |      |           |   |   |           |  
|                                                     
|Operating income                                      |  |                                    | 107,820   |                                   |   | 124,543   |   |      | 338,476   |   |   | 336,072   |  
|                                                     
|Investment income                                     |  |                                    | 2,369     |                                   |   | 3,407     |   |      | 6,392     |   |   | 8,255     |  
|Interest expense                                      |  |                                    | (40,925   | )                                 |   | (43,368   | ) |      | (124,691  | ) |   | (128,849  | )
|                                                      |  |                                    |           |                                   |   |           |   |      |           |   |   |           |  
|                                                     
|Income before income taxes                            |  |                                    | 69,264    |                                   |   | 84,582    |   |      | 220,177   |   |   | 215,478   |  
|                                                     
|Income tax provision                                  |  |                                    | 26,667    |                                   |   | 32,352    |   |      | 85,352    |   |   | 101,638   |  
|                                                     
|                                                      |  |                                    |           |                                   |   |           |   |      |           |   |   |           |  
|Net income                                            |  | $                                  | 42,597    |                                   | $ | 52,230    |   | $    | 134,825   |   | $ | 113,840   |  
|                                                      |  |                                    |           |                                   |   |           |   |      |           |   |   |           |  
|                                                     
|Earnings per share:                                   |  |                                    |           |                                   |   |           |   |      |           |   |   |           |  
|Basic                                                 |  | $                                  | 0.36      |                                   | $ | 0.44      |   | $    | 1.13      |   | $ | 0.96      |  
|                                                      |  |                                    |           |                                   |   |           |   |      |           |   |   |           |  
|Diluted                                               |  | $                                  | 0.35      |                                   | $ | 0.43      |   | $    | 1.11      |   | $ | 0.93      |  
|                                                      |  |                                    |           |                                   |   |           |   |      |           |   |   |           |  
|                                                     
|Dividends per common share                            |  | $                                  | 0.0225    |                                   | $ | 0.0225    |   | $    | 0.0675    |   | $ | 0.0675    |  
|                                                      |  |                                    |           |                                   |   |           |   |      |           |   |   |           |  
|                                                     
|Weighted average number of common shares outstanding: |  |                                    |           |                                   |   |           |   |      |           |   |   |           |  
|Basic                                                 |  |                                    | 119,466   |                                   |   | 118,667   |   |      | 119,312   |   |   | 118,376   |  
|                                                      |  |                                    |           |                                   |   |           |   |      |           |   |   |           |  
|Diluted                                               |  |                                    | 121,229   |                                   |   | 122,114   |   |      | 121,320   |   |   | 122,904   |  
|                                                      |  |                                    |           |                                   |   |           |   |      |           |   |   |           |  
|                                                     
|Comprehensive income                                  |  | $                                  | 47,334    |                                   | $ | 53,839    |   | $    | 142,540   |   | $ | 113,315   |  
|                                                      |  |                                    |           |                                   |   |           |   |      |           |   |   |           |  

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)
 September 30,
 2007 |           | December
 31,
 2006 |  
|                                                                                                                       |  |                                  |           |                     |   |           |  
|ASSETS                                                                                                                 |  |                                  |           |                     |   |           |  
|Current
 assets:                                                                                                       |  |                                  |           |                     |   |           |  
|Cash and cash equivalents                                                                                              |  | $                                | 257,022   |                     | $ | 138,034   |  
|Restricted cash                                                                                                        |  |                                  | 13,276    |                     |   | 3,777     |  
|Accounts receivable, less allowances of
 $219,306 (2006-$191,048)                                                      |  |                                  | 1,464,372 |                     |   | 1,522,266 |  
|Unbilled receivables, CRO                                                                                              |  |                                  | 27,710    |                     |   | 21,949    |  
|Inventories                                                                                                            |  |                                  | 425,928   |                     |   | 449,671   |  
|Deferred income tax benefits                                                                                           |  |                                  | 94,607    |                     |   | 94,231    |  
|Other current assets                                                                                                   |  |                                  | 230,532   |                     |   | 194,900   |  
|                                                                                                                       |  |                                  |           |                     |   |           |  
|Total current assets                                                                                                   |  |                                  | 2,513,447 |                     |   | 2,424,828 |  
|                                                                                                                       |  |                                  |           |                     |   |           |  
|Properties and equipment, at cost less
 accumulated depreciation of $308,707 (2006-$286,157)                           |  |                                  | 201,990   |                     |   | 200,425   |  
|Goodwill                                                                                                               |  |                                  | 4,318,338 |                     |   | 4,225,011 |  
|Identifiable intangible assets, less
 accumulated amortization of $106,343 (2006-$80,095)                              |  |                                  | 315,049   |                     |   | 319,588   |  
|Rabbi trust
 assets for settlement of pension obligations                                                              |  |                                  | 111,556   |                     |   | 83,184    |  
|Other
 noncurrent assets                                                                                               |  |                                  | 146,385   |                     |   | 145,435   |  
|                                                                                                                       |  |                                  |           |                     |   |           |  
|Total noncurrent assets                                                                                                |  |                                  | 5,093,318 |                     |   | 4,973,643 |  
|                                                                                                                       |  |                                  |           |                     |   |           |  
|Total assets                                                                                                           |  | $                                | 7,606,765 |                     | $ | 7,398,471 |  
|                                                                                                                       |  |                                  |           |                     |   |           |  
|                                                                                                                       |  |                                  |           |                     |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                   |  |                                  |           |                     |   |           |  
|Current
 liabilities:                                                                                                  |  |                                  |           |                     |   |           |  
|Accounts payable                                                                                                       |  | $                                | 323,836   |                     | $ | 262,918   |  
|Accrued employee compensation                                                                                          |  |                                  | 44,557    |                     |   | 33,864    |  
|Deferred revenue, CRO                                                                                                  |  |                                  | 17,752    |                     |   | 26,434    |  
|Current debt                                                                                                           |  |                                  | 3,619     |                     |   | 5,371     |  
|Other current liabilities and income taxes
 payable                                                                    |  |                                  | 283,333   |                     |   | 223,814   |  
|                                                                                                                       |  |                                  |           |                     |   |           |  
|Total current liabilities                                                                                              |  |                                  | 673,097   |                     |   | 552,401   |  
|                                                                                                                       |  |                                  |           |                     |   |           |  
|Long-term
 debt, notes and convertible debentures                                                                      |  |                                  | 2,812,215 |                     |   | 2,955,120 |  
|Deferred
 income tax liabilities                                                                                       |  |                                  | 437,288   |                     |   | 384,989   |  
|Other
 noncurrent liabilities                                                                                          |  |                                  | 371,026   |                     |   | 342,510   |  
|                                                                                                                       |  |                                  |           |                     |   |           |  
|Total noncurrent liabilities                                                                                           |  |                                  | 3,620,529 |                     |   | 3,682,619 |  
|                                                                                                                       |  |                                  |           |                     |   |           |  
|Total liabilities                                                                                                      |  |                                  | 4,293,626 |                     |   | 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, 124,580,000 shares issued (2006-124,269,500 shares issued) |  |                                  | 124,580   |                     |   | 124,269   |  
|Paid-in capital                                                                                                        |  |                                  | 1,910,826 |                     |   | 1,885,529 |  
|Retained earnings                                                                                                      |  |                                  | 1,421,345 |                     |   | 1,300,550 |  
|Treasury stock, at cost-2,863,000 shares
 (2006-2,805,000 shares)                                                      |  |                                  | (91,185   | )                   |   | (86,755   | )
|Accumulated other comprehensive income                                                                                 |  |                                  | (52,427   | )                   |   | (60,142   | )
|                                                                                                                       |  |                                  |           |                     |   |           |  
|Total stockholders equity                                                                                             |  |                                  | 3,313,139 |                     |   | 3,163,451 |  
|                                                                                                                       |  |                                  |           |                     |   |           |  
|Total liabilities and stockholders equity                                                                             |  | $                                | 7,606,765 |                     | $ | 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)

|                                                                                                        |  |                                   |          |      |   |          |  
|------------------------------------------------------------------------------------------------------- |  | --------------------------------- | -------- | ---- | - | -------- | -
|                                                                                                        |  | Nine
 months ended
 September 30, |         
|                                                                                                        |  |                                   |         
|                                                                                                        |  | 2007                              |          | 2006 |  
|                                                                                                        |  |                                   |          |      |  
|Cash flows
 from operating activities:                                                                  |  |                                   |          |      |   |          |  
|Net income                                                                                              |  | $                                 | 134,825  |      | $ | 113,840  |  
|Adjustments to reconcile net income to net
 cash flows from operating activities:                       |  |                                   |          |      |   |          |  
|Depreciation                                                                                            |  |                                   | 41,374   |      |   | 42,820   |  
|Amortization                                                                                            |  |                                   | 43,742   |      |   | 47,656   |  
|Provision for doubtful accounts                                                                         |  |                                   | 89,165   |      |   | 54,499   |  
|Deferred tax provision                                                                                  |  |                                   | 50,493   |      |   | 21,377   |  
|Changes in assets and liabilities, net of
 effects from acquisition of businesses:                      |  |                                   |          |      |   |          |  
|Accounts receivable and unbilled
 receivables                                                           |  |                                   | (22,576  | )    |   | (275,742 | )
|Inventories                                                                                             |  |                                   | 28,635   |      |   | 23,989   |  
|Deposits with drug wholesalers                                                                          |  |                                   | 617      |      |   | 81,664   |  
|Other current and noncurrent assets                                                                     |  |                                   | (68,391  | )    |   | 2,858    |  
|Accounts payable                                                                                        |  |                                   | 54,149   |      |   | (74,434  | )
|Accrued employee compensation                                                                           |  |                                   | 10,693   |      |   | 11,128   |  
|Deferred revenue                                                                                        |  |                                   | (8,682   | )    |   | (1,725   | )
|Current and noncurrent liabilities and
 income taxes payable                                            |  |                                   | 77,195   |      |   | 164,817  |  
|                                                                                                        |  |                                   |          |      |   |          |  
|                                                                                                       
|Net cash flows from operating activities                                                                |  |                                   | 431,239  |      |   | 212,747  |  
|                                                                                                        |  |                                   |          |      |   |          |  
|Cash flows
 from investing activities:                                                                  |  |                                   |          |      |   |          |  
|Acquisition of businesses, net of cash
 received                                                        |  |                                   | (105,979 | )    |   | (71,446  | )
|Capital expenditures                                                                                    |  |                                   | (33,104  | )    |   | (22,900  | )
|Transfer of cash to trusts for employee
 health and severance costs, net of payments out of the trust   |  |                                   | (10,423  | )    |   | (10,836  | )
|Other                                                                                                   |  |                                   | (184     | )    |   | 93       |  
|                                                                                                        |  |                                   |          |      |   |          |  
|                                                                                                       
|Net cash flows used by investing activities                                                             |  |                                   | (149,690 | )    |   | (105,089 | )
|                                                                                                        |  |                                   |          |      |   |          |  
|Cash flows
 from financing activities:                                                                  |  |                                   |          |      |   |          |  
|Borrowings on line of credit facilities and
 term A loan                                                |  |                                   | 78,000   |      |   | 133,000  |  
|Payments on line of credit facilities and
 term A loan                                                  |  |                                   | (228,000 | )    |   | (233,000 | )
|Payments on long-term borrowings and
 obligations                                                       |  |                                   | (4,673   | )    |   | (4,701   | )
|Fees paid for financing arrangements                                                                    |  |                                   |         |      |   | (3,413   | )
|Change in cash overdraft balance                                                                        |  |                                   | 2,664    |      |   | 12,982   |  
|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 |  |                                   | (8,068   | )    |   | (2,661   | )
|Excess tax benefits from stock-based
 compensation                                                      |  |                                   | 4,089    |      |   | 11,678   |  
|Dividends paid                                                                                          |  |                                   | (8,226   | )    |   | (8,198   | )
|                                                                                                        |  |                                   |          |      |   |          |  
|                                                                                                       
|Net cash flows used in financing activities                                                             |  |                                   | (164,214 | )    |   | (45,074  | )
|                                                                                                        |  |                                   |          |      |   |          |  
|                                                                                                       
|Effect of
 exchange rate changes on cash                                                                |  |                                   | 1,653    |      |   | 1,288    |  
|                                                                                                        |  |                                   |          |      |   |          |  
|Net increase
 in cash and cash equivalents                                                              |  |                                   | 118,988  |      |   | 63,872   |  
|Cash and
 cash equivalents at beginning of period                                                       |  |                                   | 138,034  |      |   | 215,421  |  
|                                                                                                        |  |                                   |          |      |   |          |  
|                                                                                                       
|Cash and
 cash equivalents at end of period                                                             |  | $                                 | 257,022  |      | $ | 279,293  |  
|                                                                                                        |  |                                   |          |      |   |          |  

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 nine months ended
September 30, 2007 were generated under the Part D program. The Company
estimates that approximately 35% of these Part D revenues during the nine
months ended September 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 long-term care facilities
(including revenues for residents funded under Medicare Part A) and other third
party payors, including private insurers, state Medicaid programs, as well
as individual residents.

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
September 30, 2007, copays outstanding from Part D Plans were approximately $36
million, of which approximately $20 million relates to 2006. Additionally, as
of September 30, 2007, Part D rejected claims outstanding from Part D Plans for
the 2006 transitional year were approximately $21 million.

On July 11,
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 $83 million (excluding interest) is owed
to the Company by this group of customers as of September 30, 2007, of which
approximately $74 million is past due based on applicable payment terms. In
comparison, at June 30, 2007, approximately $85 million (excluding interest)
was owed to Omnicare by this group of customers, of which approximately $72
million was past due.

Until all
administrative and payment issues relating to the Part D Drug Benefit as well
as the aforementioned legal action against a group of Omnicares customers are
fully resolved, there can be no assurance that the impact of these matters on
the Companys results of operations, financial position or cash flows will not
change based on the outcome of any unforeseen future developments.

7

---



Accumulated Other Comprehensive Income

The accumulated other
comprehensive income (loss) balances at September 30, 2007 and December 31,
2006, net of aggregate applicable tax benefits of $35.9 million and $34.9
million, respectively, by component and in the aggregate, follow (in
thousands):

|                                                                              |  |                      |         |                     |   |         |  
|----------------------------------------------------------------------------- |  | -------------------- | ------- | ------------------- | - | ------- | -
|                                                                              |  | September
 30,
 2007 |         | December
 31,
 2006 |  
|                                                                              |  |                      |         |                     |  
|Cumulative
 foreign currency translation adjustments                          |  | $                    | 2,965   |                     | $ | 1,705   |  
|Unrealized
 loss on fair value of investments                                 |  |                      | (286    | )                   |   | (1,423  | )
|Unamortized
 prior service cost and loss for pension and long-term care plans |  |                      | (55,106 | )                   |   | (60,424 | )
|                                                                              |  |                      |         |                     |   |         |  
|Total
 accumulated other comprehensive loss balances, net                     |  | $                    | (52,427 | )                   | $ | (60,142 | )
|                                                                              |  |                      |         |                     |   |         |  

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 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

8

---



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 and service 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 nine months of 2007, Omnicare completed 16
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 outlays of $142.8 million
(including amounts payable pursuant to acquisition agreements relating to
pre-2007 acquisitions) in the nine months ended September 30, 2007, of which
$106.0 million has been paid in cash and $36.8 million was accrued at period
end. 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 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 nine months ended September 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 nine months ended September 30, 2007 |  |                    | 69,197    |               |   |       |  |   | 69,197    | 
| | Other                                                          |  |                    | 23,479    |               |   | 651    |  |   | 24,130    | 
| |                                                                |  |                    |           |               |   |        |  |   |           | 
| | Balance as
 of September 30, 2007                              |  | $                  | 4,226,911 |               | $ | 91,427 |  | $ | 4,318,338 | 
| |                                                                |  |                    |           |               |   |        |  |   |           | 

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 $4.5 million from December 31, 2006, primarily relates
to amortization expense

9

---



recorded
during the period, partially offset by increases due primarily to customer
relationship assets and non-compete agreements related primarily to recent
acquisitions, with a weighted average life of approximately 11 years.

Note 4 - Debt

A summary of debt follows (in
thousands):

|                                                            |  |                      |           |                     |  
|----------------------------------------------------------- |  | -------------------- | --------- | ------------------- | -
|                                                            |  | September
 30,
 2007 |           | December
 31,
 2006 |  
|                                                            |  |                      |           |                     |  
|Revolving
 loans, due 2010                                  |  | $                    |          |                     | $
|Term loan,
 due 2010                                        |  |                      | 50,206    |                     |  
|Senior term
 A loan, due 2010                               |  |                      | 450,000   |                     |  
|6.125%
 senior subordinated notes, due 2013                 |  |                      | 250,000   |                     |  
|6.75% senior
 subordinated notes, due 2013                  |  |                      | 225,000   |                     |  
|6.875%
 senior subordinated notes, due 2015                 |  |                      | 525,000   |                     |  
|4.00% junior
 subordinated convertible debentures, due 2033 |  |                      | 345,000   |                     |  
|3.25%
 convertible senior debentures, due 2035              |  |                      | 977,500   |                     |  
|Capitalized
 lease and other debt obligations               |  |                      | 9,453     |                     |  
|                                                            |  |                      |           |                     |  
|Subtotal                                                    |  |                      | 2,832,159 |                     |  
|Less
 interest rate swap agreement                          |  |                      | (16,325   | )                   |  
|Less current
 portion of debt                               |  |                      | (3,619    | )                   |  
|                                                            |  |                      |           |                     |  
|Total
 long-term debt, net                                  |  | $                    | 2,812,215 |                     | $
|                                                            |  |                      |           |                     |  

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 September
30, 2007, there was no outstanding balance under the Companys $800 million
revolving credit facility (Revolving Loans), maturing on July 28, 2010, and
$450 million outstanding under the Companys senior term A loan facility,
maturing on July 28, 2010 (the Term Loans). The Company repaid $150 million
on the Term Loans during the nine months ended September 30, 2007. The interest
rate on the Term Loans was 6.38% at September 30, 2007. As of September 30,
2007, the Company had approximately $22.4 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 September 30, 2007 and 2006.
During the nine months ended September 30, 2007 and 2006, the Company amortized
to expense $6.1 million of deferred debt issuance costs.

At September 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
6.42%. The estimated floating interest rate on the interest rate swap agreement
was 7.42% at September 30, 2007.

10

---



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.

Note 6 - Stock-Based Employee Compensation

At September
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 nine months ended September 30, 2007 and 2006 is as follows (in
thousands):

|                                       |  |                                       |       |                                      |   |       |  |      |        |  |   |        | 
|-------------------------------------- |  | ------------------------------------- | ----- | ------------------------------------ | - | ----- |  | ---- | ------ |  | - | ------ | 
|                                       |  | Three
  months ended,
  September 30, |       | Nine
  months ended,
  September 30, |  
|                                       |  |                                       |       |                                      |  
|                                       |  | 2007                                  |       | 2006                                 |   | 2007  |  | 2006 |       
|                                       |  |                                       |       |                                      |   |       |  |      |       
|Stock awards                           |  | $                                     | 4,989 |                                      | $ | 5,312 |  | $    | 14,426 |  | $ | 15,268 | 
|Stock options                          |  |                                       | 1,040 |                                      |   | 442   |  |      | 3,082  |  |   | 3,770  | 
|                                       |  |                                       |       |                                      |   |       |  |      |        |  |   |        | 
|Total stock-based compensation expense |  | $                                     | 6,029 |                                      | $ | 5,754 |  | $    | 17,508 |  | $ | 19,038 | 
|                                       |  |                                       |       |                                      |   |       |  |      |        |  |   |        | 

The
assumptions used to value stock options granted during the periods ended September
30, 2007 and 2006 are as follows:

|                                    |  |      |      |      |  |      |  
|----------------------------------- |  | ---- | ---- | ---- |  | ---- | -
|                                    |  | 2007 |      | 2006 | 
|                                    |  |      |      |      | 
|Expected volatility                 |  |      | 33.1 | %    |  | 29.0 | %
|Risk-free interest rate             |  |      | 4.5  | %    |  | 4.4  | %
|Expected dividend yield             |  |      | 0.2  | %    |  | 0.2  | %
|Expected term of options (in years) |  |      | 4.6  |      |  | 4.7  |  

|                                         |  |                                      |       |                                     |   |       |  |      |       |  |   |       | 
|---------------------------------------- |  | ------------------------------------ | ----- | ----------------------------------- | - | ----- |  | ---- | ----- |  | - | ----- | 
|                                         |  | Three
  months ended
  September 30, |       | Nine
  months ended
  September 30, |  
|                                         |  |                                      |       |                                     |  
|                                         |  | 2007                                 |       | 2006                                |   | 2007  |  | 2006 |      
|                                         |  |                                      |       |                                     |   |       |  |      |      
|Weighted
  average fair value per option |  | $                                    | 11.60 |                                     | $ | 15.04 |  | $    | 11.96 |  | $ | 17.09 | 

11

---



A summary of
stock option activity under the plans for the nine months ended September 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                          |  |        | 92    |                                       |   | 36.28                                               |  |                               |  |   |        |  | 
|Options exercised                        |  |        | (80   | )                                     |   | 23.83                                               |  |                               |  |   |        |  | 
|Options forfeited                        |  |        | (298  | )                                     |   | 47.79                                               |  |                               |  |   |        |  | 
|                                         |  |        |       |                                       |   |                                                     |  |                               |  |   |        |  | 
|Options outstanding, end of period       |  |        | 7,377 |                                       | $ | 30.82                                               |  | 5.1                           |  | $ | 50,416 | 
|                                         |  |        |       |                                       |   |                                                     |  |                               |  |   |        |  | 
|Options exercisable, end of period       |  |        | 5,513 |                                       | $ | 25.89                                               |  | 4.0                           |  | $ | 50,126 | 
|                                         |  |        |       |                                       |   |                                                     |  |                               |  |   |        |  | 

The total
exercise date intrinsic value of options exercised during the nine months ended
September 30, 2007 was approximately $1.3 million.

A summary of
non-vested restricted stock awards for the nine months ended September 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                         |  |        | 225   |                                         |   | 39.38 | 
|Shares
  vested                          |  |        | (597  | )                                       |   | 24.71 | 
|Shares
  forfeited                       |  |        | (48   | )                                       |   | 45.18 | 
|                                         |  |        |       |                                         |   |       | 
|Non-vested
  shares, end of period       |  |        | 2,197 |                                         | $ | 37.49 | 
|                                         |  |        |       |                                         |   |       | 

As of
September 30, 2007, there was approximately $77 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 4.4
years. The total grant date fair value of shares vested during the nine months
ended September 30, 2007 related to stock awards and stock options was
approximately $15.8 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

12

---



contribution
plans was $2.1 million and $5.4 million for the three and nine months ended
September 30, 2007, respectively, and $1.8 million and $5.3 million for the
three and nine months ended September 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 nine months ended September 30, 2007 and 2006 (pretax, in thousands):

|                                                                      |  |                                      |       |                                     |   |       |   |      |        |   |   |       |  
|--------------------------------------------------------------------- |  | ------------------------------------ | ----- | ----------------------------------- | - | ----- | - | ---- | ------ | - | - | ----- | -
|                                                                      |  | Three
  months ended
  September 30, |       | Nine
  months ended
  September 30, |  
|                                                                      |  |                                      |       |                                     |  
|                                                                      |  | 2007                                 |       | 2006                                |   | 2007  |   | 2006 |       
|                                                                      |  |                                      |       |                                     |   |       |   |      |       
|Service cost                                                          |  | $                                    | 1,087 |                                     | $ | 561   |   | $    | 3,261  |   | $ | 1,683 |  
|Interest
  cost                                                       |  |                                      | 2,051 |                                     |   | 1,043 |   |      | 6,153  |   |   | 3,129 |  
|Amortization
  of deferred amounts (primarily prior actuarial losses) |  |                                      | 2,901 |                                     |   | 1,091 |   |      | 8,703  |   |   | 3,273 |  
|Return on
  assets                                                    |  |                                      | (47   | )                                   |   | (44   | ) |      | (141   | ) |   | (132  | )
|                                                                      |  |                                      |       |                                     |   |       |   |      |        |   |   |       |  
|Net periodic pension cost                                             |  | $                                    | 5,992 |                                     | $ | 2,651 |   | $    | 17,976 |   | $ | 7,953 |  
|                                                                      |  |                                      |       |                                     |   |       |   |      |        |   |   |       |  

As of
September 30, 2007, the aggregate defined benefit plans liabilities total
approximately $151 million. During the first nine months of 2007, the Company
made payments of $23.3 million related to funding the rabbi trusts for the
settlement of the Companys pension

13

---



obligations,
resulting in aggregate assets with a fair value of approximately $112 million
at September 30, 2007. The Company currently anticipates making contributions
of approximately $6 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 September 30, |       
|                                                  |  |                                  |       
|2007:                                             |  | Income
 (Numerator)              |        | Common
 Shares
 (Denominator) |  | Per
 Common
 Share
 Amounts | 
|                                                  | 
|Basic EPS                                         |  |                                  |        |                               |  |                             |  |   |      | 
|Net income                                        |  | $                                | 42,597 |                               |  | 119,466                     |  | $ | 0.36 | 
|                                                  |  |                                  |        |                               |  |                             |  |   |      | 
|Effect of Dilutive Securities                     |  |                                  |        |                               |  |                             |  |   |      | 
|4.00% junior subordinated convertible
 debentures |  |                                  | 70     |                               |  | 275                         |  |   |      | 
|Stock options, warrants and awards                |  |                                  |       |                               |  | 1,488                       |  |   |      | 
|                                                  |  |                                  |        |                               |  |                             |  |   |      | 
|Diluted EPS                                       |  |                                  |        |                               |  |                             |  |   |      | 
|Net income plus assumed conversions               |  | $                                | 42,667 |                               |  | 121,229                     |  | $ | 0.35 | 
|                                                  |  |                                  |        |                               |  |                             |  |   |      | 
|                                                  |  |                                  |        |                               |  |                             |  |   |      | 
|2006:                                             |  |                                  |        |                               |  |                             |  |   |      | 
|                                                  | 
|Basic EPS                                         |  |                                  |        |                               |  |                             |  |   |      | 
|Net income                                        |  | $                                | 52,230 |                               |  | 118,667                     |  | $ | 0.44 | 
|                                                  |  |                                  |        |                               |  |                             |  |   |      | 
|Effect of Dilutive Securities                     |  |                                  |        |                               |  |                             |  |   |      | 
|4.00% junior subordinated convertible debentures  |  |                                  | 72     |                               |  | 1,088                       |  |   |      | 
|Stock options, warrants and awards                |  |                                  |       |                               |  | 2,359                       |  |   |      | 
|                                                  |  |                                  |        |                               |  |                             |  |   |      | 
|Diluted EPS                                       |  |                                  |        |                               |  |                             |  |   |      | 
|Net income plus assumed conversions               |  | $                                | 52,302 |                               |  | 122,114                     |  | $ | 0.43 | 
|                                                  |  |                                  |        |                               |  |                             |  |   |      | 

15

---



|                                                  |  |                                 |         |                               |  |                             |  |   |      | 
|------------------------------------------------- |  | ------------------------------- | ------- | ----------------------------- |  | --------------------------- |  | - | ---- | 
|                                                  |  | Nine months ended September 30, |        
|                                                  |  |                                 |        
|2007:                                             |  | Income
 (Numerator)             |         | Common
 Shares
 (Denominator) |  | Per
 Common
 Share
 Amounts | 
|                                                  | 
|Basic EPS                                         |  |                                 |         |                               |  |                             |  |   |      | 
|Net income                                        |  | $                               | 134,825 |                               |  | 119,312                     |  | $ | 1.13 | 
|                                                  |  |                                 |         |                               |  |                             |  |   |      | 
|Effect of Dilutive Securities                     |  |                                 |         |                               |  |                             |  |   |      | 
|4.00% junior subordinated convertible
 debentures |  |                                 | 214     |                               |  | 302                         |  |   |      | 
|Stock
 options, warrants and awards               |  |                                 |        |                               |  | 1,706                       |  |   |      | 
|                                                  |  |                                 |         |                               |  |                             |  |   |      | 
|Diluted EPS                                       |  |                                 |         |                               |  |                             |  |   |      | 
|Net income
 plus assumed conversions              |  | $                               | 135,039 |                               |  | 121,320                     |  | $ | 1.11 | 
|                                                  |  |                                 |         |                               |  |                             |  |   |      | 
|                                                  |  |                                 |         |                               |  |                             |  |   |      | 
|2006:                                             |  |                                 |         |                               |  |                             |  |   |      | 
|                                                  | 
|Basic EPS                                         |  |                                 |         |                               |  |                             |  |   |      | 
|Net income                                        |  | $                               | 113,840 |                               |  | 118,376                     |  | $ | 0.96 | 
|                                                  |  |                                 |         |                               |  |                             |  |   |      | 
|Effect of Dilutive Securities                     |  |                                 |         |                               |  |                             |  |   |      | 
|4.00% junior subordinated convertible
 debentures |  |                                 | 217     |                               |  | 1,827                       |  |   |      | 
|Stock
 options, warrants and awards               |  |                                 |        |                               |  | 2,701                       |  |   |      | 
|                                                  |  |                                 |         |                               |  |                             |  |   |      | 
|Diluted EPS                                       |  |                                 |         |                               |  |                             |  |   |      | 
|Net income
 plus assumed conversions              |  | $                               | 114,057 |                               |  | 122,904                     |  | $ | 0.93 | 
|                                                  |  |                                 |         |                               |  |                             |  |   |      | 

During the
three and nine months ended September 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 September
30, 2007 and 2006 totaled 4.3 million and 1.7 million, respectively, and for
the nine months ended September 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, including the realignment
and right-sizing of functions, and a hub-and-spoke model, whereby certain key
support and production functions will be transferred to regional

16

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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 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 and professional fees, as well as other related
costs. The Company recorded restructuring and other related charges for the
Omnicare Full Potential Plan of approximately $5 million and $22 million pretax
during the three and nine months ended September 30, 2007, respectively, and
approximately $17 million pretax during the year ended December 31, 2006
(approximately $4 million and $13 million pretax in the three and nine months
ended September 30, 2006, respectively). The remainder of the overall
restructuring and other related charges will be recognized and disclosed over
the remainder of 2007 and beyond, 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 1,140 of these
positions have been eliminated as of September 30, 2007.

The
restructuring charges primarily include severance pay, the buy-out of
employment agreements, lease terminations, and other exit-related asset
disposals, professional 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 at
  December 31,
  2006 |       | 2007
  Provision/
  Accrual |   | Utilized
  during
  2007 |  | Balance at
  September 30,
  2007 |        
|                                                |  |                                  |       |                             |   |                          |  |                                   |        
|Employee severance                              |  | $                                | 2,690 |                             | $ | 1,512                    |  | $                                 | (3,480  | ) | $ | 722   | 
|Employment agreement buy-outs                   |  |                                  |      |                             |   | 2,546                    |  |                                   | (932    | ) |   | 1,614 | 
|Lease terminations                              |  |                                  | 74    |                             |   | 3,330                    |  |                                   | (1,185  | ) |   | 2,219 | 
|Other assets, fees and facility exit costs      |  |                                  | 1,169 |                             |   | 6,857                    |  |                                   | (6,525  | ) |   | 1,501 | 
|                                                |  |                                  |       |                             |   |                          |  |                                   |         |   |   |       | 
|Total restructuring charges                     |  | $                                | 3,933 |                             |   | 14,245                   |  | $                                 | (12,122 | ) | $ | 6,056 | 
|                                                |  |                                  |       |                             |   |                          |  |                                   |         |   |   |       | 
|                                               
|Other related charges                           |  |                                  |       |                             |   | 7,715                    |  |                                   |         |   |   |       | 
|                                                |  |                                  |       |                             |   |                          |  |                                   |         |   |   |       | 
|                                               
|Total restructuring and other related
  charges |  |                                  |       |                             | $ | 21,960                   |  |                                   |         |   |   |       | 
|                                                |  |                                  |       |                             |   |                          |  |                                   |         |   |   |       | 

As of
September 30, 2007, the Company has made cumulative payments of approximately
$8.2 million of severance and other employee-related costs for the Omnicare
Full Potential Plan. The remaining liabilities at September 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

17

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in accordance
with SFAS No. 146 Accounting for Costs Associated with Exit or Disposal
Activities (SFAS 146).

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 $1 million
and $12 million pretax in the three and nine months ended September 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 were 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 in the
second quarter of 2007 to reduce the employee severance and employee agreement
buy-out liabilities by approximately $1.2 million and $0.4 million pretax,
respectively.

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

|                                           |  |                                  |        |                             |   |                          |   |                                   |        |   |   |       | 
|------------------------------------------ |  | -------------------------------- | ------ | --------------------------- | - | ------------------------ | - | --------------------------------- | ------ | - | - | ----- | 
|Restructuring
  liabilities:               |  | Balance at
  December 31,
  2006 |        | Adjustments
  during
  2007 |   | Utilized
  during
  2007 |   | Balance at
  September 30,
  2007 |       
|                                           |  |                                  |        |                             |   |                          |   |                                   |       
|Employee severance                         |  | $                                | 1,590  |                             | $ | (1,218                   | ) | $                                 | (64    | ) | $ | 308   | 
|Employment agreement buy-outs              |  |                                  | 211    |                             |   | (361                     | ) |                                   | 150    |   |   |      | 
|Lease terminations                         |  |                                  | 7,564  |                             |   |                         |   |                                   | (1,935 | ) |   | 5,629 | 
|Other assets, fees and facility exit costs |  |                                  | 945    |                             |   |                         |   |                                   | (919   | ) |   | 26    | 
|                                           |  |                                  |        |                             |   |                          |   |                                   |        |   |   |       | 
|Total restructuring liabilities            |  | $                                | 10,310 |                             | $ | (1,579                   | ) | $                                 | (2,768 | ) | $ | 5,963 | 
|                                           |  |                                  |        |                             |   |                          |   |                                   |        |   |   |       | 

As of
September 30, 2007, the Company has made cumulative payments of approximately
$7.6 million of severance and other employee-related costs. The remaining
liabilities at September 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

---



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 $0.4
million and $53.8 million pretax in the three and nine months ended September
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 Company also reached an agreement
in principle with the State of Michigan to resolve claims relating to billing
by Specialized Pharmacy Services for drugs provided to hospice patients for a
settlement amount of approximately $3.5 million. On October 26, 2007 the  Company
entered into settlement agreements with the federal government and the State
of  Michigan to resolve these hospice claims. Under the terms of the October 26, 2007 settlement
 agreements, the Company will pay the federal government and the State of Michigan
an aggregate
amount of approximately $3.5 million. In connection with the settlements, the
November 9,
2006 Corporate Integrity Agreement with the Department of Health and Human Services
Office
of the Inspector General was also amended to cover certain hospice billing matters.
The
settlement agreements do not include any finding of wrongdoing or any admission
of
liability.

19

---



The
Company recorded a special litigation charge of $54.0 million pretax ($46.7
million aftertax) in its financial results for the nine months ended September
30, 2006 based on the terms of the settlement agreements. 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 have resulted in increased
costs to maintain Specialized Pharmacy Services compliance program and
could result in 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

20

---



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. On October 12, 2007, the court issued an opinion and order dismissing the
case and denying plaintiffs motion to add an additional named plaintiff.

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, oral argument was held on August 21, 2007, and the court reserved
decision.

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

The three and
nine months ended September 30, 2007 included a $9.2 million pretax charge
($5.6 million after taxes) and a $25.1 million pretax charge ($15.4 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.

21

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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 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 September 30, 2007 included special charges of
approximately $3.6 million pretax ($3.3 million and $0.3 million was recorded
in the cost of sales and operating expenses sections of the Consolidated
Statements of Income, respectively) ($2.2 million after taxes) for costs
associated with the quality control, product recall and fire damage issues at Heartland.
The associated costs for the nine months ended September 30, 2007 totaled
approximately $14.4 million pretax ($11.6 million and $2.7 million was recorded
in the cost of sales and operating expenses sections of the Consolidated
Statements of Income, respectively) ($8.8 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 September
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

22

---



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 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 September 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
September 30, 2007, including the United States.

23

---



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

|                                        |  |                                  |           |               |   |                              |   |                      |         |   |   |           |  
|--------------------------------------- |  | -------------------------------- | --------- | ------------- | - | ---------------------------- | - | -------------------- | ------- | - | - | --------- | -
|                                        |  | Three months ended September 30, |          
|                                        |  |                                  |          
|2007:                                   |  | Pharmacy
 Services               |           | CRO
 Services |   | Corporate and
 Consolidating |   | Consolidated
 Totals |        
|                                        |  |                                  |           |               |   |                              |   |                      |         |   |   |           |  
|Net sales                               |  | $                                | 1,488,518 |               | $ | 48,471                       |   | $                    |        |   | $ | 1,536,989 |  
|Depreciation and amortization           |  |                                  | (26,525   | )             |   | (457                         | ) |                      | (926    | ) |   | (27,908   | )
|Restructuring and other related charges |  |                                  | (4,389    | )             |   | (141                         | ) |                      | (427    | ) |   | (4,957    | )
|Litigation charges                      |  |                                  | (9,192    | )             |   |                             |   |                      |        |   |   | (9,192    | )
|Heartland matters                       |  |                                  | (3,648    | )             |   |                             |   |                      |        |   |   | (3,648    | )
|Operating income (expense)              |  |                                  | 129,655   |               |   | 3,682                        |   |                      | (25,517 | ) |   | 107,820   |  
|Total assets                            |  |                                  | 7,041,947 |               |   | 187,368                      |   |                      | 377,450 |   |   | 7,606,765 |  
|Capital expenditures                    |  |                                  | (13,201   | )             |   | (520                         | ) |                      | (458    | ) |   | (14,179   | )
|                                        |  |                                  |           |               |   |                              |   |                      |         |   |   |           |  
|2006:                                   |  |                                  |           |               |   |                              |   |                      |         |   |   |           |  
|                                        |  |                                  |           |               |   |                              |   |                      |         |   |   |           |  
|Net sales                               |  | $                                | 1,553,515 |               | $ | 40,351                       |   | $                    |        |   | $ | 1,593,866 |  
|Depreciation and amortization           |  |                                  | (28,070   | )             |   | (493                         | ) |                      | (776    | ) |   | (29,339   | )
|Restructuring and other related charges |  |                                  | (4,336    | )             |   |                             |   |                      | (783    | ) |   | (5,119    | )
|Litigation charges                      |  |                                  | (9,886    | )             |   |                             |   |                      |        |   |   | (9,886    | )
|Heartland matters                       |  |                                  | (24,985   | )             |   |                             |   |                      |        |   |   | (24,985   | )
|Operating income (expense)              |  |                                  | 140,894   |               |   | 1,371                        |   |                      | (17,722 | ) |   | 124,543   |  
|Total assets                            |  |                                  | 6,939,259 |               |   | 164,531                      |   |                      | 462,622 |   |   | 7,566,412 |  
|Capital expenditures                    |  |                                  | (7,541    | )             |   | (236                         | ) |                      | (558    | ) |   | (8,335    | )

24

---



|                                        |  |                                 |           |               |   |                              |   |                      |         |   |   |           |  
|--------------------------------------- |  | ------------------------------- | --------- | ------------- | - | ---------------------------- | - | -------------------- | ------- | - | - | --------- | -
|                                        |  | Nine months ended September 30, |          
|                                        |  |                                 |          
|2007:                                   |  | Pharmacy
 Services              |           | CRO
 Services |   | Corporate and
 Consolidating |   | Consolidated
 Totals |        
|                                        |  |                                 |           |               |   |                              |   |                      |        
|Net sales                               |  | $                               | 4,517,079 |               | $ | 146,132                      |   | $                    |        |   | $ | 4,663,211 |  
|Depreciation and amortization           |  |                                 | (81,032   | )             |   | (1,411                       | ) |                      | (2,673  | ) |   | (85,116   | )
|Restructuring and other related charges |  |                                 | (14,145   | )             |   | (2,211                       | ) |                      | (4,025  | ) |   | (20,381   | )
|Litigation charges                      |  |                                 | (25,109   | )             |   |                             |   |                      |        |   |   | (25,109   | )
|Heartland matters                       |  |                                 | (14,351   | )             |   |                             |   |                      |        |   |   | (14,351   | )
|Operating income (expense)              |  |                                 | 409,519   |               |   | 7,316                        |   |                      | (78,359 | ) |   | 338,476   |  
|Total assets                            |  |                                 | 7,041,947 |               |   | 187,368                      |   |                      | 377,450 |   |   | 7,606,765 |  
|Capital expenditures                    |  |                                 | (30,301   | )             |   | (1,182                       | ) |                      | (1,621  | ) |   | (33,104   | )
|                                        |  |                                 |           |               |   |                              |   |                      |         |   |   |           |  
|2006:                                   |  |                                 |           |               |   |                              |   |                      |         |   |   |           |  
|                                        |  |                                 |           |               |   |                              |   |                      |         |   |   |           |  
|Net sales                               |  | $                               | 4,768,671 |               | $ | 124,903                      |   | $                    |        |   | $ | 4,893,574 |  
|Depreciation and amortization           |  |                                 | (86,712   | )             |   | (1,473                       | ) |                      | (2,291  | ) |   | (90,476   | )
|Restructuring and other related charges |  |                                 | (19,214   | )             |   | (1,302                       | ) |                      | (4,205  | ) |   | (24,721   | )
|Litigation charges                      |  |                                 | (108,468  | )             |   |                             |   |                      |        |   |   | (108,468  | )
|Heartland matters                       |  |                                 | (24,985   | )             |   |                             |   |                      |        |   |   | (24,985   | )
|Operating income (expense)              |  |                                 | 398,625   |               |   | 3,835                        |   |                      | (66,388 | ) |   | 336,072   |  
|Total assets                            |  |                                 | 6,939,259 |               |   | 164,531                      |   |                      | 462,622 |   |   | 7,566,412 |  
|Capital expenditures                    |  |                                 | (21,229   | )             |   | (412                         | ) |                      | (1,259  | ) |   | (22,900   | )

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 nine month periods ended September 30, 2007,
reimbursable out-of-pockets totaling $7.9 million and $23.3 million,
respectively, and $5.5 million and $17.8 million for the three and nine months
ended September 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 September 30, 2007 and December 31, 2006 for the balance
sheets, the three and nine months ended September 30, 2007 and 2006 for the
statements of income and the statements of cash flows for the nine months ended
September 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 September 30, |        
|                                             |  |                                  |        
|2007:                                        |  | Parent                           |         | Guarantor
 Subsidiaries |   | Non-
 Guarantor
 Subsidiaries |   | Consolidating/
 Eliminating
 Adjustments |        | Omnicare,
 Inc. and
 Subsidiaries |  
|                                             |  |                                  |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|Net sales                                    |  | $                                |        |                         | $ | 1,486,175                     |   | $                                        | 50,814 |                                   | $ |        |   | $ | 1,536,989 |  
|Cost of sales                                |  |                                  |        |                         |   | 1,114,122                     |   |                                          | 37,205 |                                   |   |        |   |   | 1,151,327 |  
|Heartland matters                            |  |                                  |        |                         |   | 3,320                         |   |                                          |       |                                   |   |        |   |   | 3,320     |  
|                                             |  |                                  |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|Gross profit                                 |  |                                  |        |                         |   | 368,733                       |   |                                          | 13,609 |                                   |   |        |   |   | 382,342   |  
|Selling, general and administrative expenses |  |                                  | 2,110   |                         |   | 246,109                       |   |                                          | 11,826 |                                   |   |        |   |   | 260,045   |  
|Restructuring and other related charges      |  |                                  |        |                         |   | 4,957                         |   |                                          |       |                                   |   |        |   |   | 4,957     |  
|Litigation charges                           |  |                                  |        |                         |   | 9,192                         |   |                                          |       |                                   |   |        |   |   | 9,192     |  
|Heartland matters                            |  |                                  |        |                         |   | 328                           |   |                                          |       |                                   |   |        |   |   | 328       |  
|                                             |  |                                  |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|Operating income (loss)                      |  |                                  | (2,110  | )                       |   | 108,147                       |   |                                          | 1,783  |                                   |   |        |   |   | 107,820   |  
|Investment income                            |  |                                  | 1,196   |                         |   | 1,173                         |   |                                          |       |                                   |   |        |   |   | 2,369     |  
|Interest expense                             |  |                                  | (39,720 | )                       |   | (297                          | ) |                                          | (908   | )                                 |   |        |   |   | (40,925   | )
|                                             |  |                                  |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|Income (loss) before income taxes            |  |                                  | (40,634 | )                       |   | 109,023                       |   |                                          | 875    |                                   |   |        |   |   | 69,264    |  
|Income tax (benefit) expense                 |  |                                  | (16,498 | )                       |   | 42,785                        |   |                                          | 380    |                                   |   |        |   |   | 26,667    |  
|Equity in net income of subsidiaries         |  |                                  | 66,733  |                         |   |                              |   |                                          |       |                                   |   | (66,733 | ) |   |          |  
|                                             |  |                                  |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|Net income                                   |  | $                                | 42,597  |                         | $ | 66,238                        |   | $                                        | 495    |                                   | $ | (66,733 | ) | $ | 42,597    |  
|                                             |  |                                  |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|2006:                                        |  |                                  |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|                                             |  |                                  |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|Net sales                                    |  | $                                |        |                         | $ | 1,536,041                     |   | $                                        | 57,825 |                                   | $ |        |   | $ | 1,593,866 |  
|Cost of sales                                |  |                                  |        |                         |   | 1,150,357                     |   |                                          | 42,877 |                                   |   |        |   |   | 1,193,234 |  
|Heartland matters                            |  |                                  |        |                         |   | 22,769                        |   |                                          |       |                                   |   |        |   |   | 22,769    |  
|                                             |  |                                  |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|Gross profit                                 |  |                                  |        |                         |   | 362,915                       |   |                                          | 14,948 |                                   |   |        |   |   | 377,863   |  
|Selling, general and administrative expenses |  |                                  | 2,285   |                         |   | 223,791                       |   |                                          | 10,023 |                                   |   |        |   |   | 236,099   |  
|Restructuring and other related charges      |  |                                  |        |                         |   | 5,119                         |   |                                          |       |                                   |   |        |   |   | 5,119     |  
|Litigation charges                           |  |                                  |        |                         |   | 9,886                         |   |                                          |       |                                   |   |        |   |   | 9,886     |  
|Heartland matters                            |  |                                  |        |                         |   | 2,216                         |   |                                          |       |                                   |   |        |   |   | 2,216     |  
|                                             |  |                                  |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|Operating income (loss)                      |  |                                  | (2,285  | )                       |   | 121,903                       |   |                                          | 4,925  |                                   |   |        |   |   | 124,543   |  
|Investment income                            |  |                                  | 2,542   |                         |   | 865                           |   |                                          |       |                                   |   |        |   |   | 3,407     |  
|Interest expense                             |  |                                  | (42,490 | )                       |   | (177                          | ) |                                          | (701   | )                                 |   |        |   |   | (43,368   | )
|                                             |  |                                  |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|Income (loss) before income taxes            |  |                                  | (42,233 | )                       |   | 122,591                       |   |                                          | 4,224  |                                   |   |        |   |   | 84,582    |  
|Income tax (benefit) expense                 |  |                                  | (16,154 | )                       |   | 46,890                        |   |                                          | 1,616  |                                   |   |        |   |   | 32,352    |  
|Equity in net income of subsidiaries         |  |                                  | 78,309  |                         |   |                              |   |                                          |       |                                   |   | (78,309 | ) |   |          |  
|                                             |  |                                  |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|Net income                                   |  | $                                | 52,230  |                         | $ | 75,701                        |   | $                                        | 2,608  |                                   | $ | (78,309 | ) | $ | 52,230    |  
|                                             |  |                                  |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  

26

---



Note 13 - Guarantor Subsidiaries (Continued)

Summary Consolidating Statements of Income(in thousands)

|                                               |  |                                 |          |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|---------------------------------------------- |  | ------------------------------- | -------- | ------------------------ | - | ------------------------------- | - | ------------------------------------------ | ------- | ----------------------------------- | - | -------- | - | - | --------- | -
|                                               |  | Nine months ended September 30, |         
|                                               |  |                                 |         
|2007:                                          |  | Parent                          |          | Guarantor
  Subsidiaries |   | Non-
  Guarantor
  Subsidiaries |   | Consolidating/
  Eliminating
  Adjustments |         | Omnicare,
  Inc. and
  Subsidiaries |  
|                                               |  |                                 |          |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|Net sales                                      |  | $                               |         |                          | $ | 4,497,905                       |   | $                                          | 165,306 |                                     | $ |         |   | $ | 4,663,211 |  
|Cost of sales                                  |  |                                 |         |                          |   | 3,370,000                       |   |                                            | 122,429 |                                     |   |         |   |   | 3,492,429 |  
|Heartland matters                              |  |                                 |         |                          |   | 11,631                          |   |                                            |        |                                     |   |         |   |   | 11,631    |  
|                                               |  |                                 |          |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|Gross profit                                   |  |                                 |         |                          |   | 1,116,274                       |   |                                            | 42,877  |                                     |   |         |   |   | 1,159,151 |  
|Selling, general and
  administrative expenses |  |                                 | 6,383    |                          |   | 733,405                         |   |                                            | 32,677  |                                     |   |         |   |   | 772,465   |  
|Restructuring and other
  related charges      |  |                                 |         |                          |   | 19,471                          |   |                                            | 910     |                                     |   |         |   |   | 20,381    |  
|Litigation charges                             |  |                                 |         |                          |   | 25,109                          |   |                                            |        |                                     |   |         |   |   | 25,109    |  
|Heartland matters                              |  |                                 |         |                          |   | 2,720                           |   |                                            |        |                                     |   |         |   |   | 2,720     |  
|                                               |  |                                 |          |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|Operating income (loss)                        |  |                                 | (6,383   | )                        |   | 335,569                         |   |                                            | 9,290   |                                     |   |         |   |   | 338,476   |  
|Investment income                              |  |                                 | 2,531    |                          |   | 3,861                           |   |                                            |        |                                     |   |         |   |   | 6,392     |  
|Interest expense                               |  |                                 | (121,326 | )                        |   | (866                            | ) |                                            | (2,499  | )                                   |   |         |   |   | (124,691  | )
|                                               |  |                                 |          |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|Income (loss) before
  income taxes            |  |                                 | (125,178 | )                        |   | 338,564                         |   |                                            | 6,791   |                                     |   |         |   |   | 220,177   |  
|Income tax (benefit)
  expense                 |  |                                 | (49,233  | )                        |   | 131,914                         |   |                                            | 2,671   |                                     |   |         |   |   | 85,352    |  
|Equity in net income of
  subsidiaries         |  |                                 | 210,770  |                          |   |                                |   |                                            |        |                                     |   | (210,770 | ) |   |          |  
|                                               |  |                                 |          |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|Net income                                     |  | $                               | 134,825  |                          | $ | 206,650                         |   | $                                          | 4,120   |                                     | $ | (210,770 | ) | $ | 134,825   |  
|                                               |  |                                 |          |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|                                               |  |                                 |          |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|2006:                                          |  |                                 |          |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|                                               |  |                                 |          |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|Net sales                                      |  | $                               |         |                          | $ | 4,652,525                       |   | $                                          | 241,049 |                                     | $ |         |   | $ | 4,893,574 |  
|Cost of sales                                  |  |                                 |         |                          |   | 3,493,339                       |   |                                            | 182,797 |                                     |   |         |   |   | 3,676,136 |  
|Heartland matters                              |  |                                 |         |                          |   | 22,769                          |   |                                            |        |                                     |   |         |   |   | 22,769    |  
|                                               |  |                                 |          |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|Gross profit                                   |  |                                 |         |                          |   | 1,136,417                       |   |                                            | 58,252  |                                     |   |         |   |   | 1,194,669 |  
|Selling, general and administrative
  expenses |  |                                 | 6,544    |                          |   | 680,527                         |   |                                            | 36,121  |                                     |   |         |   |   | 723,192   |  
|Restructuring and other
  related charges      |  |                                 |         |                          |   | 24,721                          |   |                                            |        |                                     |   |         |   |   | 24,721    |  
|Litigation charges                             |  |                                 |         |                          |   | 108,468                         |   |                                            |        |                                     |   |         |   |   | 108,468   |  
|Heartland matters                              |  |                                 |         |                          |   | 2,216                           |   |                                            |        |                                     |   |         |   |   | 2,216     |  
|                                               |  |                                 |          |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|Operating income (loss)                        |  |                                 | (6,544   | )                        |   | 320,485                         |   |                                            | 22,131  |                                     |   |         |   |   | 336,072   |  
|Investment income                              |  |                                 | 5,553    |                          |   | 2,702                           |   |                                            |        |                                     |   |         |   |   | 8,255     |  
|Interest expense                               |  |                                 | (125,600 | )                        |   | (1,331                          | ) |                                            | (1,918  | )                                   |   |         |   |   | (128,849  | )
|                                               |  |                                 |          |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|Income (loss) before
  income taxes            |  |                                 | (126,591 | )                        |   | 321,856                         |   |                                            | 20,213  |                                     |   |         |   |   | 215,478   |  
|Income tax (benefit)
  expense                 |  |                                 | (47,105  | )                        |   | 141,261                         |   |                                            | 7,482   |                                     |   |         |   |   | 101,638   |  
|Equity in net income of
  subsidiaries         |  |                                 | 193,326  |                          |   |                                |   |                                            |        |                                     |   | (193,326 | ) |   |          |  
|                                               |  |                                 |          |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  
|Net income                                     |  | $                               | 113,840  |                          | $ | 180,595                         |   | $                                          | 12,731  |                                     | $ | (193,326 | ) | $ | 113,840   |  
|                                               |  |                                 |          |                          |   |                                 |   |                                            |         |                                     |   |          |   |   |           |  

27

---



Note 13 - Guarantor Subsidiaries (Continued)

Condensed Consolidating Balance Sheets(in thousands)

|                                                           |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|---------------------------------------------------------- |  | ------ | --------- | ------------------------ | - | ------------------------------- |  | ------------------------------------------ | ------- | ----------------------------------- | - | ---------- | - | - | --------- | 
|As of
  September 30, 2007:                                |  | Parent |           | Guarantor
  Subsidiaries |   | Non-
  Guarantor
  Subsidiaries |  | Consolidating/
  Eliminating
  Adjustments |         | Omnicare,
  Inc. and
  Subsidiaries |  
|                                                           |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|ASSETS                                                     |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|Cash and cash equivalents                                  |  | $      | 158,992   |                          | $ | 63,276                          |  | $                                          | 34,754  |                                     | $ |           |   | $ | 257,022   | 
|Restricted cash                                            |  |        |          |                          |   | 13,276                          |  |                                            |        |                                     |   |           |   |   | 13,276    | 
|Accounts receivable, net (including intercompany)          |  |        |          |                          |   | 1,437,957                       |  |                                            | 30,637  |                                     |   | (4,222     | ) |   | 1,464,372 | 
|Unbilled receivables, CRO                                  |  |        |          |                          |   | 27,710                          |  |                                            |        |                                     |   |           |   |   | 27,710    | 
|Inventories                                                |  |        |          |                          |   | 412,815                         |  |                                            | 13,113  |                                     |   |           |   |   | 425,928   | 
|Deferred income tax benefits (liabilities), net-current    |  |        | (4,836    | )                        |   | 99,548                          |  |                                            | (105    | )                                   |   |           |   |   | 94,607    | 
|Other current assets                                       |  |        | 1,685     |                          |   | 219,661                         |  |                                            | 9,186   |                                     |   |           |   |   | 230,532   | 
|                                                           |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|Total current assets                                       |  |        | 155,841   |                          |   | 2,274,243                       |  |                                            | 87,585  |                                     |   | (4,222     | ) |   | 2,513,447 | 
|                                                           |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|Properties and equipment, net                              |  |        |          |                          |   | 190,592                         |  |                                            | 11,398  |                                     |   |           |   |   | 201,990   | 
|Goodwill                                                   |  |        |          |                          |   | 4,215,683                       |  |                                            | 102,655 |                                     |   |           |   |   | 4,318,338 | 
|Identifiable intangible assets, net                        |  |        |          |                          |   | 309,563                         |  |                                            | 5,486   |                                     |   |           |   |   | 315,049   | 
|Other noncurrent assets                                    |  |        | 54,117    |                          |   | 203,459                         |  |                                            | 365     |                                     |   |           |   |   | 257,941   | 
|Investment in subsidiaries                                 |  |        | 6,003,046 |                          |   |                                |  |                                            |        |                                     |   | (6,003,046 | ) |   |          | 
|                                                           |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|Total assets                                               |  | $      | 6,213,004 |                          | $ | 7,193,540                       |  | $                                          | 207,489 |                                     | $ | (6,007,268 | ) | $ | 7,606,765 | 
|                                                           |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|                                                           |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|LIABILITIES AND STOCKHOLDERS EQUITY                       |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|Current liabilities (including intercompany)               |  | $      | 58,837    |                          | $ | 597,499                         |  | $                                          | 20,983  |                                     | $ | (4,222     | ) | $ | 673,097   | 
|Long-term debt, notes and convertible debentures           |  |        | 2,756,175 |                          |   | 3,826                           |  |                                            | 52,214  |                                     |   |           |   |   | 2,812,215 | 
|Deferred income tax liabilities (benefits), net-noncurrent |  |        | 68,528    |                          |   | 359,326                         |  |                                            | 9,434   |                                     |   |           |   |   | 437,288   | 
|Other noncurrent liabilities                               |  |        | 16,325    |                          |   | 353,574                         |  |                                            | 1,127   |                                     |   |           |   |   | 371,026   | 
|Stockholders equity                                       |  |        | 3,313,139 |                          |   | 5,879,315                       |  |                                            | 123,731 |                                     |   | (6,003,046 | ) |   | 3,313,139 | 
|                                                           |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 
|Total liabilities and stockholders
equity                 |  | $      | 6,213,004 |                          | $ | 7,193,540                       |  | $                                          | 207,489 |                                     | $ | (6,007,268 | ) | $ | 7,606,765 | 
|                                                           |  |        |           |                          |   |                                 |  |                                            |         |                                     |   |            |   |   |           | 

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)                                                                                         | 
|                                                                                                       
|                                                                                                        |  | Nine
 months ended September 30, |         
|                                                                                                        |  |                                  |         
|2007:                                                                                                   |  | Parent                           |          | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |   | Omnicare,
 Inc.
 andSubsidiaries |       
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |       
|Cash flows from operating activities:                                                                   |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|Provision for doubtful accounts                                                                         |  | $                                |         |                       | $ | 87,294                    |   | $                                | 1,871  |   | $ | 89,165   |  
|Other                                                                                                   |  |                                  | (22,321  | )                     |   | 352,472                   |   |                                  | 11,923 |   |   | 342,074  |  
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|Net cash flows from operating activities                                                                |  |                                  | (22,321  | )                     |   | 439,766                   |   |                                  | 13,794 |   |   | 431,239  |  
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|Cash flows from investing activities:                                                                   |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|Acquisition of businesses, net of cash received                                                         |  |                                  |         |                       |   | (105,979                  | ) |                                  |       |   |   | (105,979 | )
|Capital expenditures                                                                                    |  |                                  |         |                       |   | (32,133                   | ) |                                  | (971   | ) |   | (33,104  | )
|Transfer of cash to trusts for employee health and severance costs,
 net of payments out of the trust   |  |                                  |         |                       |   | (10,423                   | ) |                                  |       |   |   | (10,423  | )
|Other                                                                                                   |  |                                  |         |                       |   | (184                      | ) |                                  |       |   |   | (184     | )
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|Net cash flows from investing activities                                                                |  |                                  |         |                       |   | (148,719                  | ) |                                  | (971   | ) |   | (149,690 | )
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|Cash flows from financing activities:                                                                   |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|Borrowings on line of credit facilities and term A loan                                                 |  |                                  | 78,000   |                       |   |                          |   |                                  |       |   |   | 78,000   |  
|Payments on line of credit facilities and term A loan                                                   |  |                                  | (228,000 | )                     |   |                          |   |                                  |       |   |   | (228,000 | )
|Payments on long-term borrowings and obligations                                                        |  |                                  | (4,673   | )                     |   |                          |   |                                  |       |   |   | (4,673   | )
|Change in cash overdraft balance                                                                        |  |                                  | 3,456    |                       |   | (792                      | ) |                                  |       |   |   | 2,664    |  
|Payments for stock awards and exercise of stock options and warrants,
 net of stock tendered in payment |  |                                  | (8,068   | )                     |   |                          |   |                                  |       |   |   | (8,068   | )
|Excess tax benefits from stock-based compensation                                                       |  |                                  | 4,089    |                       |   |                          |   |                                  |        |   |   | 4,089    |  
|Dividends paid                                                                                          |  |                                  | (8,226   | )                     |   |                          |   |                                  |       |   |   | (8,226   | )
|Other                                                                                                   |  |                                  | 301,241  |                       |   | (301,241                  | ) |                                  |       |   |   |         |  
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|Net cash flows from financing activities                                                                |  |                                  | 137,819  |                       |   | (302,033                  | ) |                                  |       |   |   | (164,214 | )
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|Effect of exchange rate changes on cash                                                                 |  |                                  |         |                       |   |                          |   |                                  | 1,653  |   |   | 1,653    |  
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|Net increase (decrease) in cash and cash equivalents                                                    |  |                                  | 115,498  |                       |   | (10,986                   | ) |                                  | 14,476 |   |   | 118,988  |  
|Cash and cash equivalents at beginning of period                                                        |  |                                  | 43,494   |                       |   | 74,262                    |   |                                  | 20,278 |   |   | 138,034  |  
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|Cash and cash equivalents at end of period                                                              |  | $                                | 158,992  |                       | $ | 63,276                    |   | $                                | 34,754 |   | $ | 257,022  |  
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  

30

---



Note 13 - Guarantor Subsidiaries (Continued)

|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |   | 
|------------------------------------------------------------------------------------------------------- |  | -------------------------------- | -------- | --------------------- | - | ------------------------- | - | -------------------------------- | ------ | - | - | -------- | - | 
|Condensed Consolidating Statements of Cash Flows -
 (Continued)                                         | 
|(in
 thousands)                                                                                         | 
|                                                                                                       
|                                                                                                        |  | Nine
 months ended September 30, |         
|                                                                                                        |  |                                  |         
|2006:                                                                                                   |  | Parent                           |          | GuarantorSubsidiaries |   | Non-GuarantorSubsidiaries |   | Omnicare,
 Inc.
 andSubsidiaries |       
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |       
|Cash flows from operating activities:                                                                   |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|Provision for doubtful accounts                                                                         |  | $                                |         |                       | $ | 54,059                    |   | $                                | 440    |   | $ | 54,499   |  
|Other                                                                                                   |  |                                  | (129,099 | )                     |   | 297,327                   |   |                                  | (9,980 | ) |   | 158,248  |  
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|Net cash flows from operating activities                                                                |  |                                  | (129,099 | )                     |   | 351,386                   |   |                                  | (9,540 | ) |   | 212,747  |  
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|Cash flows from investing activities:                                                                   |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|Acquisition of businesses, net of cash received                                                         |  |                                  |         |                       |   | (70,849                   | ) |                                  | (597   | ) |   | (71,446  | )
|Capital expenditures                                                                                    |  |                                  |         |                       |   | (22,803                   | ) |                                  | (97    | ) |   | (22,900  | )
|Transfer of cash to trusts for employee health and severance costs,
 net of payments out of the trust   |  |                                  |         |                       |   | (10,836                   | ) |                                  |       |   |   | (10,836  | )
|Other                                                                                                   |  |                                  |         |                       |   | 93                        |   |                                  |       |   |   | 93       |  
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|Net cash flows from investing activities                                                                |  |                                  |         |                       |   | (104,395                  | ) |                                  | (694   | ) |   | (105,089 | )
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|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                                                   |  |                                  | (233,000 | )                     |   |                          |   |                                  |       |   |   | (233,000 | )
|Payments on long-term borrowings and obligations                                                        |  |                                  | (4,701   | )                     |   |                          |   |                                  |       |   |   | (4,701   | )
|Fees paid for financing arrangements                                                                    |  |                                  | (3,413   | )                     |   |                          |   |                                  |       |   |   | (3,413   | )
|Change in cash overdraft balance                                                                        |  |                                  | 1,280    |                       |   | 11,702                    |   |                                  |       |   |   | 12,982   |  
|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 |  |                                  | (2,661   | )                     |   |                          |   |                                  |       |   |   | (2,661   | )
|Excess tax benefits from stock-based compensation                                                       |  |                                  | 11,678   |                       |   |                          |   |                                  |       |   |   | 11,678   |  
|Dividends paid                                                                                          |  |                                  | (8,198   | )                     |   |                          |   |                                  |       |   |   | (8,198   | )
|Other                                                                                                   |  |                                  | 268,583  |                       |   | (271,377                  | ) |                                  | 2,794  |   |   |         |  
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|Net cash flows from financing activities                                                                |  |                                  | 211,807  |                       |   | (259,675                  | ) |                                  | 2,794  |   |   | (45,074  | )
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|Effect of exchange rate changes on cash                                                                 |  |                                  |         |                       |   |                          |   |                                  | 1,288  |   |   | 1,288    |  
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|Net increase (decrease) in cash and cash equivalents                                                    |  |                                  | 82,708   |                       |   | (12,684                   | ) |                                  | (6,152 | ) |   | 63,872   |  
|Cash and cash equivalents at beginning of period                                                        |  |                                  | 143,227  |                       |   | 38,999                    |   |                                  | 33,195 |   |   | 215,421  |  
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  
|Cash and cash equivalents at end of period                                                              |  | $                                | 225,935  |                       | $ | 26,315                    |   | $                                | 27,043 |   | $ | 279,293  |  
|                                                                                                        |  |                                  |          |                       |   |                           |   |                                  |        |   |   |          |  

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 September 30, 2007 and December 31, 2006 for the balance
sheets, the three and nine months ended September 30, 2007 and 2006 for the
statements of income and the statements of cash flows for the nine months ended
September 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 September 30, |        
|                                             |  |                                   |        
|2007:                                        |  | Parent                            |         | GuarantorSubsidiary |   | Non-
 GuarantorSubsidiaries |   | Consolidating/
 EliminatingAdjustments |           | Omnicare,
 Inc. andSubsidiaries |  
|                                             |  |                                   |         |                     |   |                             |   |                                        |           |                                 |  
|Net sales                                    |  | $                                 |        |                     | $ |                            |   | $                                      | 1,536,989 |                                 | $ |        |   | $ | 1,536,989 |  
|Cost of sales                                |  |                                   |        |                     |   |                            |   |                                        | 1,151,327 |                                 |   |        |   |   | 1,151,327 |  
|Heartland matters                            |  |                                   |        |                     |   |                            |   |                                        | 3,320     |                                 |   |        |   |   | 3,320     |  
|                                             |  |                                   |         |                     |   |                             |   |                                        |           |                                 |   |         |   |   |           |  
|Gross profit                                 |  |                                   |        |                     |   |                            |   |                                        | 382,342   |                                 |   |        |   |   | 382,342   |  
|Selling, general and administrative expenses |  |                                   | 2,110   |                     |   | 266                         |   |                                        | 257,669   |                                 |   |        |   |   | 260,045   |  
|Restructuring and other related charges      |  |                                   |        |                     |   |                            |   |                                        | 4,957     |                                 |   |        |   |   | 4,957     |  
|Litigation charges                           |  |                                   |        |                     |   |                            |   |                                        | 9,192     |                                 |   |        |   |   | 9,192     |  
|Heartland matters                            |  |                                   |        |                     |   |                            |   |                                        | 328       |                                 |   |        |   |   | 328       |  
|                                             |  |                                   |         |                     |   |                             |   |                                        |           |                                 |   |         |   |   |           |  
|Operating income (loss)                      |  |                                   | (2,110  | )                   |   | (266                        | ) |                                        | 110,196   |                                 |   |        |   |   | 107,820   |  
|Investment income                            |  |                                   | 1,196   |                     |   |                            |   |                                        | 1,173     |                                 |   |        |   |   | 2,369     |  
|Interest expense                             |  |                                   | (39,720 | )                   |   |                            |   |                                        | (1,205    | )                               |   |        |   |   | (40,925   | )
|                                             |  |                                   |         |                     |   |                             |   |                                        |           |                                 |   |         |   |   |           |  
|Income (loss) before income taxes            |  |                                   | (40,634 | )                   |   | (266                        | ) |                                        | 110,164   |                                 |   |        |   |   | 69,264    |  
|Income tax (benefit) expense                 |  |                                   | (16,498 | )                   |   | (108                        | ) |                                        | 43,273    |                                 |   |        |   |   | 26,667    |  
|Equity in net income of subsidiaries         |  |                                   | 66,733  |                     |   |                            |   |                                        |          |                                 |   | (66,733 | ) |   |          |  
|                                             |  |                                   |         |                     |   |                             |   |                                        |           |                                 |   |         |   |   |           |  
|Net income (loss)                            |  | $                                 | 42,597  |                     | $ | (158                        | ) | $                                      | 66,891    |                                 | $ | (66,733 | ) | $ | 42,597    |  
|                                             |  |                                   |         |                     |   |                             |   |                                        |           |                                 |   |         |   |   |           |  
|                                             |  |                                   |         |                     |   |                             |   |                                        |           |                                 |   |         |   |   |           |  
|2006:                                        |  |                                   |         |                     |   |                             |   |                                        |           |                                 |   |         |   |   |           |  
|                                             |  |                                   |         |                     |   |                             |   |                                        |           |                                 |   |         |   |   |           |  
|Net sales                                    |  | $                                 |        |                     | $ |                            |   | $                                      | 1,593,866 |                                 | $ |        |   | $ | 1,593,866 |  
|Cost of sales                                |  |                                   |        |                     |   |                            |   |                                        | 1,193,234 |                                 |   |        |   |   | 1,193,234 |  
|Heartland matters                            |  |                                   |        |                     |   |                            |   |                                        | 22,769    |                                 |   |        |   |   | 22,769    |  
|                                             |  |                                   |         |                     |   |                             |   |                                        |           |                                 |   |         |   |   |           |  
|Gross profit                                 |  |                                   |        |                     |   |                            |   |                                        | 377,863   |                                 |   |        |   |   | 377,863   |  
|Selling, general and administrative expenses |  |                                   | 2,285   |                     |   | 237                         |   |                                        | 233,577   |                                 |   |         |   |   | 236,099   |  
|Restructuring and other related charges      |  |                                   |        |                     |   |                            |   |                                        | 5,119     |                                 |   |        |   |   | 5,119     |  
|Litigation charges                           |  |                                   |        |                     |   |                            |   |                                        | 9,886     |                                 |   |        |   |   | 9,886     |  
|Heartland matters                            |  |                                   |        |                     |   |                            |   |                                        | 2,216     |                                 |   |        |   |   | 2,216     |  
|                                             |  |                                   |         |                     |   |                             |   |                                        |           |                                 |   |         |   |   |           |  
|Operating income (loss)                      |  |                                   | (2,285  | )                   |   | (237                        | ) |                                        | 127,065   |                                 |   |        |   |   | 124,543   |  
|Investment income                            |  |                                   | 2,542   |                     |   |                            |   |                                        | 865       |                                 |   |        |   |   | 3,407     |  
|Interest expense                             |  |                                   | (42,490 | )                   |   |                            |   |                                        | (878      | )                               |   |        |   |   | (43,368   | )
|                                             |  |                                   |         |                     |   |                             |   |                                        |           |                                 |   |         |   |   |           |  
|Income (loss) before income taxes            |  |                                   | (42,233 | )                   |   | (237                        | ) |                                        | 127,052   |                                 |   |        |   |   | 84,582    |  
|Income tax (benefit) expense                 |  |                                   | (16,154 | )                   |   | (91                         | ) |                                        | 48,597    |                                 |   |        |   |   | 32,352    |  
|Equity in net income of subsidiaries         |  |                                   | 78,309  |                     |   |                            |   |                                        |          |                                 |   | (78,309 | ) |   |          |  
|                                             |  |                                   |         |                     |   |                             |   |                                        |           |                                 |   |         |   |   |           |  
|Net income (loss)                            |  | $                                 | 52,230  |                     | $ | (146                        | ) | $                                      | 78,455    |                                 | $ | (78,309 | ) | $ | 52,230    |  
|                                             |  |                                   |         |                     |   |                             |   |                                        |           |                                 |   |         |   |   |           |  

32

---



Note 13 - Guarantor Subsidiaries (Continued)

Summary Consolidating Statements of Income(in thousands)

|                                             |  |                                 |          |                       |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|-------------------------------------------- |  | ------------------------------- | -------- | --------------------- | - | ----------------------------- | - | ---------------------------------------- | --------- | --------------------------------- | - | -------- | - | - | --------- | -
|                                             |  | Nine months ended September 30, |         
|                                             |  |                                 |         
|2007:                                        |  | Parent                          |          | Guarantor
 Subsidiary |   | Non-
 Guarantor
 Subsidiaries |   | Consolidating/
 Eliminating
 Adjustments |           | Omnicare,
 Inc. and
 Subsidiaries |  
|                                             |  |                                 |          |                       |   |                               |   |                                          |           |                                   |  
|Net sales                                    |  | $                               |         |                       | $ |                              |   | $                                        | 4,663,211 |                                   | $ |         |   | $ | 4,663,211 |  
|Cost of sales                                |  |                                 |         |                       |   |                              |   |                                          | 3,492,429 |                                   |   |         |   |   | 3,492,429 |  
|Heartland matters                            |  |                                 |         |                       |   |                              |   |                                          | 11,631    |                                   |   |         |   |   | 11,631    |  
|                                             |  |                                 |          |                       |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|Gross profit                                 |  |                                 |         |                       |   |                              |   |                                          | 1,159,151 |                                   |   |         |   |   | 1,159,151 |  
|Selling, general and administrative expenses |  |                                 | 6,383    |                       |   | 807                           |   |                                          | 765,275   |                                   |   |         |   |   | 772,465   |  
|Restructuring and other related charges      |  |                                 |         |                       |   |                              |   |                                          | 20,381    |                                   |   |         |   |   | 20,381    |  
|Litigation charges                           |  |                                 |         |                       |   |                              |   |                                          | 25,109    |                                   |   |         |   |   | 25,109    |  
|Heartland matters                            |  |                                 |         |                       |   |                              |   |                                          | 2,720     |                                   |   |         |   |   | 2,720     |  
|                                             |  |                                 |          |                       |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|Operating income (loss)                      |  |                                 | (6,383   | )                     |   | (807                          | ) |                                          | 345,666   |                                   |   |         |   |   | 338,476   |  
|Investment income                            |  |                                 | 2,531    |                       |   |                              |   |                                          | 3,861     |                                   |   |         |   |   | 6,392     |  
|Interest expense                             |  |                                 | (121,326 | )                     |   |                              |   |                                          | (3,365    | )                                 |   |         |   |   | (124,691  | )
|                                             |  |                                 |          |                       |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|Income (loss) before income taxes            |  |                                 | (125,178 | )                     |   | (807                          | ) |                                          | 346,162   |                                   |   |         |   |   | 220,177   |  
|Income tax (benefit) expense                 |  |                                 | (49,233  | )                     |   | (317                          | ) |                                          | 134,902   |                                   |   |         |   |   | 85,352    |  
|Equity in net income of subsidiaries         |  |                                 | 210,770  |                       |   |                              |   |                                          |          |                                   |   | (210,770 | ) |   |          |  
|                                             |  |                                 |          |                       |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|Net income (loss)                            |  | $                               | 134,825  |                       | $ | (490                          | ) | $                                        | 211,260   |                                   | $ | (210,770 | ) | $ | 134,825   |  
|                                             |  |                                 |          |                       |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|                                             |  |                                 |          |                       |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|2006:                                        |  |                                 |          |                       |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|                                             |  |                                 |          |                       |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|Net sales                                    |  | $                               |         |                       | $ |                              |   | $                                        | 4,893,574 |                                   | $ |         |   | $ | 4,893,574 |  
|Cost of sales                                |  |                                 |         |                       |   |                              |   |                                          | 3,676,136 |                                   |   |         |   |   | 3,676,136 |  
|Heartland matters                            |  |                                 |         |                       |   |                              |   |                                          | 22,769    |                                   |   |         |   |   | 22,769    |  
|                                             |  |                                 |          |                       |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|Gross profit                                 |  |                                 |         |                       |   |                              |   |                                          | 1,194,669 |                                   |   |         |   |   | 1,194,669 |  
|Selling, general and administrative expenses |  |                                 | 6,544    |                       |   | 763                           |   |                                          | 715,885   |                                   |   |         |   |   | 723,192   |  
|Restructuring and other related charges      |  |                                 |         |                       |   |                              |   |                                          | 24,721    |                                   |   |         |   |   | 24,721    |  
|Litigation charges                           |  |                                 |         |                       |   |                              |   |                                          | 108,468   |                                   |   |         |   |   | 108,468   |  
|Heartland matters                            |  |                                 |         |                       |   |                              |   |                                          | 2,216     |                                   |   |         |   |   | 2,216     |  
|                                             |  |                                 |          |                       |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|Operating income (loss)                      |  |                                 | (6,544   | )                     |   | (763                          | ) |                                          | 343,379   |                                   |   |         |   |   | 336,072   |  
|Investment income                            |  |                                 | 5,553    |                       |   |                              |   |                                          | 2,702     |                                   |   |         |   |   | 8,255     |  
|Interest expense                             |  |                                 | (125,600 | )                     |   |                              |   |                                          | (3,249    | )                                 |   |         |   |   | (128,849  | )
|                                             |  |                                 |          |                       |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|Income (loss) before income taxes            |  |                                 | (126,591 | )                     |   | (763                          | ) |                                          | 342,832   |                                   |   |         |   |   | 215,478   |  
|Income tax (benefit) expense                 |  |                                 | (47,105  | )                     |   | (284                          | ) |                                          | 149,027   |                                   |   |         |   |   | 101,638   |  
|Equity in net income of subsidiaries         |  |                                 | 193,326  |                       |   |                              |   |                                          |          |                                   |   | (193,326 | ) |   |          |  
|                                             |  |                                 |          |                       |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|Net income (loss)                            |  | $                               | 113,840  |                       | $ | (479                          | ) | $                                        | 193,805   |                                   | $ | (193,326 | ) | $ | 113,840   |  
|                                             |  |                                 |          |                       |   |                               |   |                                          |           |                                   |   |          |   |   |           |  

33

---



Note 13 - Guarantor Subsidiaries (Continued)

Condensed Consolidating Balance Sheets(in thousands)

|                                                           |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|---------------------------------------------------------- |  | ------ | --------- | --------------------- | - | ----------------------------- |  | ---------------------------------------- | --------- | --------------------------------- | - | ---------- | - | - | --------- | 
|As of
 September 30, 2007:                                 |  | Parent |           | Guarantor
 Subsidiary |   | Non-
 Guarantor
 Subsidiaries |  | Consolidating/
 Eliminating
 Adjustments |           | Omnicare,
 Inc. and
 Subsidiaries |  
|                                                           |  |        |           |                       |   |                               |  |                                          |           |                                   |  
|ASSETS                                                     |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|Cash and cash equivalents                                  |  | $      | 158,992   |                       | $ |                              |  | $                                        | 98,030    |                                   | $ |           |   | $ | 257,022   | 
|Restricted cash                                            |  |        |          |                       |   |                              |  |                                          | 13,276    |                                   |   |           |   |   | 13,276    | 
|Accounts receivable, net (including intercompany)          |  |        |          |                       |   | 22                            |  |                                          | 1,464,372 |                                   |   | (22        | ) |   | 1,464,372 | 
|Unbilled receivables, CRO                                  |  |        |          |                       |   |                              |  |                                          | 27,710    |                                   |   |           |   |   | 27,710    | 
|Inventories                                                |  |        |          |                       |   |                              |  |                                          | 425,928   |                                   |   |           |   |   | 425,928   | 
|Deferred income tax benefits (liabilities), net-current    |  |        | (4,836    | )                     |   |                              |  |                                          | 99,443    |                                   |   |           |   |   | 94,607    | 
|Other current assets                                       |  |        | 1,685     |                       |   |                              |  |                                          | 228,847   |                                   |   |           |   |   | 230,532   | 
|                                                           |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|Total current assets                                       |  |        | 155,841   |                       |   | 22                            |  |                                          | 2,357,606 |                                   |   | (22        | ) |   | 2,513,447 | 
|                                                           |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|Properties and equipment, net                              |  |        |          |                       |   | 30                            |  |                                          | 201,960   |                                   |   |           |   |   | 201,990   | 
|Goodwill                                                   |  |        |          |                       |   |                              |  |                                          | 4,318,338 |                                   |   |           |   |   | 4,318,338 | 
|Identifiable intangible assets, net                        |  |        |          |                       |   |                              |  |                                          | 315,049   |                                   |   |           |   |   | 315,049   | 
|Other noncurrent assets                                    |  |        | 54,117    |                       |   | 19                            |  |                                          | 203,805   |                                   |   |           |   |   | 257,941   | 
|Investment in subsidiaries                                 |  |        | 6,003,046 |                       |   |                              |  |                                          |          |                                   |   | (6,003,046 | ) |   |          | 
|                                                           |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|Total assets                                               |  | $      | 6,213,004 |                       | $ | 71                            |  | $                                        | 7,396,758 |                                   | $ | (6,003,068 | ) | $ | 7,606,765 | 
|                                                           |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|                                                           |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|LIABILITIES AND STOCKHOLDERS EQUITY                       |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|Current liabilities (including intercompany)               |  | $      | 58,837    |                       | $ |                              |  | $                                        | 614,282   |                                   | $ | (22        | ) | $ | 673,097   | 
|Long-term debt, notes and convertible debentures           |  |        | 2,756,175 |                       |   |                              |  |                                          | 56,040    |                                   |   |           |   |   | 2,812,215 | 
|Deferred income tax liabilities (benefits), net-noncurrent |  |        | 68,528    |                       |   |                              |  |                                          | 368,760   |                                   |   |           |   |   | 437,288   | 
|Other noncurrent liabilities                               |  |        | 16,325    |                       |   |                              |  |                                          | 354,701   |                                   |   |           |   |   | 371,026   | 
|Stockholders equity                                       |  |        | 3,313,139 |                       |   | 71                            |  |                                          | 6,002,975 |                                   |   | (6,003,046 | ) |   | 3,313,139 | 
|                                                           |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|Total liabilities and stockholders
equity                 |  | $      | 6,213,004 |                       | $ | 71                            |  | $                                        | 7,396,758 |                                   | $ | (6,003,068 | ) | $ | 7,606,765 | 
|                                                           |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 

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)

|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|-------------------------------------------------------------------------------------------------------- |  | ------------------------------- | -------- | ---------------------- | - | ---------------------------- |  | ----------------------------------- | -------- | - | - | -------- | -
|                                                                                                         |  | Nine months ended September 30, |         
|                                                                                                         |  |                                 |         
|2007:                                                                                                    |  | Parent                          |          | Guarantor
  Subsidiary |   | Non-Guarantor
  Subsidiaries |  | Omnicare, Inc.
  and
  Subsidiaries |         
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |         
|Cash flows from operating activities:                                                                    |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|Provision for doubtful accounts                                                                          |  | $                               |         |                        | $ |                             |  | $                                   | 89,165   |   | $ | 89,165   |  
|Other                                                                                                    |  |                                 | (22,321  | )                      |   |                             |  |                                     | 364,395  |   |   | 342,074  |  
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|Net cash flows from operating activities                                                                 |  |                                 | (22,321  | )                      |   |                             |  |                                     | 453,560  |   |   | 431,239  |  
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|Cash flows from investing activities:                                                                    |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|Acquisition of businesses, net of cash received                                                          |  |                                 |         |                        |   |                             |  |                                     | (105,979 | ) |   | (105,979 | )
|Capital expenditures                                                                                     |  |                                 |         |                        |   |                             |  |                                     | (33,104  | ) |   | (33,104  | )
|Transfer of cash to trusts for employee health and severance costs,
  net of payments out of the trust   |  |                                 |         |                        |   |                             |  |                                     | (10,423  | ) |   | (10,423  | )
|Other                                                                                                    |  |                                 |         |                        |   |                             |  |                                     | (184     | ) |   | (184     | )
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|Net cash flows from investing activities                                                                 |  |                                 |         |                        |   |                             |  |                                     | (149,690 | ) |   | (149,690 | )
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|Cash flows from financing activities:                                                                    |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|Borrowings on line of credit facilities and term A loan                                                  |  |                                 | 78,000   |                        |   |                             |  |                                     |         |   |   | 78,000   |  
|Payments on line of credit facilities and term A loan                                                    |  |                                 | (228,000 | )                      |   |                             |  |                                     |         |   |   | (228,000 | )
|Payments on long-term borrowings and obligations                                                         |  |                                 | (4,673   | )                      |   |                             |  |                                     |         |   |   | (4,673   | )
|Change in cash overdraft balance                                                                         |  |                                 | 3,456    |                        |   |                             |  |                                     | (792     | ) |   | 2,664    |  
|Payments for stock awards and exercise of stock options and warrants,
  net of stock tendered in payment |  |                                 | (8,068   | )                      |   |                             |  |                                     |         |   |   | (8,068   | )
|Excess tax benefits from stock-based compensation                                                        |  |                                 | 4,089    |                        |   |                             |  |                                     |         |   |   | 4,089    |  
|Dividends paid                                                                                           |  |                                 | (8,226   | )                      |   |                             |  |                                     |         |   |   | (8,226   | )
|Other                                                                                                    |  |                                 | 301,241  |                        |   |                             |  |                                     | (301,241 | ) |   |         |  
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|Net cash flows from financing activities                                                                 |  |                                 | 137,819  |                        |   |                             |  |                                     | (302,033 | ) |   | (164,214 | )
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|Effect of exchange rate changes on cash                                                                  |  |                                 |         |                        |   |                             |  |                                     | 1,653    |   |   | 1,653    |  
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|Net increase in cash and cash equivalents                                                                |  |                                 | 115,498  |                        |   |                             |  |                                     | 3,490    |   |   | 118,988  |  
|Cash and cash equivalents at beginning of period                                                         |  |                                 | 43,494   |                        |   |                             |  |                                     | 94,540   |   |   | 138,034  |  
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|Cash and cash equivalents at end of period                                                               |  | $                               | 158,992  |                        | $ |                             |  | $                                   | 98,030   |   | $ | 257,022  |  
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  

36

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Note
13 - Guarantor Subsidiaries (Continued)

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

|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|-------------------------------------------------------------------------------------------------------- |  | ------------------------------- | -------- | ---------------------- | - | ---------------------------- |  | ----------------------------------- | -------- | - | - | -------- | -
|                                                                                                         |  | Nine months ended September 30, |         
|                                                                                                         |  |                                 |         
|2006:                                                                                                    |  | Parent                          |          | Guarantor
  Subsidiary |   | Non-Guarantor
  Subsidiaries |  | Omnicare, Inc.
  and
  Subsidiaries |         
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |         
|Cash flows from operating activities:                                                                    |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|Provision for doubtful accounts                                                                          |  | $                               |         |                        | $ |                             |  | $                                   | 54,499   |   | $ | 54,499   |  
|Other                                                                                                    |  |                                 | (129,099 | )                      |   |                             |  |                                     | 287,347  |   |   | 158,248  |  
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|Net cash flows from operating activities                                                                 |  |                                 | (129,099 | )                      |   |                             |  |                                     | 341,846  |   |   | 212,747  |  
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|Cash flows from investing activities:                                                                    |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|Acquisition of businesses, net of cash received                                                          |  |                                 |         |                        |   |                             |  |                                     | (71,446  | ) |   | (71,446  | )
|Capital expenditures                                                                                     |  |                                 |         |                        |   |                             |  |                                     | (22,900  | ) |   | (22,900  | )
|Transfer of cash to trusts for employee health and severance costs,
  net of payments out of the trust   |  |                                 |         |                        |   |                             |  |                                     | (10,836  | ) |   | (10,836  | )
|Other                                                                                                    |  |                                 |         |                        |   |                             |  |                                     | 93       |   |   | 93       |  
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|Net cash flows from investing activities                                                                 |  |                                 |         |                        |   |                             |  |                                     | (105,089 | ) |   | (105,089 | )
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|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                                                    |  |                                 | (233,000 | )                      |   |                             |  |                                     |         |   |   | (233,000 | )
|Payments on long-term borrowings and obligations                                                         |  |                                 | (4,701   | )                      |   |                             |  |                                     |         |   |   | (4,701   | )
|Fees paid for financing arrangements                                                                     |  |                                 | (3,413   | )                      |   |                             |  |                                     |         |   |   | (3,413   | )
|Change in cash overdraft balance                                                                         |  |                                 | 1,280    |                        |   |                             |  |                                     | 11,702   |   |   | 12,982   |  
|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 |  |                                 | (2,661   | )                      |   |                             |  |                                     |         |   |   | (2,661   | )
|Excess tax benefits from stock-based compensation                                                        |  |                                 | 11,678   |                        |   |                             |  |                                     |         |   |   | 11,678   |  
|Dividends paid                                                                                           |  |                                 | (8,198   | )                      |   |                             |  |                                     |         |   |   | (8,198   | )
|Other                                                                                                    |  |                                 | 268,583  |                        |   |                             |  |                                     | (268,583 | ) |   |         |  
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|Net cash flows from financing activities                                                                 |  |                                 | 211,807  |                        |   |                             |  |                                     | (256,881 | ) |   | (45,074  | )
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|Effect of exchange rate changes on cash                                                                  |  |                                 |         |                        |   |                             |  |                                     | 1,288    |   |   | 1,288    |  
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|Net increase (decrease) in cash and cash equivalents                                                     |  |                                 | 82,708   |                        |   |                             |  |                                     | (18,836  | ) |   | 63,872   |  
|Cash and cash equivalents at beginning of period                                                         |  |                                 | 143,227  |                        |   |                             |  |                                     | 72,194   |   |   | 215,421  |  
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  
|Cash and cash equivalents at end of period                                                               |  | $                               | 225,935  |                        | $ |                             |  | $                                   | 53,358   |   | $ | 279,293  |  
|                                                                                                         |  |                                 |          |                        |   |                              |  |                                     |          |   |   |          |  

37

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|       |   |                                                                                                 
|------ | - | ------------------------------------------------------------------------------------------------
|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 Nine Months Ended September 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 1,396,000 beds in 47 states in
the United States, the District of Columbia and Canada at September 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 nine months ended September 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
  September 30, |           | Nine months ended
  September 30, |  
|                                                                                   |  |                                    |           |                                   |  
|                                                                                   |  | 2007                               |           | 2006                              |   | 2007      |   | 2006 |          
|                                                                                   |  |                                    |           |                                   |   |           |   |      |          
|Net sales                                                                          |  | $                                  | 1,536,989 |                                   | $ | 1,593,866 |   | $    | 4,663,211 |   | $ | 4,893,574 |  
|                                                                                   |  |                                    |           |                                   |   |           |   |      |           |   |   |           |  
|Net income                                                                         |  | $                                  | 42,597    |                                   | $ | 52,230    |   | $    | 134,825   |   | $ | 113,840   |  
|                                                                                   |  |                                    |           |                                   |   |           |   |      |           |   |   |           |  
|Earnings per share:                                                                |  |                                    |           |                                   |   |           |   |      |           |   |   |           |  
|Basic                                                                              |  | $                                  | 0.36      |                                   | $ | 0.44      |   | $    | 1.13      |   | $ | 0.96      |  
|                                                                                   |  |                                    |           |                                   |   |           |   |      |           |   |   |           |  
|Diluted                                                                            |  | $                                  | 0.35      |                                   | $ | 0.43      |   | $    | 1.11      |   | $ | 0.93      |  
|                                                                                   |  |                                    |           |                                   |   |           |   |      |           |   |   |           |  
|EBITDA(a)                                                                          |  | $                                  | 135,728   |                                   | $ | 153,882   |   | $    | 423,592   |   | $ | 426,548   |  
|                                                                                   |  |                                    |           |                                   |   |           |   |      |           |   |   |           |  
|EBITDA reconciliation to net cash flows from operating
activities:                 |  |                                    |           |                                   |   |           |   |      |           |   |   |           |  
|EBITDA(a)                                                                          |  | $                                  | 135,728   |                                   | $ | 153,882   |   | $    | 423,592   |   | $ | 426,548   |  
|(Subtract)/Add:                                                                    |  |                                    |           |                                   |   |           |   |      |           |   |   |           |  
|Interest expense, net of investment income                                         |  |                                    | (38,556   | )                                 |   | (39,961   | ) |      | (118,299  | ) |   | (120,594  | )
|Income tax provision                                                               |  |                                    | (26,667   | )                                 |   | (32,352   | ) |      | (85,352   | ) |   | (101,638  | )
|Changes in assets and liabilities, net of effects from acquisition of
  businesses |  |                                    | 79,376    |                                   |   | (20,679   | ) |      | 71,640    |   |   | (67,445   | )
|Provision for doubtful accounts                                                    |  |                                    | 30,362    |                                   |   | 19,339    |   |      | 89,165    |   |   | 54,499    |  
|Deferred tax provision                                                             |  |                                    | 15,069    |                                   |   | 4,461     |   |      | 50,493    |   |   | 21,377    |  
|                                                                                   |  |                                    |           |                                   |   |           |   |      |           |   |   |           |  
|Net cash flows from operating activities                                           |  | $                                  | 195,312   |                                   | $ | 84,690    |   | $    | 431,239   |   | $ | 212,747   |  
|                                                                                   |  |                                    |           |                                   |   |           |   |      |           |   |   |           |  

(a) EBITDA
represents earnings before interest (net of investment income), income taxes,
depreciation and amortization. The Company uses EBITDA primarily as a financial
measure, and believes that certain investors find EBITDA to be a useful tool
for measuring a companys ability to service its debt. 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 September 30, 2007 vs. 2006
|                                                

Total net
sales for the three months ended September 30, 2007 decreased to $1,537.0
million from $1,593.9 million in the comparable prior-year period. Net income
for the three months ended September 30, 2007 was $42.6 million versus $52.2
million earned in the comparable 2006 period. Diluted earnings per share for
the three months ended September 30, 2007 were $0.35 versus $0.43 in the same
prior-year period. EBITDA totaled $135.7 million for the three months ended
September 30, 2007 as compared with $153.9 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 third quarter of 2007 by
approximately $33.0 million (approximately $20.0 million aftertax). The
unilateral reduction in reimbursement rates began in April 2006; the impact on
the third quarter of 2006 was approximately $24.5 million (approximately $15.1
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.

Net sales for
the quarter were unfavorably impacted by a lower number of beds served,
combined with a year-over-year shift in mix towards assisted living, the
increased availability and utilization of generic drugs and the aforementioned
impact of the reduction in reimbursement under the United Part D contract,
partially offset by the favorable impact of drug price inflation, acquisitions
and year-over-year 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 $382.3 million increased $4.4 million for the three months ended September 30, 2007, from the same prior-year period amount of $377.9 million.  Gross profit as a percentage of total net sales of 24.9% in the three months ended September 30, 2007, was higher than the 23.7% experienced during the comparable 2006 period.  Gross profit was favorably impacted in the 2007 period largely as a result of lower incremental
costs associated with the closure of the Companys Heartland repackaging facility as further described below, 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 lower number of beds served and the reduction in reimbursement under the United Part D
contract, as well as an increase in direct payroll costs.

Omnicares
consolidated selling, general and administrative (operating) expenses
for the three months ended September 30, 2007 of $260.0 million were higher than
the comparable prior-year amount of $236.1 million by $23.9 million. Operating
expenses as a percentage of net sales amounted to 16.9% in the third quarter
of 2007, representing an increase from the 14.8% experienced in the comparable
prior-year period. Operating expenses for the quarter ended September 30, 2007
were unfavorably impacted primarily by an $11.0 million increase in the
provision for doubtful accounts, a $3.3 million increase in periodic pension
costs, and increased operating legal 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
implementation of the Omnicare Full Potential Plan, as further discussed
in the Restructuring and Other Related Charges section of this MD&A.

40

---



Investment
income for the three months ended September 30, 2007 of $2.4 million was lower
than the $3.4 million earned in the comparable prior-year period, primarily due
to lower average invested balances versus the prior year.

Interest
expense for the three months ended September 30, 2007 of $40.9 million is lower
than the $43.4 million in the comparable prior-year period, primarily due to
lower debt outstanding resulting from payments aggregating $250 million on the
Companys senior term A loan facility, maturing on July 28, 2010 (the Term
Loans) in the latter half of 2006 and the first nine months of 2007, partially
offset by increased interest rates for variable rate loans.

The effective
income tax rate was 38.5% for the three months ended September 30, 2007, as
compared to the third quarter of 2006 rate of 38.2%. 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.

Special Items:

The three
months ended September 30, 2007 included the following charges, which primarily
impacted the Pharmacy Services segment, and that management considers to be special
items as they are not related to Omnicares ordinary course
of business:

(i) Operating
income included restructuring and other related charges of approximately $5.0
million pretax ($3.0 million aftertax), relating 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.
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 September
30, 2007 included special charges of $3.6 million pretax (approximately $3.3
million and $0.3 million was recorded in the cost of sales and operating
expense sections of the Consolidated Statements of Income, respectively) ($2.2
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 September 30, 2007, no receivables for insurance
recoveries have been recorded by the Company.

(iii)
Operating income included a special litigation charge of $9.2 million pretax
($5.6 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

41

---



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 September 30, 2006 included the following charges, which primarily
impacted the Pharmacy Services segment, and that management considers to be
    special items as they are not related to Omnicares ordinary course
    of business:

(i) Operating income included a special
litigation charge of $9.9 million pretax ($6.1 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 and the investigation by the federal government and certain states
relating to drug substitutions. 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) Operating income included
restructuring and other related charges of approximately $5.1 million pretax
($3.2 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 note of the Notes to Consolidated Financial Statements and
Restructuring and Other Related Charges section of this MD&A.

(iii) Operating income included a special
charge of $25.0 million pretax, including $22.8 million and $2.2 million
recorded in the cost of sales and operating expense sections of the
Consolidated Statements of Income, respectively, ($15.4 million aftertax)
related to the quality control, product recall and fire issues at Heartland.
See further discussion at the Commitments and Contingencies note to the Notes
to Consolidated Financial Statements.

Pharmacy Services Segment

|                 |  |                                   |           |      |   |           | 
|---------------- |  | --------------------------------- | --------- | ---- | - | --------- | 
|                 |  | Three months ended
  Sepember 30, |          
|                 |  |                                   |          
|                 |  | 2007                              |           | 2006 |  
|                 |  |                                   |           |      |  
|Net sales        |  | $                                 | 1,488,518 |      | $ | 1,553,515 | 
|                 |  |                                   |           |      |   |           | 
|Operating income |  | $                                 | 129,655   |      | $ | 140,894   | 
|                 |  |                                   |           |      |   |           | 

Three Months Ended September 30, 2007 vs. 2006

Omnicares
Pharmacy Services segment recorded sales of $1,488.5 million for the three
months ended September 30, 2007, down from the 2006 amount of $1,553.5 million
by $65.0 million, or 4.2%. At September 30, 2007, Omnicare served long-term
care facilities and other chronic care

42

---



settings
comprising approximately 1,396,000 beds as compared with approximately
1,409,000 beds served at September 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 and the impact of a bed mix
shift toward assisted living, which typically has lower penetration rates than
    skilled nursing facilities. 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 $129.7 million in the third quarter
of 2007, an $11.2 million decrease as compared with the $140.9 million earned
    in the comparable period of 2006. As a percentage of the segments sales,
operating income was 8.7% for the third quarter of 2007, compared with 9.1% 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 improvements, as
well as the Companys continued integration of prior-period acquisitions
and productivity enhancements, including the Omnicare Full Potential Plan,
as further discussed in the Restructuring and Other Related Charges section
of this MD&A. More than offsetting these factors was the unfavorable impact
of a lower number of beds served, the aforementioned reduction in the
reimbursement rates under the United Part D contract, the previously discussed
increase in the provision for doubtful accounts and a modest increase in total
labor costs from the prior-year quarter which were
not fully leveraged due to the decrease in sales from the prior-year quarter.

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 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.

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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 receive a 3.3 percent market basket increase, which increases
Medicare payments to SNFs by approximately $690 million in fiscal year 2008.
The final rule also includes several policy and payment provisions, including
rebasing the market basket, which currently reflects data from fiscal 1997, to
a base year of fiscal year 2004; revisions to the calculation of 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. In
addition, on August 1, 2007, the House of Representatives approved H.R. 3162,
the Childrens Health and Medicare Protection Act of 2007, that included a
number of Medicare policy changes, including a freeze in FY 2008 SNF PPS rates
at FY 2007 levels. Note that while the version of the bill that ultimately
passed Congress did not include these Medicare provisions, Congress may yet
consider these and other proposals in the future that would further restrict
Medicare funding for SNFs.

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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.

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

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(net of
allowances for contractual adjustments, and prior to allowance for doubtful
accounts) for copays and rejected claims. As of September 30, 2007, copays
outstanding from Part D Plans were approximately $36 million, of which approximately
$20 million relates to 2006. Additionally, as of September 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 Company has agreed with various Plan sponsors and their agents with
respect to the format, terms and conditions for providing such information and
the Company intends to continue to work with other sponsors with respect to
providing such information.

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.

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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. Only suppliers that are
winning bidders will be eligible to provide competitively-bid items to Medicare
beneficiaries in the selected areas. 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. 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,

47

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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. Additionally, 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.

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. 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. 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

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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
May 29, 2007, CMS published a final rule to implement this provision, but
Congress blocked the rule for one year in an emergency FY 2007 spending bill,
H.R. 2206.

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, and granted amended preliminary approval of the
agreement on August 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 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

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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
 September 30, |       
|                  |  |                                   |       
|                  |  | 2007                              |        | 2006 |  
|                  |  |                                   |        |      |  
|                 
|Revenues          |  | $                                 | 48,471 |      | $ | 40,351 | 
|                  |  |                                   |        |      |   |        | 
|Operating
 income |  | $                                 | 3,682  |      | $ | 1,371  | 
|                  |  |                                   |        |      |   |        | 

Three Months Ended September 30, 2007 vs. 2006

Omnicares CRO
Services segment recorded revenues of $48.5 million for the three months ended
September 30, 2007, which increased by $8.1 million, or 20.0% from the $40.4
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 $7.9 million and $5.5 million of reimbursable
out-of-pockets in its CRO Services segment reported revenue and direct cost
amounts for the three months ended September 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 half of 2007, exceeding project terminations and cancellations.

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Operating
income in the CRO Services segment was $3.7 million in the third quarter of
2007 compared with $1.4 million in 2006, an increase of $2.3 million. As a
percentage of the segments revenue, operating income was 7.6% in the third
quarter of 2007 compared with 3.4% in the same period of 2006. This increase is
primarily attributable to the favorable impact of the increase in revenues
discussed above. Backlog at September 30, 2007 was $311.5 million, representing
an increase of $9.6 million from the December 31, 2006 backlog of $301.9
million, and an increase of $23.0 million from the September 30, 2006 backlog
of $288.5 million.

|                                              
|----------------------------------------------
|Nine Months
 Ended September 30, 2007 vs. 2006
|                                              

Total net
sales for the nine months ended September 30, 2007 decreased to $4,663.2
million from $4,893.6 million in the comparable prior-year period. Net income
for the nine months ended September 30, 2007 was $134.8 million versus $113.8
million earned in the comparable 2006 period. Diluted earnings per share for
the nine months ended September 30, 2007 were $1.11 versus $0.93 in the same
prior-year period. EBITDA totaled $423.6 million for the nine months ended
September 30, 2007 as compared with $426.5 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 nine months of 2007 by approximately $96 million (approximately
$59 million aftertax). The unilateral reduction in reimbursement rates began in
April 2006; the impact on the first nine months of 2006 was approximately $46
million (approximately $29 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 nine 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 deconsolidation of these operations excluded
net sales of approximately $84 million and $22 million for the first nine
months of 2007 and 2006, respectively, but had no impact on earnings.

Net sales for the nine months were unfavorably impacted by a lower number of beds served, the increased availability and utilization of generic drugs, the deconsolidation of the pharmacy joint-venture operations, the impact of the reduction in reimbursement under the United Part D contract and a shift in mix towards assisted living, 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 $1,159.2 million decreased $35.5 million for the
nine months ended September 30, 2007 from the same prior-year period amount of
$1,194.7 million. Gross profit as a percentage of total net sales of 24.9% in
the nine months ended September 30, 2007 increased from the 24.4% experienced
during the comparable 2006 period.

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Gross profit was favorably impacted in the 2007 period largely as a result of the increased availability and utilization of higher margin generic drugs, lower incremental costs associated with the closure of the Companys Heartland repackaging facility as further described below, the continued integration of prior-period acquisitions, drug purchasing improvements, and year-over-year growth in hospice pharmacy and specialty pharmacy services.  Offsetting these factors was the unfavorable 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.

Omnicares
consolidated operating expenses for the nine months ended September 30, 2007 of
$772.5 million were higher than the comparable prior-year amount of $723.2
million by $49.3 million. Operating expenses as a percentage of net sales
amounted to 16.6% in the first nine months of 2007, representing an increase
from the 14.8% experienced in the comparable prior-year period. Operating
expenses for the nine months ended September 30, 2007 were unfavorably impacted
primarily by a $34.7 million increase in the provision for doubtful accounts, a
$10.0 million increase in periodic pension costs, and increased legal and
professional 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 nine months ended September 30, 2007 of $6.4 million was lower
than the $8.3 million earned in the comparable prior-year period, primarily due
to lower average invested balances versus the prior year.

Interest
expense for the nine months ended September 30, 2007 of $124.7 million is lower
than the $128.8 million in the comparable prior-year period, primarily due to
lower debt outstanding resulting from payments aggregating $250 million on the
Term Loans in the latter half of 2006 and the first nine months of 2007,
partially offset by increased interest rates for variable rate loans.

The effective
income tax rate was 38.8% for the nine months ended September 30, 2007, as
compared to the same prior-year period rate of 47.2%. 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 nine
months ended September 30, 2007 included the following charges/(credits), which
primarily impacted the Pharmacy Services segment, and that management considers
    to be special items as they are not related to Omnicares ordinary course
    of business:

(i) Operating
income included restructuring and other related charges of approximately $20.4
million pretax ($12.5 million aftertax), $22.0 million of which related to the
implementation of the Omnicare Full Potential Plan, a major initiative
designed to re-engineer

52

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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 nine months ended September 30, 2007 included special charges of $14.4
million pretax (approximately $11.6 million and $2.7 million was recorded in
the cost of sales and operating expense sections of the Consolidated Statements
of Income, respectively) ($8.8 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 September 30, 2007,
no receivables for insurance recoveries have been recorded by the Company.

(iii) Operating income included a special litigation charge of $25.1 million pretax
($15.4 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 nine
months ended September 30, 2006 included the following charges, which primarily
impacted the Pharmacy Services segment, and that management considers to be special
items as they are not related to Omnicares ordinary course of business:

(i) Operating income included a special litigation charge of $118.8 million pretax ($96.3 million aftertax) for litigation-related professional expenses and settlement reserves relating to the following matters.  Specifically, a $53.8 million pretax ($42.8 million aftertax) charge was recorded 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 Companyls estimate of the settlement amounts and associated costs under SFAS 5.  Also, 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 nine months ended September 30, 2006.  The 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 Generall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.  Additionally, operating income included a special litigation charge of $11.0 million pretax ($6.8 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 and the Companyls lawsuit against United.  See further disclosures 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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(ii) Operating income included
restructuring and other related charges of approximately $24.7 million pretax
($15.5 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 further discussion at the Restructuring and Other
Related Charges section of this MD&A.

(iii) Operating income included special
charges of $25.0 million pretax, including $22.8 million and $2.2 million
recorded in the cost of sales and operating expense sections of the
Consolidated Statements of Income, respectively, ($15.4 million aftertax)
related to the quality control, product recall and fire issues at Heartland.
See further discussion at the Commitments and Contingencies note
of the Notes to Consolidated Financial Statements.

(iv) 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.

Pharmacy Services Segment

|                  |  |                                  |           |      |   |           | 
|----------------- |  | -------------------------------- | --------- | ---- | - | --------- | 
|                  |  | Nine months ended
 September 30, |          
|                  |  |                                  |          
|                  |  | 2007                             |           | 2006 |  
|                  |  |                                  |           |      |  
|                 
|Net sales         |  | $                                | 4,517,079 |      | $ | 4,768,671 | 
|                  |  |                                  |           |      |   |           | 
|Operating
 income |  | $                                | 409,519   |      | $ | 398,625   | 
|                  |  |                                  |           |      |   |           | 

Nine Months Ended September 30, 2007 vs. 2006

Omnicares
Pharmacy Services segment recorded sales of $4,517.1 million for the nine
months ended September 30, 2007, down from the 2006 amount of $4,768.7 million
by $251.6 million, or 5.3%. At September 30, 2007, Omnicare served long-term
care facilities and other chronic

54

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care settings
comprising approximately 1,396,000 beds as compared with approximately
1,409,000 beds served at September 30, 2006. Pharmacy Services sales were
unfavorably impacted by a lower number of beds served, the increased
availability and utilization of generic drugs, the aforementioned deconsolidation
of the pharmacy joint-venture operations, the effects of the reduction in
reimbursement under the United Part D contract and the impact of a bed mix
shift toward assisted living, which typically has lower penetration rates than
    skilled nursing facilities. 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 $409.5 million in the first nine
months of 2007, an $10.9 million increase as compared with the $398.6 million
earned in the comparable period of 2006. As a percentage of the segments
sales, operating income was 9.1% for the first nine months of 2007, compared
with 8.4% 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 were 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
previously discussed increase in the provision for doubtful accounts.

CRO Services Segment

|                  |  |                                  |         |      |   |         | 
|----------------- |  | -------------------------------- | ------- | ---- | - | ------- | 
|                  |  | Nine months ended
 September 30, |        
|                  |  |                                  |        
|                  |  | 2007                             |         | 2006 |  
|                  |  |                                  |         |      |  
|                 
|Revenues          |  | $                                | 146,132 |      | $ | 124,903 | 
|                  |  |                                  |         |      |   |         | 
|Operating
 income |  | $                                | 7,316   |      | $ | 3,835   | 
|                  |  |                                  |         |      |   |         | 

Nine Months Ended September 30, 2007 vs. 2006

Omnicares CRO
Services segment recorded revenues of $146.1 million for the nine months ended
September 30, 2007, which increased by $21.2 million, or 17.0% from the $124.9
million recorded in the same prior-year period. In accordance with EITF Issue
No. 01-14, the Company included $23.3 million and $17.8 million of reimbursable
out-of-pockets in its CRO Services segment reported revenue and direct cost
amounts for the nine months ended September 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 half of 2007, exceeding project terminations and cancellations.

55

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Operating
income in the CRO Services segment was $7.3 million in the first nine months of
2007 compared with $3.8 million in 2006, an increase of $3.5 million. As a
percentage of the segments revenue, operating income was 5.0% in the first
nine months of 2007 compared with 3.1% 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 $0.9 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, including the realignment
and right-sizing of functions, 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 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
    and professional fees, as well as other related costs. The Company recorded
    restructuring and other related charges for the Omnicare Full Potential Plan
    of approximately $5 million and $22 million pretax (approximately $3 million
    and $13 million aftertax) during the three and nine months ended September
    30, 2007, respectively. Further, Omnicare recorded approximately $17 million
    pretax (approximately $11 million aftertax) during the year ended December
    31, 2006 relating to the Omnicare Full Potential Plan (approximately
    $4 million and $13 million pretax in the three and nine months ended September
    30, 2006, respectively, or $3 million and $8 million aftertax). The remainder
    of the overall restructuring and other related charges will be recognized
    and disclosed over the remainder of 2007 and beyond, 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 1,140
of these positions have been eliminated as of September 30, 2007.

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

56

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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
    $1 million and $12 million pretax (approximately $0.6 million and $8 million
    aftertax) in the three and nine months ended September 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 were 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 in the second quarter of 2007 to reduce the employee
    severance and employee agreement buy-out liabilities by approximately $1.2
    million and $0.4 million pretax, respectively.

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

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

Cash and cash
equivalents at September 30, 2007 were $270.3 million compared with $141.8
million at December 31, 2006 (including restricted cash amounts of $13.3
million and $3.8 million, respectively).

The Company
generated positive net cash flows from operating activities of $431.2 million
during the nine months ended September 30, 2007, compared with net cash flows
from operating activities of $212.7 million during the nine months ended
September 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 on operating cash flows. Cash flow for the first nine
months of 2006 was favorably impacted by the first quarter return of a deposit
    of approximately $38.3 million from one of the Companys drug wholesalers.
Cash flow from operations for the quarter ended September 30, 2006 also included
the return of a $44.0 million deposit from another of the Companys drug
wholesalers in connection with a change in terms to more frequent, weekly
payments. The impact of these more frequent payments on cash flow in the third
quarter of 2006 slightly more than offset the $44.0 million return of the
deposit. 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
by investing activities was $149.7 million and $105.1 million for the nine
months ended September 30, 2007 and 2006, respectively. Acquisitions of
businesses, primarily funded by operating cash flows, required outlays of
$142.8 million (including amounts payable pursuant to acquisition agreements
relating to pre-2007 acquisitions) in 2007, of which $106.0 million had

57

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been paid in
cash and $36.8 million was accrued at period end. Acquisitions of businesses
during the first nine months of 2006 required $71.4 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 $164.2 million for the nine months ended September
30, 2007 as compared to $45.1 million for the comparable prior-year period.
During the first nine months of 2007, the Company paid down $150 million on the
Companys senior term A loan facility, maturing on July 28, 2010. Borrowings on
the revolving credit facility totaled approximately $78 million during the
first nine 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 September
30, 2007, there were no outstanding borrowings under the $800 million revolving
credit facility, and $450 million in borrowings were outstanding under the
senior term A loan facility due 2010. As of September 30, 2007, the Company had
approximately $22.4 million outstanding relating to standby letters of credit,
substantially all of which are subject to automatic annual renewals.

On August 9,
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, which is consistent with the annual dividends per share actually
paid in 2006. Aggregate dividends of $8.2 million were paid during each of the
nine month periods ended September 30, 2007 and 2006.

There were no
known material commitments and contingencies outstanding at September 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 nine months ended September 30, 2007 at the respective 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).

58

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Disclosures About Aggregate Contractual Obligations and Off-Balance
Sheet Arrangements

Aggregate Contractual Obligations:

The following
summarizes the Companys aggregate contractual obligations as of September 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)                                               |  | $     | 2,822,706 |                    | $ |          |  | $         | 500,206   |               | $ |        |  | $ | 2,322,500 | 
|Capital lease obligations(a)                                      |  |       | 9,453     |                    |   | 3,619     |  |           | 2,339     |               |   | 2,108   |  |   | 1,387     | 
|Operating lease obligations                                       |  |       | 161,993   |                    |   | 43,362    |  |           | 62,013    |               |   | 27,665  |  |   | 28,953    | 
|Purchase obligations(b)                                           |  |       | 94,368    |                    |   | 72,395    |  |           | 11,220    |               |   | 10,753  |  |   |          | 
|Other current obligations(c)                                      |  |       | 356,632   |                    |   | 356,632   |  |           |          |               |   |        |  |   |          | 
|Other long-term obligations(d)                                    |  |       | 371,026   |                    |   |          |  |           | 152,296   |               |   | 22,613  |  |   | 196,117   | 
|                                                                  |  |       |           |                    |   |           |  |           |           |               |   |         |  |   |           | 
|Subtotal                                                          |  |       | 3,816,178 |                    |   | 476,008   |  |           | 728,074   |               |   | 63,139  |  |   | 2,548,957 | 
|Future interest relating to debt and capital lease
obligations(e) |  |       | 1,819,074 |                    |   | 144,870   |  |           | 282,007   |               |   | 224,706 |  |   | 1,167,491 | 
|                                                                  |  |       |           |                    |   |           |  |           |           |               |   |         |  |   |           | 
|Total contractual cash obligations                                |  | $     | 5,635,252 |                    | $ | 620,878   |  | $         | 1,010,081 |               | $ | 287,845 |  | $ | 3,716,448 | 
|                                                                  |  |       |           |                    |   |           |  |           |           |               |   |         |  |   |           | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(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
September 30, 2007, the Company had approximately $22.4 million outstanding
relating to standby letters of credit, substantially all of which are subject
to automatic annual renewals.

59

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Off-Balance Sheet Arrangements:

As of September 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 September 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.

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-

60

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pockets) for
the related quarter. The resultant percentage is multiplied by 92 days to
derive the DSO amount. Omnicares DSO approximated 89 days at September 30,
2007, which was higher than the December 31, 2006 DSO of approximately 86 days
despite net accounts receivable at September 30, 2007 being $57.9 million lower
than at December 31, 2006, partially as a result of the aforementioned
averaging method used in the calculation. 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 September
30, 2007, copays outstanding from Part D Plans were approximately $36 million,
of which approximately $20 million relates to 2006. Additionally, as of
September 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, as well as the increase in the 181 days and over past due accounts
receivable balance, is the aging in accounts receivable relating to several of
the Companys larger nursing home chain customers. On July 11, 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 $83 million (excluding interest) is owed
to the Company by this group of customers as of September 30, 2007, of which
approximately $74 million is past due based on applicable payment terms. The
$83 million represents approximately five days of the overall DSO at September
30, 2007. In comparison, at June 30, 2007, approximately $85 million (excluding
interest) was owed to Omnicare by this group of customers, of which
approximately $72 million was past due. Until all administrative and payment
issues relating to the Part D Drug Benefit as well as the aforementioned legal
action against a group of Omnicares customers are fully resolved, there can be
no assurance that the impact of these matters 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 allowance
for doubtful accounts as of September 30, 2007 was $219.3 million, compared
with $191.0 million at December 31, 2006. These allowances for doubtful
accounts represented 13.0% and 11.2% of gross receivables (net of contractual
allowances) as of September 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, 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 September 30, 2007 would result in an increase to the allowance
for doubtful accounts, as well as bad debt expense, of approximately $16.8
million pretax.

The following
table is an aging of the Companys September 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):

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|                                                                            |  |                                   |           |                              |   |         |  |   |           | 
|--------------------------------------------------------------------------- |  | --------------------------------- | --------- | ---------------------------- | - | ------- |  | - | --------- | 
|                                                                            |  | September 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              |  | $                                 | 409,125   |                              | $ | 152,214 |  | $ | 561,339   | 
|Facility payors                                                             |  |                                   | 540,728   |                              |   | 307,234 |  |   | 847,962   | 
|Private Pay payors                                                          |  |                                   | 131,607   |                              |   | 117,599 |  |   | 249,206   | 
|CRO                                                                         |  |                                   | 25,171    |                              |   |        |  |   | 25,171    | 
|                                                                            |  |                                   |           |                              |   |         |  |   |           | 
|Total gross accounts receivable (net of
 contractual allowance adjustments) |  | $                                 | 1,106,631 |                              | $ | 577,047 |  | $ | 1,683,678 | 
|                                                                            |  |                                   |           |                              |   |         |  |   |           | 
|                                                                            |  |                                   |           |                              |   |         |  |   |           | 
|                                                                            |  | 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, 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.

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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
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

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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 September 30, 2007 include $450.0 million outstanding under
the variable-rate Senior term A loan, due 2010, at an interest rate of 6.38%
at September 30, 2007 (a 100 basis-point change in the interest rate would
increase or decrease pretax interest expense by approximately $4.5 million per
year); $50.2 million borrowed on a variable-rate term loan, due 2010, at an
interest rate of 6.76% at September 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, 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 7.42% at
September 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

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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
$16.3 million at September 30, 2007 is recorded as a noncurrent liability and a
reduction to the book carrying value of the related 6.125% Senior Notes. At
September 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

|                                                           |  |                    |         |                   |   |            |  |              |         |  |   |         | 
|---------------------------------------------------------- |  | ------------------ | ------- | ----------------- | - | ---------- |  | ------------ | ------- |  | - | ------- | 
|                                                           |  | September 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 |                   | $ | 229,375    |  | $            | 250,000 |  | $ | 241,300 | 
|6.75% senior subordinated
 notes, due 2013                 |  |                    | 225,000 |                   |   | 212,625    |  |              | 225,000 |  |   | 221,900 | 
|6.875% senior subordinated
 notes, due 2015                |  |                    | 525,000 |                   |   | 508,898    |  |              | 525,000 |  |   | 520,400 | 
|4.00% junior subordinated
 convertibledebentures, due 2033 |  |                    | 345,000 |                   |   | 305,327    |  |              | 345,000 |  |   | 372,200 | 
|3.25% convertible senior
 debentures, due 2035             |  |                    | 977,500 |                   |   | 783,222    |  |              | 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.

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

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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 quarter ended September 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 and on September 28, 2007 their motion was denied. 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 and the parties have engaged in extensive documentary discovery. 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

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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 Company
also reached an agreement in principle with the State of Michigan to resolve
claims relating to billing by Specialized Pharmacy Services for drugs provided
to hospice patients for a settlement amount of approximately $3.5 million. On
October 26, 2007 the Company entered into settlement agreements with the federal
government and the State of Michigan to resolve these hospice claims. Under the
terms of the October 26, 2007 settlement agreements, the Company will pay the
federal government and the State of Michigan an aggregate amount of approximately
$3.5 million. In connection with the settlements, the November 9, 2006 Corporate
Integrity Agreement with the Department of Health and Human Services Office of
the Inspector General was also amended to cover certain hospice billing matters.
The settlement agreements do not include any finding of wrongdoing or any admission
of liability. 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 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

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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. On October 12, 2007, the court issued an opinion and
order dismissing the case and denying plaintiffs motion to add an additional
named plaintiff.

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, oral argument was held on August 21, 2007,
and the court reserved decision.

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

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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 1 A - 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 receive a 3.3 percent market basket increase, which increases
Medicare payments to SNFs by approximately $690 million in fiscal year 2008.
The final rule also includes several policy and payment provisions, including
rebasing the market basket, which currently reflects data from fiscal 1997, to
a base year of fiscal year 2004; revisions to the calculation of the SNF market
basket (including revising the pharmacy component);

69

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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. In addition, on August 1, 2007, the
House of Representatives approved H.R. 3162, the Childrens Health and Medicare
Protection Act of 2007, that included a number of Medicare policy changes,
including a freeze in FY 2008 SNF PPS rates at FY 2007 levels. Note that while
the version of the bill that ultimately passed Congress did not include these
Medicare provisions, 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,

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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.

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 September 30, 2007, copays outstanding from Part
D Plans were approximately $36 million, of which approximately $20 million
relates to 2006. Additionally, as of September 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.

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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 Company has agreed with various Plan
sponsors and their agents with respect to the format, terms and conditions for
providing such information and the Company intends to continue to work with
other sponsors with respect to providing such information.

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. Only suppliers that are
winning bidders will be eligible to provide competitively-bid items to Medicare
beneficiaries in the selected areas. 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.

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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. 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. Additionally, 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

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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 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. 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. 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 May 29, 2007,
CMS published a final rule to implement this provision, but Congress blocked
the rule for one year in an emergency FY 2007 spending bill, H.R. 2206.

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

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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.

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 September
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 |  
|                        |  |                                        |  |                                |       |                                                                                         |   |                                                                                                                    |  
|July 1 - 31,
 2007      |  | 0                                      |  | $                              |      |                                                                                         |  |                                                                                                                    |  | 
|August 1 -
 31, 2007    |  | 1                                      |  |                                | 34.31 |                                                                                         |  |                                                                                                                    |  | 
|September 1
 - 30, 2007 |  | 1                                      |  |                                | 31.62 |                                                                                         |  |                                                                                                                    |  | 
|                        |  |                                        |  |                                |       |                                                                                         |   |                                                                                                                    |   | 
|Total                   |  | 2                                      |  | $                              | 33.57 |                                                                                         |  |                                                                                                                    |  | 
|                        |  |                                        |  |                                |       |                                                                                         |   |                                                                                                                    |   | 

|    |                                                                                                                                                                                                                                                                                                                        
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | During the
 third quarter of 2007, the Company purchased 2 shares of Omnicare common
 stock in connection with its employee benefit plans, including any purchases
 associated with the vesting of restricted stock awards. These purchases were
 not made pursuant to a publicly announced repurchase plan or program.

ITEM 6 - EXHIBITS

See Index of
Exhibits.

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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:
  October 31, 2007 | By: | /s/ David W. Froesel, Jr.  
|                         |     |                            
|                         |     | David W.
  Froesel, Jr.    
|                         |     | Senior Vice
  President and
|                         |     | Chief
  Financial Officer  
|                         |     | (Principal
  Financial and 
|                         |     | Accounting
  Officer)      

76

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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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