|                                  
|----------------------------------
|UNITED STATES                     
|SECURITIES AND EXCHANGE COMMISSION
|Washington,
 D.C. 20549           
|                                  
|FORM 10-Q                         

(Mark One)


|                                                                                          
|------------------------------------------------------------------------------------------
|xQUARTERLY REPORT PURSUANT TO SECTION
13 OR 15(d) OF
 THE SECURITIES EXCHANGE ACT OF 1934 
|For
 the quarterly period ended March 31, 2009                                            
|or                                                                                        
|oTRANSITION REPORT PURSUANT TO SECTION
13 OR 15(d) OF
 THE SECURITIES EXCHANGE ACT OF 1934
|For
 the transition period from __________ to __________.                                 
|                                                                                          
|Commission
 File Number 1-8269                                                            

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

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

|                                                                                   
|-----------------------------------------------------------------------------------
|100 East RiverCenter Boulevard, Covington, Kentucky 41011                          
|                                                                                   
|(Address
 of principal executive offices) (Zip Code)                               
|                                                                                   
|(859) 392-3300                                                                     
|                                                                                   
|(Registrants
 telephone number, including area code)                              
|                                                                                   
|                                                                                   
|(Former
 name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant:

| |    |                                                                                                                                                                                                                                   
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1) | has filed all reports
 required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
 1934 during the preceding 12 months (or for such shorter period that the
 registrant was required to file such reports), and
| |    |                                                                                                                                                                                                                                   
| | 2) | has been subject to such
 filing requirements for the past 90 days.                                                                                                                                                               

|              | 
|------------- | 
|Yes
 x   No o | 

Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate
Web site, if any, every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post
such files).


|              | 
|------------- | 
|Yes
 o  No
 o | 

Indicate by check mark
whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated filer and smaller reporting company
in Rule 12b-2 of the Exchange Act.


|                        |   |                                                |                           |  
|----------------------- | - | ---------------------------------------------- | ------------------------- | -
|Large accelerated filer | x |                                                | Accelerated filer         | o
|Non-accelerated filer   | o | (Do not check if a smaller
 reporting company) | Smaller reporting company | 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 |  | 118,438,584      |  | March
 31, 2009 | 

---



OMNICARE, INC. AND

SUBSIDIARY COMPANIES

FORM 10-Q QUARTERLY REPORT MARCH 31, 2009

INDEX

|         |  |                                                                                        |  |      | 
|-------- |  | -------------------------------------------------------------------------------------- |  | ---- | 
|         |  |                                                                                        |  | PAGE
|         |  |                                                                                        |  |     
|         |  |                                                                                        |  |      | 
|         |  | PART I - FINANCIAL
 INFORMATION:                                                       |  |      | 
|         |  |                                                                                        |  |      | 
|ITEM 1.  |  | FINANCIAL STATEMENTS (UNAUDITED)                                                       |  |      | 
|         |  |                                                                                        |  |      | 
|         |  | Consolidated Statements of Income

 Three months ended  March 31, 2009 and 2008      |  | 3    | 
|         |  |                                                                                        |  |      | 
|         |  | Consolidated Balance Sheets 
 March 31, 2009 and December 31, 2008                    |  | 4    | 
|         |  |                                                                                        |  |      | 
|         |  | Consolidated Statements of Cash Flows

 Three months ended  March 31, 2009 and 2008  |  | 5    | 
|         |  |                                                                                        |  |      | 
|         |  | Notes to Consolidated Financial Statements                                             |  | 6    | 
|         |  |                                                                                        |  |      | 
|ITEM 2.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 RESULTS OF OPERATIONS |  | 39   | 
|         |  |                                                                                        |  |      | 
|ITEM 3.  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                             |  | 63   | 
|         |  |                                                                                        |  |      | 
|ITEM 4.  |  | CONTROLS AND PROCEDURES                                                                |  | 64   | 
|         |  |                                                                                        |  |      | 
|         |  | PART II - OTHER
 INFORMATION:                                                          |  |      | 
|         |  |                                                                                        |  |      | 
|ITEM 1.  |  | LEGAL PROCEEDINGS                                                                      |  | 65   | 
|         |  |                                                                                        |  |      | 
|ITEM 1A. |  | RISK FACTORS                                                                           |  | 67   | 
|         |  |                                                                                        |  |      | 
|ITEM 2.  |  | UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS                             |  | 74   | 
|         |  |                                                                                        |  |      | 
|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
 March 31, |          
|                                                         |  |                                |          
|                                                         |  | 2009                           |           | 2008
 as adjusted
 (Note 2) |  
|                                                         |  |                                |           |                             |  
|Net sales                                                |  | $                              | 1,563,560 |                             | $ | 1,558,979 |  
|                                                        
|Cost of sales                                            |  |                                | 1,165,036 |                             |   | 1,177,763 |  
|Heartland matters (Note 11)                              |  |                                | 1,102     |                             |   | 1,574     |  
|                                                         |  |                                |           |                             |   |           |  
|Gross profit                                             |  |                                | 397,422   |                             |   | 379,642   |  
|                                                         |  |                                |           |                             |   |           |  
|Selling, general and administrative
expenses             |  |                                | 225,174   |                             |   | 236,597   |  
|Provision for doubtful accounts                          |  |                                | 26,626    |                             |   | 30,392    |  
|Restructuring and other related charges (Note
10)        |  |                                | 6,917     |                             |   | 6,448     |  
|Litigation and other related professional fees
(Note 11) |  |                                | 41,665    |                             |   | 21,642    |  
|Heartland matters (Note 11)                              |  |                                | 891       |                             |   | 319       |  
|Acquisition and other related costs (Note
3)             |  |                                | 839       |                             |   |          |  
|                                                         |  |                                |           |                             |   |           |  
|Operating income                                         |  |                                | 95,310    |                             |   | 84,244    |  
|                                                         |  |                                |           |                             |   |           |  
|Investment income                                        |  |                                | 2,407     |                             |   | 2,611     |  
|Interest expense                                         |  |                                | (31,292   | )                           |   | (36,822   | )
|Amortization of discount on convertible notes
(Note 5)   |  |                                | (6,797    | )                           |   | (6,300    | )
|                                                         |  |                                |           |                             |   |           |  
|Income before income taxes                               |  |                                | 59,628    |                             |   | 43,733    |  
|                                                         |  |                                |           |                             |   |           |  
|Income tax provision                                     |  |                                | 28,734    |                             |   | 17,583    |  
|                                                         |  |                                |           |                             |   |           |  
|                                                         |  |                                |           |                             |   |           |  
|Net income                                               |  | $                              | 30,894    |                             | $ | 26,150    |  
|                                                         |  |                                |           |                             |   |           |  
|                                                         |  |                                |           |                             |   |           |  
|Earnings per share:                                      |  |                                |           |                             |   |           |  
|Basic                                                    |  | $                              | 0.27      |                             | $ | 0.22      |  
|                                                         |  |                                |           |                             |   |           |  
|Diluted                                                  |  | $                              | 0.26      |                             | $ | 0.22      |  
|                                                         |  |                                |           |                             |   |           |  
|Dividends per common share                               |  | $                              | 0.0225    |                             | $ | 0.0225    |  
|                                                         |  |                                |           |                             |   |           |  
|Weighted average number of common shares
outstanding:    |  |                                |           |                             |   |           |  
|Basic                                                    |  |                                | 116,448   |                             |   | 119,848   |  
|                                                         |  |                                |           |                             |   |           |  
|Diluted                                                  |  |                                | 117,341   |                             |   | 120,538   |  
|                                                         |  |                                |           |                             |   |           |  
|Comprehensive income                                     |  | $                              | 30,675    |                             | $ | 35,277    |  
|                                                         |  |                                |           |                             |   |           |  

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

3

---



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

|                                                                                                                       |  |                             |           |                                           |   |           |  
|---------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | --------- | ----------------------------------------- | - | --------- | -
|                                                                                                                       |  | (UNAUDITED)
 March 31, 2009 |           | December 31,
 2008
 as adjusted
 (Note 2) |  
|                                                                                                                       |  |                             |           |                                           |  
|ASSETS                                                                                                                 |  |                             |           |                                           |   |           |  
|Current assets:                                                                                                        |  |                             |           |                                           |   |           |  
|Cash and cash equivalents                                                                                              |  | $                           | 215,089   |                                           | $ | 215,090   |  
|Restricted cash                                                                                                        |  |                             | 2,872     |                                           |   | 1,891     |  
|Accounts receivable, less allowances of $337,729
(2008-$332,969)                                                       |  |                             | 1,364,836 |                                           |   | 1,367,155 |  
|Unbilled receivables, CRO                                                                                              |  |                             | 23,931    |                                           |   | 22,329    |  
|Inventories                                                                                                            |  |                             | 410,043   |                                           |   | 452,748   |  
|Deferred income tax benefits                                                                                           |  |                             | 143,074   |                                           |   | 134,249   |  
|Other current assets                                                                                                   |  |                             | 189,357   |                                           |   | 178,231   |  
|                                                                                                                       |  |                             |           |                                           |   |           |  
|Total current assets                                                                                                   |  |                             | 2,349,202 |                                           |   | 2,371,693 |  
|                                                                                                                       |  |                             |           |                                           |   |           |  
|Properties and equipment, at cost less
accumulated depreciation of
 $350,650 (2008-$346,260)                           |  |                             | 222,976   |                                           |   | 219,652   |  
|Goodwill                                                                                                               |  |                             | 4,272,741 |                                           |   | 4,252,906 |  
|Identifiable intangible assets, less accumulated
amortization of
 $162,155 (2008-$152,405)                             |  |                             | 329,352   |                                           |   | 333,769   |  
|Rabbi trust assets for settlement of pension
obligations                                                               |  |                             | 134,732   |                                           |   | 134,587   |  
|Other noncurrent assets                                                                                                |  |                             | 132,570   |                                           |   | 137,638   |  
|                                                                                                                       |  |                             |           |                                           |   |           |  
|Total noncurrent assets                                                                                                |  |                             | 5,092,371 |                                           |   | 5,078,552 |  
|                                                                                                                       |  |                             |           |                                           |   |           |  
|Total assets                                                                                                           |  | $                           | 7,441,573 |                                           | $ | 7,450,245 |  
|                                                                                                                       |  |                             |           |                                           |   |           |  
|LIABILITIES AND STOCKHOLDERS
EQUITY                                                                                   |  |                             |           |                                           |   |           |  
|Current liabilities:                                                                                                   |  |                             |           |                                           |   |           |  
|Accounts payable                                                                                                       |  | $                           | 276,840   |                                           | $ | 339,552   |  
|Accrued employee compensation                                                                                          |  |                             | 68,020    |                                           |   | 51,451    |  
|Deferred revenue, CRO                                                                                                  |  |                             | 19,986    |                                           |   | 23,227    |  
|Current debt                                                                                                           |  |                             | 2,088     |                                           |   | 2,263     |  
|Other current liabilities                                                                                              |  |                             | 275,695   |                                           |   | 224,296   |  
|                                                                                                                       |  |                             |           |                                           |   |           |  
|Total current liabilities                                                                                              |  |                             | 642,629   |                                           |   | 640,789   |  
|                                                                                                                       |  |                             |           |                                           |   |           |  
|Long-term debt, notes and convertible debentures
(Note 5)                                                              |  |                             | 2,285,743 |                                           |   | 2,352,877 |  
|Deferred income tax liabilities                                                                                        |  |                             | 381,313   |                                           |   | 362,610   |  
|Other noncurrent liabilities                                                                                           |  |                             | 280,336   |                                           |   | 276,284   |  
|                                                                                                                       |  |                             |           |                                           |   |           |  
|Total noncurrent liabilities                                                                                           |  |                             | 2,947,392 |                                           |   | 2,991,771 |  
|                                                                                                                       |  |                             |           |                                           |   |           |  
|Total liabilities                                                                                                      |  |                             | 3,590,021 |                                           |   | 3,632,560 |  
|                                                                                                                       |  |                             |           |                                           |   |           |  
|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, 125,690,600
 shares issued (2008-125,583,300 shares issued) |  |                             | 125,691   |                                           |   | 125,583   |  
|Paid-in capital (Note 5)                                                                                               |  |                             | 2,395,659 |                                           |   | 2,386,945 |  
|Retained earnings                                                                                                      |  |                             | 1,526,392 |                                           |   | 1,498,171 |  
|Treasury stock, at cost-7,252,000 shares
(2008-7,135,300 shares)                                                       |  |                             | (196,135  | )                                         |   | (193,178  | )
|Accumulated other comprehensive income                                                                                 |  |                             | (55       | )                                         |   | 164       |  
|                                                                                                                       |  |                             |           |                                           |   |           |  
|Total stockholders equity                                                                                             |  |                             | 3,851,552 |                                           |   | 3,817,685 |  
|                                                                                                                       |  |                             |           |                                           |   |           |  
|Total liabilities and stockholders
equity                                                                             |  | $                           | 7,441,573 |                                           | $ | 7,450,245 |  
|                                                                                                                       |  |                             |           |                                           |   |           |  

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

4

---



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

|                                                                                                      |  |                               |         |                             |   |         |  
|----------------------------------------------------------------------------------------------------- |  | ----------------------------- | ------- | --------------------------- | - | ------- | -
|                                                                                                      |  | Three months ended
 March 31, |        
|                                                                                                      |  |                               |        
|                                                                                                      |  | 2009                          |         | 2008
 as adjusted
 (Note 2) |  
|                                                                                                      |  |                               |         |                             |  
|Cash flows from operating activities:                                                                 |  |                               |         |                             |   |         |  
|Net income                                                                                            |  | $                             | 30,894  |                             | $ | 26,150  |  
|Adjustments to reconcile net income to net cash
flows from operating
 activities:                     |  |                               |         |                             |   |         |  
|Depreciation expense                                                                                  |  |                               | 13,623  |                             |   | 12,933  |  
|Amortization expense                                                                                  |  |                               | 23,118  |                             |   | 22,882  |  
|Changes in assets and liabilities, net of effects
from acquisition of
 businesses:                    |  |                               |         |                             |   |         |  
|Accounts receivable and unbilled receivables, net
of provision for
 doubtful accounts                 |  |                               | 6,741   |                             |   | 15,402  |  
|Inventories                                                                                           |  |                               | 44,361  |                             |   | 39,966  |  
|Other current and noncurrent assets                                                                   |  |                               | (10,809 | )                           |   | 23,181  |  
|Accounts payable                                                                                      |  |                               | (61,393 | )                           |   | (43,626 | )
|Accrued employee compensation                                                                         |  |                               | 16,902  |                             |   | 14,109  |  
|Deferred revenue                                                                                      |  |                               | (3,241  | )                           |   | (3,289  | )
|Current and noncurrent liabilities                                                                    |  |                               | 60,722  |                             |   | 34,556  |  
|                                                                                                      |  |                               |         |                             |   |         |  
|Net cash flows from operating
activities                                                              |  |                               | 120,918 |                             |   | 142,264 |  
|                                                                                                      |  |                               |         |                             |   |         |  
|Cash flows from investing activities:                                                                 |  |                               |         |                             |   |         |  
|Acquisition of businesses, net of cash
received                                                       |  |                               | (31,710 | )                           |   | (35,983 | )
|Capital expenditures                                                                                  |  |                               | (8,819  | )                           |   | (12,439 | )
|Transfer of cash to trusts for employee health
and severance costs,
 net of payments out of the trust |  |                               | 1,448   |                             |   | (11,542 | )
|Other                                                                                                 |  |                               | (2,394  | )                           |   | (32     | )
|                                                                                                      |  |                               |         |                             |   |         |  
|Net cash flows used in investing
activities                                                           |  |                               | (41,475 | )                           |   | (59,996 | )
|                                                                                                      |  |                               |         |                             |   |         |  
|Cash flows from financing activities:                                                                 |  |                               |         |                             |   |         |  
|Net payments on revolving credit facility and
term A loan                                             |  |                               | (75,000 | )                           |   | (50,000 | )
|Payments on long-term borrowings and
obligations                                                      |  |                               | (494    | )                           |   | (963    | )
|(Decrease) in
    cash overdraft balance                                                              |  |                               | (1,403  | )                           |   | (857    | )
|Payments for stock awards and exercise of stock
options, net of stock
 tendered in payment            |  |                               | (1,870  | )                           |   | (3,584  | )
|Excess tax benefits from stock-based
compensation                                                     |  |                               | 438     |                             |   | 82      |  
|Dividends paid                                                                                        |  |                               | (2,673  | )                           |   | (2,746  | )
|                                                                                                      |  |                               |         |                             |   |         |  
|Net cash flows used in financing
activities                                                           |  |                               | (81,002 | )                           |   | (58,068 | )
|                                                                                                      |  |                               |         |                             |   |         |  
|Effect of exchange rate changes on cash                                                               |  |                               | 1,558   |                             |   | 2,612   |  
|                                                                                                      |  |                               |         |                             |   |         |  
|Net (decrease) increase in cash and cash
equivalents                                                  |  |                               | (1      | )                           |   | 26,812  |  
|Cash and cash equivalents at beginning of
period                                                      |  |                               | 215,090 |                             |   | 274,448 |  
|                                                                                                      |  |                               |         |                             |   |         |  
|Cash and cash equivalents at end of
period                                                            |  | $                             | 215,089 |                             | $ | 301,260 |  
|                                                                                                      |  |                               |         |                             |   |         |  

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 statement 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, 2008
(Omnicares 2008 Annual Report) and any related updates included in the
Companys periodic quarterly Securities and Exchange Commission (SEC)
filings. Certain reclassifications and adjustments (see Note 2) 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 2008 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 2008 Annual Report and any
related updates contained in the Companys periodic quarterly SEC filings,
including those presented below.

Concentration of 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 39% of the Companys revenues in the three months ended
March 31, 2009 were generated under the Part D program. The Company estimates
that approximately 25% of these Part D revenues during the three months ended
March 31, 2009 relate to patients enrolled in Part D prescription drug plans
sponsored by UnitedHealth Group, Inc. and its affiliates (United).
United and a small number of other Part D Plan sponsors and pharmaceutical benefit
managers reimburse a significant portion of the Companys Part D revenues. 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 pursuant to the agreement it negotiates with 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 and renegotiates
    these agreements in the ordinary course. Further, the proportion of the Companys
    Part D business serviced under specific agreements may change over time based
    upon beneficiary choice, reassignment of dual eligibles to different Part
    D Plans or Part D Plan consolidation. As such, reimbursement under these
    agreements is subject to change. Moreover, as expected in the transition
    to a 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 any allowance for doubtful accounts), particularly for copays.
    As of March 31, 2009, copays outstanding from Part D Plans were approximately
    $17 million relating to 2006 and 2007. The Company is pursuing solutions,
    including legal actions against certain Part D Plans, to collect outstanding
    copays, as well as certain rejected claims.

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 $93 million (excluding interest) is owed
to the Company by this group of customers as of March 31, 2009, of which
approximately $87 million is past-due based on applicable payment terms (a
significant portion of which is not reserved based on the relevant facts and
circumstances).

Until these
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 these matters will not
adversely impact the Companys results of operations, financial position
or cash flows.

7

---



Accumulated Other Comprehensive Income (Loss)

The
accumulated other comprehensive income (loss) balances at March 31, 2009 and
December 31, 2008, net of aggregate applicable tax benefits of $3.2 million and
$2.5 million, respectively, by component and in the aggregate, follow (in
thousands):

|                                                             |  |                 |         |                    |   |         |  
|------------------------------------------------------------ |  | --------------- | ------- | ------------------ | - | ------- | -
|                                                             |  | March 31,
 2009 |         | December 31,
 2008 |  
|                                                             |  |                 |         |                    |  
|Cumulative
 foreign currency translation adjustments         |  | $               | 5,027   |                    | $ | 4,112   |  
|Unrealized
 gain on fair value of investments                |  |                 | 6,052   |                    |   | 7,340   |  
|Pension and
 postemployment benefits                         |  |                 | (11,134 | )                  |   | (11,288 | )
|                                                             |  |                 |         |                    |   |         |  
|Total
 accumulated other comprehensive loss adjustments, net |  | $               | (55     | )                  | $ | 164     |  
|                                                             |  |                 |         |                    |   |         |  

Noncontrolling Interests

Effective
January 1, 2009, the Company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 160, Noncontrolling Interests in Consolidated
Financial Statements, an amendment of ARB No. 51 (SFAS 160). SFAS 160
requires all entities to report noncontrolling (minority) interests in
subsidiaries in the same way as equity in the consolidated financial
statements. SFAS 160 is effective for the first annual reporting period
beginning after December 15, 2008. The first quarter 2009 adoption of SFAS 160
had an immaterial effect on the Companys consolidated results of operations,
financial position and cash flows.

Income Taxes

The effective income tax rate was 48.2% for the three months
    ended March 31, 2009, as compared to the first quarter of 2008 rate of 40.2%.
    The year-over-year increase in the effective tax rate is primarily attributable
    to certain nondeductible litigation costs recognized in the 2009 period.
    The effective tax rates in 2009 and 2008 are higher than the federal statutory
    rate largely as a result of the impact of state and local income taxes and
    various nondeductible expenses (including a portion of the aforementioned
    litigation costs in 2009).

Recently Issued Accounting Standards

In December
2008, the FASB issued FASB Staff Position (FSP) No. FAS 132(R)-1, Employers
Disclosures about Postretirement Benefit Plan Assets (FSP FAS 132(R)-1).
Among other items, FSP FAS 132(R)-1 requires increased disclosures about plan
assets in an employers defined benefit pension or other postretirement plans
such as how investment allocation decisions are made; major categories of plan
assets; inputs and valuation techniques used to measure the fair value of plan
assets; the effect of fair value measurements using significant unobservable
inputs on changes in plan assets for the period; and significant concentrations
of risk within plan assets. The disclosures about plan assets required by FSP
FAS 132(R)-1 shall be provided for fiscal years ending after December 15, 2009.
The Company is evaluating the impact of this recently issued standard on its
disclosures.

Note 2  Change in Method of Accounting for
Convertible Debt

Effective
January 1, 2009, the Company retrospectively adopted the provisions of FSP No.
    APB 14-1, Accounting for Convertible Debt Instruments
That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement) (FSP APB 14-1). Among other items, FSP APB 14-1 specifies that
issuers of convertible debt instruments that may be settled in cash upon
conversion (including partial cash settlement) should separately account for
the liability and equity components in a manner that reflects the entitys
calculated

8

---



nonconvertible
debt borrowing rate when the debt was issued. Comparative financial statements
of prior years have been adjusted to apply the new method retrospectively. The
following financial statement line items for the periods ending March 31, 2008
and as of December 31, 2008 were affected by this accounting change (in
thousands):

|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|--------------------------------------------------------- |  | ---------------------------- | --------- | ----------------------------- | - | ------------------ | - | - | -------- | -
|Income
 Statement
 Three Months Ended March 31, 2008      |  |                              |           |                               |   |                    |  
|                                                          |  |                              |           |                               |   |                    |  
|                                                          |  | As Computed
 Under
 APB 14-1 |           | As Reported
 Before
 APB 14-1 |   | Effect
 of
 Change |  
|                                                          |  |                              |           |                               |   |                    |  
|Amortization of discount on convertible notes (Note 5)    |  | $                            | (6,300    | )                             | $ |                   |   | $ | (6,300   | )
|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|Interest expense                                          |  |                              | (36,822   | )                             |   | (37,056            | ) |   | 234      |  
|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|Income before income taxes                                |  |                              | 43,733    |                               |   | 49,799             |   |   | (6,066   | )
|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|Income tax provision                                      |  |                              | 17,583    |                               |   | 19,855             |   |   | 2,272    |  
|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|Net income                                                |  | $                            | 26,150    |                               | $ | 29,944             |   | $ | (3,794   | )
|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|Earnings per share:                                       |  |                              |           |                               |   |                    |   |   |          |  
|Basic                                                     |  | $                            | 0.22      |                               | $ | 0.25               |   | $ | (0.03    | )
|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|Diluted                                                   |  | $                            | 0.22      |                               | $ | 0.25               |   | $ | (0.03    | )
|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|Comprehensive income                                      |  | $                            | 35,277    |                               | $ | 39,071             |   | $ | (3,794   | )
|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|Balance
 Sheet 
 As of December 31, 2008                  |  |                              |           |                               |   |                    |   |   |          |  
|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|                                                          |  | As Computed
 Under
 APB 14-1 |           | As Reported
 Before
 APB 14-1 |   | Effect
 of
 Change |  
|                                                          |  |                              |           |                               |   |                    |  
|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|Other noncurrent assets                                   |  | $                            | 137,638   |                               | $ | 147,111            |   | $ | (9,473   | )
|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|Total noncurrent assets                                   |  |                              | 5,078,552 |                               |   | 5,088,025          |   |   | (9,473   | )
|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|Total assets                                              |  |                              | 7,450,245 |                               |   | 7,459,718          |   |   | (9,473   | )
|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|Long-term debt, notes and convertible debentures (Note 5) |  |                              | 2,352,877 |                               |   | 2,731,163          |   |   | (378,286 | )
|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|Deferred income tax liabilities                           |  |                              | 362,610   |                               |   | 390,098            |   |   | (27,488  | )
|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|Total noncurrent liabilities                              |  |                              | 2,991,771 |                               |   | 3,397,545          |   |   | (405,774 | )
|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|Total liabilities                                         |  |                              | 3,632,560 |                               |   | 4,038,334          |   |   | (405,774 | )
|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|Paid-in capital (Note 5)                                  |  |                              | 2,386,945 |                               |   | 1,945,627          |   |   | 441,318  |  
|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|Retained earnings                                         |  |                              | 1,498,171 |                               |   | 1,543,188          |   |   | (45,017  | )
|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|Total stockholders equity                                |  |                              | 3,817,685 |                               |   | 3,421,384          |   |   | 396,301  |  
|                                                          |  |                              |           |                               |   |                    |   |   |          |  
|Total liabilities and stockholders equity                |  |                              | 7,450,245 |                               |   | 7,459,718          |   |   | (9,473   | )

9

---



|                                                           |  |                              |         |                               |   |                    |  |   |        |  
|---------------------------------------------------------- |  | ---------------------------- | ------- | ----------------------------- | - | ------------------ |  | - | ------ | -
|Statement of Cash Flows
 Three Months Ended March 31, 2008 |  |                              |         |                               |   |                    | 
|                                                           |  |                              |         |                               |   |                    | 
|                                                           |  | As Computed
 Under
 APB 14-1 |         | As Reported
 Before
 APB 14-1 |   | Effect
 of
 Change | 
|                                                           |  |                              |         |                               |   |                    | 
|Cash flows from operating activities:                      |  |                              |         |                               |   |                    |  |   |        |  
|                                                           |  |                              |         |                               |   |                    |  |   |        |  
|Net income                                                 |  | $                            | 26,150  |                               | $ | 29,944             |  | $ | (3,794 | )
|                                                           |  |                              |         |                               |   |                    |  |   |        |  
|Amortization
    expense                                   |  |                              | 22,882  |                               |   | 16,582             |  |   | 6,300  |  
|                                                           |  |                              |         |                               |   |                    |  |   |        |  
|Change in other current and noncurrent assets              |  |                              | 23,181  |                               |   | 23,415             |  |   | (234   | )
|                                                           |  |                              |         |                               |   |                    |  |   |        |  
|Change in current and noncurrent liabilities               |  |                              | 34,556  |                               |   | 36,828             |  |   | (2,272 | )
|                                                           |  |                              |         |                               |   |                    |  |   |        |  
|Net cash flows from operating activities                   |  |                              | 142,264 |                               |   | 142,264            |  |   |       |  

Note 3  Acquisitions

Since 1989,
the Company has been involved in a program to acquire providers of
pharmaceutical products and related pharmacy services to long-term care
facilities and their residents as well as patients in other care settings. The
Companys strategy has included the acquisition of freestanding institutional
pharmacy businesses as well as other assets, generally insignificant in size,
which have been combined with existing pharmacy operations to augment their
internal growth. From time-to-time the Company may acquire other businesses,
such as pharmacy consulting companies, specialty pharmacy companies, medical supply
and service companies, hospice pharmacy companies and companies providing
distribution and product support services for specialty pharmaceuticals, as
well as contract research organizations, which complement the Companys core
businesses.

Effective January
1, 2009, the Company adopted the provisions of SFAS No. 141 (revised 2007),
Business Combinations (SFAS 141R) as amended by FSP No.
FAS 141(R)-1,
Accounting for Assets Acquired and Liabilities Assumed in a Business
Combination that Arise from Contingencies (FSP FAS 141(R)-1).
SFAS 141R requires the acquiring entity in a business combination to recognize
all (and only) the assets acquired and liabilities assumed in the transaction
at fair value; and establishes the acquisition-date fair value as the measurement
objective for all assets acquired and liabilities assumed, including earn-out
provisions. The first quarter 2009 implementation resulted in acquisition and
other related costs of approximately $0.8 million pretax during the three months
ended March 31, 2009, which were primarily related to professional fees for acquisitions
completed during the quarter.

During the
first three months of 2009, Omnicare completed three acquisitions of businesses
in the Pharmacy Services segment, none of which were, individually or in the
aggregate, significant to the Company. Acquisitions of businesses required
outlays of $31.7 million (including amounts payable pursuant to acquisition
agreements relating to pre-2009 acquisitions) in the three months ended March
31, 2009. 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. The Company continues to evaluate the tax
effects, identifiable

10

---



intangible
assets 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 4 - Goodwill and Other Intangible Assets

Changes in the
carrying amount of goodwill for the three months ended March 31, 2009, by
business segment, are as follows (in thousands):

|                                                            |  |                    |           |               |   |        |  |   |           | 
|----------------------------------------------------------- |  | ------------------ | --------- | ------------- | - | ------ |  | - | --------- | 
|                                                            |  | Pharmacy
 Services |           | CRO
 Services |   | Total  | 
|                                                            |  |                    |           |               |   |        | 
|Balance as of December 31, 2008                             |  | $                  | 4,162,893 |               | $ | 90,013 |  | $ | 4,252,906 | 
|Goodwill acquired in the three months ended
 March 31, 2009 |  |                    | 14,096    |               |   |       |  |   | 14,096    | 
|Other                                                       |  |                    | 4,967     |               |   | 772    |  |   | 5,739     | 
|                                                            |  |                    |           |               |   |        |  |   |           | 
|Balance as of March 31, 2009                                |  | $                  | 4,181,956 |               | $ | 90,785 |  | $ | 4,272,741 | 
|                                                            |  |                    |           |               |   |        |  |   |           | 

The Other
caption above includes 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 primarily to the Contract Research
Organization (CRO) Services segment, as well as one pharmacy located in
Canada which is included in the Pharmacy Services segment.

The decrease
in the March 31, 2009 net carrying amount of the Companys other identifiable
intangible assets of approximately $4 million from December 31, 2008 primarily
relates to amortization expense recorded during the three-month period,
partially offset by increases due primarily to customer relationship assets and
non-compete agreements associated with recent acquisitions, which have a
weighted-average life of approximately 10 years.

11

---



Note 5 - Debt

A summary of
debt follows (in thousands):

|                                                            |  |                 |           |                    |   |           |  
|----------------------------------------------------------- |  | --------------- | --------- | ------------------ | - | --------- | -
|                                                            |  | March 31,
 2009 |           | December 31,
 2008 |  
|                                                            |  |                 |           |                    |  
|Revolving loans, due 2010, $800 million                     |  | $               |          |                    | $ |          |  
|Senior term A loan, due 2010                                |  |                 | 325,000   |                    |   | 400,000   |  
|6.125% senior subordinated notes, due 2013                  |  |                 | 250,000   |                    |   | 250,000   |  
|6.75% senior subordinated notes, due 2013                   |  |                 | 225,000   |                    |   | 225,000   |  
|6.875% senior subordinated notes, due 2015                  |  |                 | 525,000   |                    |   | 525,000   |  
|4.00% junior subordinated convertible
 debentures, due 2033 |  |                 | 345,000   |                    |   | 345,000   |  
|3.25% convertible senior debentures, due
 2035              |  |                 | 977,500   |                    |   | 977,500   |  
|Capitalized lease and other debt
 obligations               |  |                 | 4,418     |                    |   | 4,913     |  
|                                                            |  |                 |           |                    |   |           |  
|Subtotal                                                    |  |                 | 2,651,918 |                    |   | 2,727,413 |  
|Add interest
    rate swap agreement                        |  |                 | 7,402     |                    |   | 6,013     |  
|(Subtract) unamortized debt discount                        |  |                 | (371,489  | )                  |   | (378,286  | )
|(Subtract) current portion of debt                          |  |                 | (2,088    | )                  |   | (2,263    | )
|                                                            |  |                 |           |                    |   |           |  
|Total long-term debt, net                                   |  | $               | 2,285,743 |                    | $ | 2,352,877 |  
|                                                            |  |                 |           |                    |   |           |  

The Companys
debt instruments, including related terms and certain financial covenants as
well as a description of Omnicares Credit Agreement, have been disclosed in
further detail at the Debt note of the Notes to Consolidated Financial Statements
in Omnicares 2008 Annual Report.

At March 31,
2009, there was no outstanding balance under the Companys $800 million
revolving credit facility, maturing on July 28, 2010 (Revolving Loans), and
$325 million outstanding under the Companys senior term A loan facility,
maturing on July 28, 2010 (the Term Loans). The Company repaid $75 million on
the Term Loans during the three months ended March 31, 2009. The interest rate
on the Term Loans was 2.31% at March 31, 2009. As of March 31, 2009, the
Company had approximately $26 million outstanding relating to standby letters
of credit, substantially all of which are subject to automatic annual renewals.
The Company amortized to expense approximately $1.8 million of deferred debt
issuance costs during the three months ended March 31, 2009 and 2008.

The estimated
floating interest rate on the interest rate swap agreement was 3.98% at March
31, 2009.

The Company
has two convertible debentures, the Series B 4.00% junior subordinated
convertible debentures, due 2033 (the New 4.00% Debentures) and its
3.25% convertible senior debentures, due 2035 (3.25% Convertible Debentures).
For further description of the Companys convertible debt see the Debt note
of the Notes to Consolidated Financial Statements in Omnicares
2008 Annual Report. Effective January 1, 2009, the Company retrospectively adopted
the provisions of FSP APB 14-1 (see additional information at the Change
in Method of Accounting for Convertible Debt note). Among other items, FSP APB
14-1 specifies that issuers of convertible debt instruments that may be settled
in cash upon conversion

12

---



(including
partial cash settlement) should separately account for the liability and equity
components in a manner that reflects the entitys calculated nonconvertible
debt borrowing rate when the debt was issued. The effect of this accounting change
on the carrying amounts of the Companys debt and equity balances, are as
follows (in thousands):

|                                       |  |                 |           |                    |   |           |  
|-------------------------------------- |  | --------------- | --------- | ------------------ | - | --------- | -
|                                       |  | March 31,
 2009 |           | December 31,
 2008 |  
|                                       |  |                 |           |                    |  
|Carrying value of equity component     |  | $               | 441,318   |                    | $ | 441,318   |  
|                                       |  |                 |           |                    |   |           |  
|                                       |  |                 |           |                    |   |           |  
|Principal amount of convertible debt   |  | $               | 1,322,500 |                    | $ | 1,322,500 |  
|Unamortized debt discount              |  |                 | (371,489  | )                  |   | (378,286  | )
|                                       |  |                 |           |                    |   |           |  
|Net carrying value of convertible debt |  | $               | 951,011   |                    | $ | 944,214   |  
|                                       |  |                 |           |                    |   |           |  

As of March
31, 2009, the remaining amortization period for the debt discount was
approximately 24 and 7 years for the New 4.00% Debentures and 3.25% Convertible
Debentures, respectively.

The effective
interest rates for the liability components of the New 4.00% Debentures and the
3.25% Convertible Debentures were 8.01% and 7.625%, respectively. The impact of
this accounting change for the three months ended March 31, 2009 and 2008 was a
non-cash increase in pretax interest expense of approximately $6.8 million and
$6.3 million ($4.2 million and $3.9 million aftertax), respectively.

Note 6 - Fair Value

On January 1,
2008, the Company adopted the provisions of SFAS No. 157, Fair Value
Measurements (SFAS 157). SFAS 157 defines a hierarchy which prioritizes the
inputs in fair value measurements. Level 1 measurements are measurements
using quoted prices in active markets for identical assets or liabilities.
Level 2 measurements use significant other observable inputs. Level 3
measurements are measurements using significant unobservable inputs which
require a company to develop its own assumptions. In recording the fair value
of assets and liabilities, companies must use the most reliable measurement
available. The impact to the Companys consolidated results of operations,
financial position and cash flows upon adoption of SFAS 157 was not material.
The assets, as further described in detail at the Fair Value note of the
Notes to the Consolidated Financial Statements in Omnicares 2008 Annual
Report, measured at fair value as of March 31, 2009 were as follows:

13

---



|                                                 |  |                            |         |                                        |   |                                |  |                             |       |  |   |   | 
|------------------------------------------------ |  | -------------------------- | ------- | -------------------------------------- | - | ------------------------------ |  | --------------------------- | ----- |  | - | - | 
|                                                 |  |                            |         | Based on                               |  
|                                                 |  |                            |         |                                        |  
|                                                 |  | Fair Valueat March 31,2009 |         | Quoted Pricesin ActiveMarkets(Level 1) |   | OtherObservableInputs(Level 2) |  | UnobservableInputs(Level 3) |      
|                                                 |  |                            |         |                                        |   |                                |  |                             |      
|Rabbi trust
 assets                              |  | $                          | 134,732 |                                        | $ | 134,732                        |  | $                           |      |  | $ |  | 
|Interest
 rate swap agreement - fair value hedge |  |                            | 7,402   |                                        |   |                               |  |                             | 7,402 |  |   |  | 
|Derivatives                                      |  |                            |        |                                        |   |                               |  |                             |      |  |   |  | 
|                                                 |  |                            |         |                                        |   |                                |  |                             |       |  |   |   | 
|Total                                            |  | $                          | 142,134 |                                        | $ | 134,732                        |  | $                           | 7,402 |  | $ |  | 
|                                                 |  |                            |         |                                        |   |                                |  |                             |       |  |   |   | 

Note 7 - Stock-Based
Compensation

At March 31,
2009, 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 Compensation note of the Notes to Consolidated Financial
Statements in Omnicares 2008 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 2008 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 months ended March 31, 2009 and 2008 is as follows (in thousands):

|                                        |  |                               |       |      |   |       | 
|--------------------------------------- |  | ----------------------------- | ----- | ---- | - | ----- | 
|                                        |  | Three months ended
 March 31, |      
|                                        |  |                               |      
|                                        |  | 2009                          |       | 2008 |  
|                                        |  |                               |       |      |  
|Stock awards                            |  | $                             | 5,515 |      | $ | 5,695 | 
|Stock
 options                          |  |                               | 1,317 |      |   | 1,031 | 
|                                        |  |                               |       |      |   |       | 
|                                        |  |                               |       |      |   |       | 
|Total
 stock-based compensation expense |  | $                             | 6,832 |      | $ | 6,726 | 
|                                        |  |                               |       |      |   |       | 

The assumptions used to value stock options granted during the periods
ended March 31, 2009 and 2008 are as follows:

|                                        |  |      |      |      |   |      |  
|--------------------------------------- |  | ---- | ---- | ---- | - | ---- | -
|                                        |  | 2009 |      | 2008 |  
|                                        |  |      |      |      |  
|Expected
 volatility                    |  |      | 35.7 | %    |   | 29.7 | %
|Risk-free
 interest rate                |  |      | 2.0  | %    |   | 2.7  | %
|Expected
 dividend yield                |  |      | 0.3  | %    |   | 0.4  | %
|Expected
 term of options (in years)    |  |      | 4.7  |      |   | 4.7  |  
|Weighted
 average fair value per option |  | $    | 9.19 |      | $ | 6.36 |  

14

---



A summary of
stock option activity under the plans for the three months ended March 31,
2009, 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 |  | 7,348  |   | $                                   | 30.19 |                                                  |     |                             |   |        | 
|Options
 granted                          |  | 27     |   |                                     | 29.10 |                                                  |     |                             |   |        | 
|Options
 exercised                        |  | (80    | ) |                                     | 15.59 |                                                  |     |                             |   |        | 
|Options
 forfeited                        |  | (11    | ) |                                     | 34.49 |                                                  |     |                             |   |        | 
|                                          |  |        |   |                                     |       |                                                  |     |                             |   |        | 
|Options
 outstanding, end of period       |  | 7,284  |   | $                                   | 30.34 |                                                  | 4.7 |                             | $ | 15,561 | 
|                                          |  |        |   |                                     |       |                                                  |     |                             |   |        | 
|Options
 exercisable, end of period       |  | 5,903  |   | $                                   | 30.29 |                                                  | 3.8 |                             | $ | 14,864 | 
|                                          |  |        |   |                                     |       |                                                  |     |                             |   |        | 

The total
exercise date intrinsic value of options exercised during the three months
ended March 31, 2009 was $0.9 million.

A summary of
non-vested restricted stock awards for the three months ended March 31, 2009 is
presented below (in thousands, except grant price data):

|                                        |  |        |   |                                       |       | 
|--------------------------------------- |  | ------ | - | ------------------------------------- | ----- | 
|                                        |  | Shares |   | Weighted-
 Average
 Grant Date
 Price |      
|                                        |  |        |   |                                       |      
|Non-vested
 shares, beginning of period |  | 2,167  |   | $                                     | 34.23 | 
|Shares
 awarded                         |  | 27     |   |                                       | 25.61 | 
|Shares
 vested                          |  | (349   | ) |                                       | 34.24 | 
|Shares
 forfeited                       |  | (5     | ) |                                       | 51.91 | 
|                                        |  |        |   |                                       |       | 
|Non-vested
 shares, end of period       |  | 1,840  |   | $                                     | 34.05 | 
|                                        |  |        |   |                                       |       | 

As of March
31, 2009, there was approximately $63 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 5
years. The total grant date fair value of shares vested during the three months
ended March 31, 2009 related to stock awards and stock options was
approximately $12.2 million.

For the three
months ended March 31, 2009 and 2008, the Company recorded approximately $1.7
million and $1.1 million, respectively, in charges relating to the prior
implementation of SFAS 123R, which primarily relate to stock option expense.

15

---



Note 8 - 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 2008 Annual Report. Expense relating primarily to the
Companys matching contributions for these defined contribution plans was $1.8
million and $1.9 million for the three months ended March 31, 2009 and 2008,
respectively.

The Company
has various defined benefit plans, as further described in Omnicares 2008
Annual Report. The following table presents the components of net periodic
pension cost for all pension plans for the three months ended March 31, 2009
and 2008 (pretax, in thousands):

|                                                                     |  |                               |       |      |   |       |  
|-------------------------------------------------------------------- |  | ----------------------------- | ----- | ---- | - | ----- | -
|                                                                     |  | Three months ended
 March 31, |      
|                                                                     |  |                               |      
|                                                                     |  | 2009                          |       | 2008 |  
|                                                                     |  |                               |       |      |  
|Service cost                                                         |  | $                             | 375   |      | $ | 1,499 |  
|Interest
 cost                                                       |  |                               | 1,499 |      |   | 2,385 |  
|Amortization
 of deferred amounts (primarily prior actuarial losses) |  |                               | 250   |      |   | 3,673 |  
|Return on
 assets                                                    |  |                               | (60   | )    |   | (54   | )
|Other                                                                |  |                               |      |      |   | (268  | )
|                                                                     |  |                               |       |      |   |       |  
|Net periodic pension cost                                            |  | $                             | 2,064 |      | $ | 7,235 |  
|                                                                     |  |                               |       |      |   |       |  

As of March
31, 2009, the aggregate defined benefit plans liabilities total approximately
$107 million. During the first three months of 2009, the Company made no
payments related to funding the rabbi trusts for the settlement of the
Companys pension obligations, resulting in aggregate assets with a fair value
of approximately $135 million at March 31, 2009. The aggregate defined benefit
plans liabilities are the projected benefit obligation to be paid based upon
services through retirement. The aggregate assets in the rabbi trusts are the
amounts required to fund the lump sum benefits of the Excess Benefit Plan.
These benefits are fully funded as of March 31, 2009.

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.

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

16

---



|                                                  |  |                              |        |                              |  |                           |  |   |      | 
|------------------------------------------------- |  | ---------------------------- | ------ | ---------------------------- |  | ------------------------- |  | - | ---- | 
|                                                  |  | Three months ended March 31, |       
|                                                  |  |                              |       
|2009:                                             |  | Income
 (Numerator)          |        | Common Shares
 (Denominator) |  | Per Common Share
 Amounts | 
|                                                  |  |                              |        |                              |  |                           | 
|Basic EPS                                         |  |                              |        |                              |  |                           |  |   |      | 
|Net income                                        |  | $                            | 30,894 |                              |  | 116,448                   |  | $ | 0.27 | 
|                                                  |  |                              |        |                              |  |                           |  |   |      | 
|Effect of Dilutive Securities                     |  |                              |        |                              |  |                           |  |   |      | 
|4.00% junior
 subordinated convertible debentures |  |                              | 71     |                              |  | 275                       |  |   |      | 
|Stock
 options, warrants and awards               |  |                              |       |                              |  | 618                       |  |   |      | 
|                                                  |  |                              |        |                              |  |                           |  |   |      | 
|Diluted EPS                                       |  |                              |        |                              |  |                           |  |   |      | 
|Net income
 plus assumed conversions              |  | $                            | 30,965 |                              |  | 117,341                   |  | $ | 0.26 | 
|                                                  |  |                              |        |                              |  |                           |  |   |      | 
|                                                  |  |                              |        |                              |  |                           |  |   |      | 
|2008:                                             |  |                              |        |                              |  |                           |  |   |      | 
|                                                  |  |                              |        |                              |  |                           | 
|Basic EPS                                         |  |                              |        |                              |  |                           |  |   |      | 
|Net income                                        |  | $                            | 26,150 |                              |  | 119,848                   |  | $ | 0.22 | 
|                                                  |  |                              |        |                              |  |                           |  |   |      | 
|Effect of Dilutive Securities                     |  |                              |        |                              |  |                           |  |   |      | 
|4.00% junior
 subordinated convertible debentures |  |                              | 70     |                              |  | 275                       |  |   |      | 
|Stock
 options, warrants and awards               |  |                              |       |                              |  | 415                       |  |   |      | 
|                                                  |  |                              |        |                              |  |                           |  |   |      | 
|Diluted EPS                                       |  |                              |        |                              |  |                           |  |   |      | 
|Net income
 plus assumed conversions              |  | $                            | 26,220 |                              |  | 120,538                   |  | $ | 0.22 | 
|                                                  |  |                              |        |                              |  |                           |  |   |      | 

During the three months ended March 31, 2009 and 2008, the
anti-dilutive effect associated with certain stock options, warrants and 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 awards
excluded from the computation of diluted EPS for the quarters ended March 31,
2009 and 2008 totaled 6.2 million and 6.6 million, respectively.

Effective January 1, 2009, the
Company adopted the provisions of FSP Emerging Issues Task Force (EITF) No.
03-6-1, Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities (FSP-EITF 03-6-1). FSP-EITF 03-6-1
clarifies that unvested share-based payment awards that contain nonforfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) are
participating securities and are to be included in the computation of earnings
per share under the two-class method. FSP-EITF 03-6-1 is effective for
financial statements issued for fiscal years beginning after December 15,
2008, and interim periods within those years. FSP-EITF 03-6-1 did not have a
material impact on the Companys consolidated results of operations, financial
position or cash flows.

17

---



Note 10 - Restructuring and Other Related
Charges

Omnicare Full Potential Program

In 2006, the
Company commenced the implementation of the Omnicare Full Potential Plan, a
major initiative primarily 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
administrative and production functions will be transferred to regional support
centers (hubs) specifically designed and managed to perform these tasks, with
local pharmacies (spokes) focusing on time-sensitive services and
customer-facing processes. Additionally, in connection with this productivity
enhancement initiative, the Company is also right-sizing and consolidating
certain CRO operations.

This program
is expected to be completed over a multi-year period and is estimated to result
in total pretax restructuring and other related charges of approximately $93
million. As presented in further detail below, the Company recorded
restructuring and other related charges for the Omnicare Full Potential Plan
    of approximately $7 million pretax (approximately $4 million aftertax) during
    the three months ended March 31, 2009, and approximately $36 million pretax
    during the year ended December 31, 2008 (approximately $6 million pretax
    in the three months ended March 31, 2008), or cumulative aggregate restructuring
    and other related charges of approximately $90 million before taxes through
    the first quarter of 2009. The remainder of the overall restructuring and
    other related charges will be recognized and disclosed prospectively, as
    the remaining portions of the project are finalized and implemented. The
    Company eliminated approximately 1,200 positions in completing its initial
    phase of the program. The remainder of the program is currently estimated
    to result in a net reduction of approximately 1,200 positions (1,900 positions
    eliminated, net of 700 new positions filled in different geographic locations
    as well as to perform new functions required by the hub-and-spoke model of
    operations), of which approximately 270 positions had been eliminated as
    of March 31, 2009. The foregoing reductions do not include additional savings
    expected from lower levels of overtime and reduced temporary labor. The Company
    currently estimates reductions in overtime, excess hours and temporary help,
as well as productivity gains, to equal an additional 820 full-time equivalents.

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):

18

---



|                                               |  |                                |        |                           |   |                        |  |                             |        |   |   |        | 
|---------------------------------------------- |  | ------------------------------ | ------ | ------------------------- | - | ---------------------- |  | --------------------------- | ------ | - | - | ------ | 
|Restructuring
 charges:                        |  | Balance at
 December 31,
 2008 |        | 2009
 Provision/
 Accrual |   | Utilized
 during
 2009 |  | Balance at
 March 31,
 2009 |       
|                                               |  |                                |        |                           |   |                        |  |                             |       
|Employee severance                             |  | $                              |       |                           | $ | 651                    |  | $                           | (651   | ) | $ |       | 
|Employment agreement buy-outs                  |  |                                | 35     |                           |   | 82                     |  |                             | (117   | ) |   |       | 
|Lease terminations                             |  |                                | 8,885  |                           |   | 486                    |  |                             | (1,034 | ) |   | 8,337  | 
|Other assets, fees and facility exit costs     |  |                                | 2,394  |                           |   | 3,273                  |  |                             | (2,754 | ) |   | 2,913  | 
|                                               |  |                                |        |                           |   |                        |  |                             |        |   |   |        | 
|Total restructuring charges                    |  | $                              | 11,314 |                           |   | 4,492                  |  | $                           | (4,556 | ) | $ | 11,250 | 
|                                               |  |                                |        |                           |   |                        |  |                             |        |   |   |        | 
|                                               |  |                                |        |                           |   |                        |  |                             |        |   |   |        | 
|Other related charges                          |  |                                |        |                           |   | 2,425                  |  |                             |        |   |   |        | 
|                                               |  |                                |        |                           |   |                        |  |                             |        |   |   |        | 
|                                               |  |                                |        |                           |   |                        |  |                             |        |   |   |        | 
|Total restructuring and other related
 charges |  |                                |        |                           | $ | 6,917                  |  |                             |        |   |   |        | 
|                                               |  |                                |        |                           |   |                        |  |                             |        |   |   |        | 

As of March
31, 2009, the Company has made cumulative payments of approximately $17 million
of severance and other employee-related costs for the Omnicare Full Potential
Plan. The remaining liabilities at March 31, 2009, represent amounts not yet
paid relating to actions taken in connection with the program (primarily lease
payments and professional fees) and will be settled as these matters are
finalized. The provision/accrual and corresponding payment amounts relating to
employee severance are being accounted for primarily in accordance with SFAS
No. 112, Employers Accounting for Postemployment Benefits; and the
provision/accrual and corresponding payment amounts relating to employment
agreement buy-outs are being accounted for primarily in accordance with SFAS
No. 146, Accounting for Costs Associated with Exit or Disposal Activities
(SFAS 146).

2005 Program

In connection
with the 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
had liabilities of $3.5 million at December 31, 2008, of which $0.3 million was
utilized in the three months ended March 31, 2009. The remaining liabilities of
$3.2 million at March 31, 2009 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 recorded 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.

As previously
disclosed, the United States Attorneys Office, District of Massachusetts is
conducting an investigation relating to the Companys relationships with
certain manufacturers and distributors of pharmaceutical products and certain
customers, as well as with respect to

19

---



contracts with
certain companies acquired by the Company. Any actions resulting from this
investigation could result in civil or criminal proceedings against the
Company. The Company believes that it has complied with all applicable laws and
regulations with respect to these matters.

On October 27,
2008, the U.S. District Court in Boston, Massachusetts unsealed a qui tam
complaint against the Company that was originally filed under seal with the
court on July 16, 2002. This action was brought by Deborah Maguire as a private
party qui
tam relator on behalf of the federal government and various state
governments. On September 16, 2008, the U.S. Government filed a Notice that it
is not intervening in the action at this time.

A qui tam
action is always filed under seal. Before a qui tam action is unsealed, and typically
following an investigation by the government initiated after the filing of the qui tam
action, the government is required to notify the court of its decision whether
to intervene in the action. The government could seek to intervene in this
qui tam
action in the future with permission from the court. Where the government
ultimately declines to intervene, the qui tam relators may continue to pursue
the litigation at their own expense on behalf of the federal or state
government and, if successful, would receive a portion of the governments
recovery. On April 2, 2009, counsel for Ms. Maguire served the Company with the
complaint relating to this action.

The action
brought by Ms. Maguire alleges civil violations of the False Claims Act, 31
U.S.C. (S) 3729 et seq. and various state false claims statutes based on
allegations that the Company: submitted claims for name brand drugs when
actually providing generic versions of the same drug to nursing homes; provided
consultant pharmacist services to its customers at below-market rates to induce
the referral of pharmaceutical business in violation of the Anti-Kickback
Statute, 42 U.S.C. 1320a-7b; and accepted discounts from drug
manufacturers in return for recommending that certain pharmaceuticals be
prescribed to nursing home residents in violation of the Anti-Kickback Statute.
The unsealed action seeks damages provided for in the False Claims Act and
applicable state statutes.

In addition to the matters described above, on October 30 and 31, 2008, Omnicare was provided with copies of two
complaints against Omnicare and other Pharmaceutical manufacturer defendants that were previously filed
under seal with the U.S. District Court in Boston, Massachusetts. One
complaint was brought by Bernard Lisitza, and the other by David Kammerer,
both as private party qui tam relators on behalf of the federal
government and various state governments. The U.S. Government has notified
the court that it is not intervening in these actions at this time.

The action
brought by Mr. Kammerer alleges civil violations of the False Claims Act,
31 U.S.C. (S) 3729 et seq. and various state statutes based on allegations
that Omnicare accepted rebates, post-purchase discounts, grants and other
forms of remuneration from drug manufacturers in return for purchasing
pharmaceuticals from those manufacturers and taking steps to increase the
purchase of those manufacturers drugs in violation of the Anti-Kickback
Statute, 42 U.S.C.

20

---



(S) 1320a-7b
and applicable state statutes. The action brought by Mr. Lisitza
alleges civil violations of the False Claims Act and various state statutes
based on allegations that Omnicare: accepted rebates from drug manufacturers
in return for recommending to physicians that certain pharmaceuticals be
prescribed to nursing home residents in violation of the Anti-Kickback Statute
and applicable state statutes; made false statements and omissions to
physicians in connection with its recommendations of those pharmaceuticals; and
substituted certain pharmaceuticals without physician authorization. The
unsealed actions seek damages provided for in the False Claims Act and
applicable state statutes. On March 27 and April 3, 2009, counsel for Mr. Kammerer and Mr. Lisitza,
respectively, served the Company with the complaints relating to their respective actions against the
Company.  The Company and counsel for each of Ms. Maguire and Messrs. Kammerer and Lisitza have
stipulated that the Company shall have until June 5, 2009 to answer or otherwise respond to the complaints.

In addition to
the unsealed qui tam actions described above, the Company is aware of two
other qui
tam complaints against it and other companies that have been filed
with the U.S. District Court in Boston, Massachusetts and remain under seal.

On or about March 23, 2009, the Company reached an agreement in principle without admitting
liability, subject to board approval and reaching agreement on the global settlement described below, with
the U.S. Attorneys Office, District of Massachusetts, pursuant to which the Company would pay $75 million
to settle the claims raised in the two sealed complaints as well as the portion of Ms. Maguire's complaint
described above that relates to the Company's provision of consultant pharmacist services and other claims
covering similar conduct. Pursuant to this agreement in principle, the Company may withdraw its settlement
 offer of $75 million if it does not also reach a global settlement with the government of any other
actions and investigations pending against the Company covering conduct generally related to the matters
described in the remaining portions of the Maguire complaint and the Kammerer and Lisitza complaints
described above. There can be no assurance as to whether any such settlements will be reached.
If any settlements are reached, there can be no assurance as to the scope or terms of, or the ultimate
cost to the Company of, any such settlements.

Omnicare recorded a special litigation charge of $35 million pretax in its financial results
for the three months ended March 31, 2009 in order to increase the settlement reserve it has established
in connection with the investigation by the U.S. Attorneys Office, District of Massachusetts and the
related matters described above to $75 million. This special litigation charge and the settlement
reserve relate to the Companys estimate of potential settlement amounts and associated costs under
SFAS No. 5, Accounting for Contingencies. The Company cannot predict the ultimate outcome
of this matter or the amount, if any, of additional charges that may be taken in the future in
connection with this matter.

The Company
believes that all of the allegations described above are without merit and
intends to vigorously defend itself in these actions if pursued.

As previously disclosed, on November 14, 2006, the Company entered
    into a voluntary civil settlement of all federal and state civil claims arising
    from 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). Another issue alleged
    by one qui
    tam relator remains
under seal and was not resolved by the settlement. The settlement agreement did
not include any finding of wrongdoing or any admission of liability. 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.

As previously disclosed, on October 5, 2006,
the Company entered into a voluntary settlement agreement and a Corporate
Integrity Agreement with the State of Michigan to resolve the

21

---



Michigan
Attorney Generals 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 26, 2007, the Company also entered
into settlement agreements with the federal government and the State of Michigan
to resolve certain hospice claims relating to Specialized Pharmacy Services.
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. 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

22

---



amendments
would be permitted absent extraordinary circumstances. Plaintiffs thereafter
filed their second amended complaint on January 29, 2007. The second amended
complaint (i) expands the putative class to include all purchasers of Omnicare
common stock from August 3, 2005 through July 27, 2006, (ii) names two members
of the Companys board of directors as additional defendants, (iii) adds a new
plaintiff and a new claim for violation of Section 11 of the Securities Act of
1933 based on alleged false and misleading statements in the registration
statement filed in connection with the Companys December 2005 public offering,
(iv) alleges that the Company failed to timely disclose its contractual dispute
with UnitedHealth Group, Inc. and its affiliates (United), and (v) alleges
that the Company failed to timely record certain special litigation reserves.
The 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. 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 November 9, 2007, plaintiffs filed a notice of
appeal with the United States Court of Appeals for the Sixth Circuit with
respect to the dismissal of their case. Oral argument was held on September 18,
2008.

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.

23

---



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

The three
months ended March 31, 2009 and 2008 included a $41.7 million and $21.6 million
pretax charge ($32.5 million and $13.0 million after taxes), respectively,
reflected in the Litigation and other related professional fees line of the
Consolidated Statements of Income, primarily for litigation-related
professional expenses in connection with the Companys lawsuit against United,
certain other large customer disputes, the investigation by the United States
Attorneys Office, District of Massachusetts; the purported class and
derivative actions; the investigation by the federal government and certain
states relating to drug substitutions; the Companys response to subpoenas it
received relating to other legal proceedings to which the Company is not a
party; and the inquiry conducted by the Attorney Generals Office in Michigan
relating to certain billing issues under the Michigan Medicaid program.

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 has been cooperating with federal and state
officials who have been conducting investigations relating to the Heartland Matters
(as defined below). The Company continues to work to address and resolve certain
remaining issues, and fully restore centralized repackaging to its original levels.
In order to 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. 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. 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 March 31, 2009 included special charges of approximately
$2.0 million pretax (approximately $1.1 million and approximately $0.9 million
was recorded in the cost of sales and operating expenses sections of the Consolidated
Statements of Income, respectively) ($1.2 million after taxes) for additional
costs precipitated by the quality control, product recall and fire damage issues
at Heartland (Heartland
Matters).
The associated costs for the three months ended March 31, 2008 totaled $1.9 million
pretax ($1.6 million and $0.3 million was recorded in the cost of sales and operating
expenses sections of the Consolidated Statements of Income, respectively) ($1.1
million after taxes). The Company maintains product recall, property and casualty
and business interruption insurance, and the extent of insurance recovery for
these expenses continues to be reviewed by its outside advisors. As of March
31, 2009, the Company has received no material insurance recoveries.

Although the
Company cannot know with certainty 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

24

---



operations, financial
position or cash flows or, in the case of the investigations regarding certain
drug substitutions and the matters relating to the Heartland facility, that
these matters will be resolved in an amount that would not exceed the amount of
the pretax charges recorded by the Company.

As part of its
ongoing operations, the Company is subject to various inspections, audits,
inquiries and similar actions by third parties, as well as
governmental/regulatory authorities responsible for enforcing the laws and
regulations to which the Company is subject. The Company is also involved in
various legal actions arising in the normal course of business. These matters
are continuously being evaluated and, in many cases, are being contested by the
Company and the outcome is not predictable. Consequently, an estimate of the
possible loss or range of loss associated with certain actions cannot be made.
Although occasional adverse outcomes (or settlements) may occur and could
possibly have an adverse effect on the results of operations and cash flows in
any one accounting period, outside of the matters described in the preceding
paragraphs, the Company is not aware of any such matters whereby it is
presently believed that 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 March 31, 2009. The Companys other
segment is CRO Services, which provides comprehensive product development and
research services to client companies in pharmaceutical, biotechnology,
nutraceutical, medical devices and diagnostics industries in 31 countries
around the world at March 31, 2009, including the United States.

25

---



The table
below presents information about the segments as of and for the three months
ended March 31, 2009 and 2008, and should be read in conjunction with the
paragraph that follows (in thousands):

|                                               |  |                              |           |               |   |                              |   |                      |         |   |   |           |  
|---------------------------------------------- |  | ---------------------------- | --------- | ------------- | - | ---------------------------- | - | -------------------- | ------- | - | - | --------- | -
|                                               |  | Three months ended March 31, |          
|                                               |  |                             
|2009:                                          |  | Pharmacy
 Services           |           | CRO
 Services |   | Corporate and
 Consolidating |   | Consolidated
 Totals |        
|                                               |  |                              |           |               |   |                              |   |                      |         |   |   |           |  
|Net sales                                      |  | $                            | 1,518,817 |               | $ | 44,743                       |   | $                    |        |   | $ | 1,563,560 |  
|Depreciation and amortization expense          |  |                              | (22,067   | )             |   | (474                         | ) |                      | (14,200 | ) |   | (36,741   | )
|Restructuring and other related charges        |  |                              | (5,998    | )             |   | (52                          | ) |                      | (867    | ) |   | (6,917    | )
|Litigation and other related professional fees |  |                              | (41,665   | )             |   |                             |   |                      |        |   |   | (41,665   | )
|Heartland matters                              |  |                              | (1,993    | )             |   |                             |   |                      |        |   |   | (1,993    | )
|Acquisition and other related costs            |  |                              | (839      | )             |   |                             |   |                      |        |   |   | (839      | )
|Operating income (expense)                     |  |                              | 118,973   |               |   | 2,992                        |   |                      | (26,655 | ) |   | 95,310    |  
|Total assets                                   |  |                              | 6,884,829 |               |   | 166,984                      |   |                      | 389,760 |   |   | 7,441,573 |  
|Capital expenditures                           |  |                              | (7,745    | )             |   | (520                         | ) |                      | (554    | ) |   | (8,819    | )
|                                               |  |                              |           |               |   |                              |   |                      |         |   |   |           |  
|2008:                                          |  |                              |           |               |   |                              |   |                      |         |   |   |           |  
|                                               |  |                              |           |               |   |                              |   |                      |         |   |   |           |  
|Net sales                                      |  | $                            | 1,509,806 |               | $ | 49,173                       |   | $                    |        |   | $ | 1,558,979 |  
|Depreciation and amortization expense          |  |                              | (20,239   | )             |   | (439                         | ) |                      | (15,137 | ) |   | (35,815   | )
|Restructuring and other related charges        |  |                              | (5,096    | )             |   | (774                         | ) |                      | (578    | ) |   | (6,448    | )
|Litigation and other related professional fees |  |                              | (21,642   | )             |   |                             |   |                      |        |   |   | (21,642   | )
|Heartland matters                              |  |                              | (1,893    | )             |   |                             |   |                      |        |   |   | (1,893    | )
|Operating income (expense)                     |  |                              | 109,235   |               |   | 2,668                        |   |                      | (27,659 | ) |   | 84,244    |  
|Total assets                                   |  |                              | 6,917,435 |               |   | 187,168                      |   |                      | 459,314 |   |   | 7,563,917 |  
|Capital expenditures                           |  |                              | (11,924   | )             |   | (342                         | ) |                      | (173    | ) |   | (12,439   | )

In accordance with 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 month periods ended March 31, 2009 and 2008, reimbursable
out-of-pockets totaling $5.8 million and $7.4 million, respectively.

26

---



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 March 31, 2009 and December 31, 2008 for the balance sheets as well as
the statements of income and the statements of cash flows for the three months
ended March 31, 2009 and 2008. Management believes 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.

27

---



Note 13 - Guarantor Subsidiaries (Continued)

Summary
Consolidating Statements of Income - Unaudited(in thousands)

|                                                                           |  |                              |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|-------------------------------------------------------------------------- |  | ---------------------------- | ------- | ----------------------- | - | ----------------------------- | - | ---------------------------------------- | ------ | --------------------------------- | - | ------- | - | - | --------- | -
|                                                                           |  | Three months ended March 31, |        
|                                                                           |  |                              |        
|2009:                                                                      |  | Parent                       |         | Guarantor
 Subsidiaries |   | Non-
 Guarantor
 Subsidiaries |   | Consolidating/
 Eliminating
 Adjustments |        | Omnicare,
 Inc. and
 Subsidiaries |  
|                                                                           |  |                              |         |                         |   |                               |   |                                          |        |                                   |  
|Net sales                                                                  |  | $                            |        |                         | $ | 1,515,991                     |   | $                                        | 47,569 |                                   | $ |        |   | $ | 1,563,560 |  
|Cost of sales                                                              |  |                              |        |                         |   | 1,127,520                     |   |                                          | 37,516 |                                   |   |        |   |   | 1,165,036 |  
|Heartland matters                                                          |  |                              |        |                         |   | 1,102                         |   |                                          |       |                                   |   |        |   |   | 1,102     |  
|                                                                           |  |                              |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|Gross profit                                                               |  |                              |        |                         |   | 387,369                       |   |                                          | 10,053 |                                   |   |        |   |   | 397,422   |  
|Selling, general and administrative
 expenses                              |  |                              | 6,938   |                         |   | 211,173                       |   |                                          | 7,063  |                                   |   |        |   |   | 225,174   |  
|Provision for doubtful accounts                                            |  |                              |        |                         |   | 25,564                        |   |                                          | 1,062  |                                   |   |        |   |   | 26,626    |  
|Restructuring and other related charges                                    |  |                              |        |                         |   | 6,917                         |   |                                          |       |                                   |   |        |   |   | 6,917     |  
|Litigation and other related professional
 fees                            |  |                              |        |                         |   | 41,665                        |   |                                          |       |                                   |   |        |   |   | 41,665    |  
|Heartland matters                                                          |  |                              |        |                         |   | 891                           |   |                                          |       |                                   |   |        |   |   | 891       |  
|Acquisition and other related costs                                        |  |                              |        |                         |   | 839                           |   |                                          |       |                                   |   |        |   |   | 839       |  
|                                                                           |  |                              |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|Operating income (loss)                                                    |  |                              | (6,938  | )                       |   | 100,320                       |   |                                          | 1,928  |                                   |   |        |   |   | 95,310    |  
|Investment income                                                          |  |                              | 436     |                         |   | 1,971                         |   |                                          |       |                                   |   |        |   |   | 2,407     |  
|Interest expense, including amortization of
 discount on convertible notes |  |                              | (37,828 | )                       |   | (257                          | ) |                                          | (4     | )                                 |   |        |   |   | (38,089   | )
|                                                                           |  |                              |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|Income (loss) before income taxes                                          |  |                              | (44,330 | )                       |   | 102,034                       |   |                                          | 1,924  |                                   |   |        |   |   | 59,628    |  
|Income tax (benefit) expense                                               |  |                              | (16,970 | )                       |   | 44,967                        |   |                                          | 737    |                                   |   |        |   |   | 28,734    |  
|Equity in net income of subsidiaries                                       |  |                              | 58,254  |                         |   |                              |   |                                          |       |                                   |   | (58,254 | ) |   |          |  
|                                                                           |  |                              |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|Net income                                                                 |  | $                            | 30,894  |                         | $ | 57,067                        |   | $                                        | 1,187  |                                   | $ | (58,254 | ) | $ | 30,894    |  
|                                                                           |  |                              |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|                                                                           |  |                              |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|2008:                                                                      |  |                              |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|                                                                           |  |                              |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|Net sales                                                                  |  | $                            |        |                         | $ | 1,498,685                     |   | $                                        | 60,294 |                                   | $ |        |   | $ | 1,558,979 |  
|Cost of sales                                                              |  |                              |        |                         |   | 1,131,614                     |   |                                          | 46,149 |                                   |   |        |   |   | 1,177,763 |  
|Heartland matters                                                          |  |                              |        |                         |   | 1,574                         |   |                                          |       |                                   |   |        |   |   | 1,574     |  
|                                                                           |  |                              |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|Gross profit                                                               |  |                              |        |                         |   | 365,497                       |   |                                          | 14,145 |                                   |   |        |   |   | 379,642   |  
|Selling, general and administrative
 expenses                              |  |                              | 1,948   |                         |   | 224,995                       |   |                                          | 9,654  |                                   |   |        |   |   | 236,597   |  
|Provision for doubtful accounts                                            |  |                              |        |                         |   | 29,051                        |   |                                          | 1,341  |                                   |   |        |   |   | 30,392    |  
|Restructuring and other related charges                                    |  |                              |        |                         |   | 6,448                         |   |                                          |       |                                   |   |        |   |   | 6,448     |  
|Litigation and other related professional
 fees                            |  |                              |        |                         |   | 21,642                        |   |                                          |       |                                   |   |        |   |   | 21,642    |  
|Heartland matters                                                          |  |                              |        |                         |   | 319                           |   |                                          |       |                                   |   |        |   |   | 319       |  
|                                                                           |  |                              |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|Operating income (loss)                                                    |  |                              | (1,948  | )                       |   | 83,042                        |   |                                          | 3,150  |                                   |   |        |   |   | 84,244    |  
|Investment income                                                          |  |                              | 574     |                         |   | 2,037                         |   |                                          |       |                                   |   |        |   |   | 2,611     |  
|Interest expense, including amortization of
 discount on convertible notes |  |                              | (41,051 | )                       |   | (1,155                        | ) |                                          | (916   | )                                 |   |        |   |   | (43,122   | )
|                                                                           |  |                              |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|Income (loss) before income taxes                                          |  |                              | (42,425 | )                       |   | 83,924                        |   |                                          | 2,234  |                                   |   |        |   |   | 43,733    |  
|Income tax (benefit) expense                                               |  |                              | (16,768 | )                       |   | 33,460                        |   |                                          | 891    |                                   |   |        |   |   | 17,583    |  
|Equity in net income of subsidiaries                                       |  |                              | 51,807  |                         |   |                              |   |                                          |       |                                   |   | (51,807 | ) |   |          |  
|                                                                           |  |                              |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  
|Net income                                                                 |  | $                            | 26,150  |                         | $ | 50,464                        |   | $                                        | 1,343  |                                   | $ | (51,807 | ) | $ | 26,150    |  
|                                                                           |  |                              |         |                         |   |                               |   |                                          |        |                                   |   |         |   |   |           |  

28

---



Note 13 - Guarantor Subsidiaries (Continued)

Condensed Consolidating Balance Sheets(in thousands)

|                                                  |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|------------------------------------------------- |  | ------ | --------- | ----------------------- | - | ----------------------------- |  | ---------------------------------------- | ------- | --------------------------------- | - | ---------- | - | - | --------- | 
|As
 of March 31, 2009 (Unaudited):                |  | Parent |           | Guarantor
 Subsidiaries |   | Non-
 Guarantor
 Subsidiaries |  | Consolidating/
 Eliminating
 Adjustments |         | Omnicare,
 Inc. and
 Subsidiaries |  
|                                                  |  |        |           |                         |   |                               |  |                                          |         |                                   |  
|ASSETS                                            |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|Cash and cash equivalents                         |  | $      | 147,331   |                         | $ | 44,043                        |  | $                                        | 23,715  |                                   | $ |           |   | $ | 215,089   | 
|Restricted cash                                   |  |        |          |                         |   | 2,872                         |  |                                          |        |                                   |   |           |   |   | 2,872     | 
|Accounts receivable, net (including intercompany) |  |        |          |                         |   | 1,341,376                     |  |                                          | 59,379  |                                   |   | (35,919    | ) |   | 1,364,836 | 
|Unbilled receivables, CRO                         |  |        |          |                         |   | 23,931                        |  |                                          |        |                                   |   |           |   |   | 23,931    | 
|Inventories                                       |  |        |          |                         |   | 400,463                       |  |                                          | 9,580   |                                   |   |           |   |   | 410,043   | 
|Deferred income tax benefits, net-current         |  |        |          |                         |   | 143,074                       |  |                                          | 106     |                                   |   | (106       | ) |   | 143,074   | 
|Other current assets                              |  |        | 1,096     |                         |   | 182,830                       |  |                                          | 5,431   |                                   |   |           |   |   | 189,357   | 
|                                                  |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|Total current assets                              |  |        | 148,427   |                         |   | 2,138,589                     |  |                                          | 98,211  |                                   |   | (36,025    | ) |   | 2,349,202 | 
|                                                  |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|Properties and equipment, net                     |  |        |          |                         |   | 216,416                       |  |                                          | 6,560   |                                   |   |           |   |   | 222,976   | 
|Goodwill                                          |  |        |          |                         |   | 4,178,977                     |  |                                          | 93,764  |                                   |   |           |   |   | 4,272,741 | 
|Identifiable intangible assets, net               |  |        |          |                         |   | 325,663                       |  |                                          | 3,689   |                                   |   |           |   |   | 329,352   | 
|Other noncurrent assets                           |  |        | 37,403    |                         |   | 229,852                       |  |                                          | 47      |                                   |   |           |   |   | 267,302   | 
|Investment in subsidiaries                        |  |        | 6,065,238 |                         |   |                              |  |                                          |        |                                   |   | (6,065,238 | ) |   |          | 
|                                                  |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|Total assets                                      |  | $      | 6,251,068 |                         | $ | 7,089,497                     |  | $                                        | 202,271 |                                   | $ | (6,101,263 | ) | $ | 7,441,573 | 
|                                                  |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|                                                  |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|LIABILITIES AND STOCKHOLDERS EQUITY              |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|Current liabilities (including intercompany)      |  | $      | 42,995    |                         | $ | 626,474                       |  | $                                        | 9,185   |                                   | $ | (36,025    | ) | $ | 642,629   | 
|Long-term debt, notes and convertible debentures  |  |        | 2,283,413 |                         |   | 2,274                         |  |                                          | 56      |                                   |   |           |   |   | 2,285,743 | 
|Deferred income tax liabilities, net-noncurrent   |  |        | 73,108    |                         |   | 297,107                       |  |                                          | 11,098  |                                   |   |           |   |   | 381,313   | 
|Other noncurrent liabilities                      |  |        |          |                         |   | 278,846                       |  |                                          | 1,490   |                                   |   |           |   |   | 280,336   | 
|Stockholders equity                              |  |        | 3,851,552 |                         |   | 5,884,796                     |  |                                          | 180,442 |                                   |   | (6,065,238 | ) |   | 3,851,552 | 
|                                                  |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|Total liabilities and stockholders
equity        |  | $      | 6,251,068 |                         | $ | 7,089,497                     |  | $                                        | 202,271 |                                   | $ | (6,101,263 | ) | $ | 7,441,573 | 
|                                                  |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 

29

---



Note 13 - Guarantor Subsidiaries (Continued)

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

|                                                  |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|------------------------------------------------- |  | ------ | --------- | ----------------------- | - | ----------------------------- |  | ---------------------------------------- | ------- | --------------------------------- | - | ---------- | - | - | --------- | 
|As of
 December 31, 2008:                         |  | Parent |           | Guarantor
 Subsidiaries |   | Non-
 Guarantor
 Subsidiaries |  | Consolidating/
 Eliminating
 Adjustments |         | Omnicare,
 Inc. and
 Subsidiaries |  
|                                                  |  |        |           |                         |   |                               |  |                                          |         |                                   |  
|ASSETS                                            |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|Cash and cash equivalents                         |  | $      | 145,178   |                         | $ | 44,529                        |  | $                                        | 25,383  |                                   | $ |           |   | $ | 215,090   | 
|Restricted cash                                   |  |        |          |                         |   | 1,891                         |  |                                          |        |                                   |   |           |   |   | 1,891     | 
|Accounts receivable, net (including intercompany) |  |        |          |                         |   | 1,338,354                     |  |                                          | 60,865  |                                   |   | (32,064    | ) |   | 1,367,155 | 
|Unbilled receivables, CRO                         |  |        |          |                         |   | 22,329                        |  |                                          |        |                                   |   |           |   |   | 22,329    | 
|Inventories                                       |  |        |          |                         |   | 441,826                       |  |                                          | 10,922  |                                   |   |           |   |   | 452,748   | 
|Deferred income tax benefits, net-current         |  |        | 1,202     |                         |   | 132,991                       |  |                                          | 56      |                                   |   |           |   |   | 134,249   | 
|Other current assets                              |  |        | 1,270     |                         |   | 171,726                       |  |                                          | 5,235   |                                   |   |           |   |   | 178,231   | 
|                                                  |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|Total current assets                              |  |        | 147,650   |                         |   | 2,153,646                     |  |                                          | 102,461 |                                   |   | (32,064    | ) |   | 2,371,693 | 
|                                                  |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|Properties and equipment, net                     |  |        |          |                         |   | 212,416                       |  |                                          | 7,236   |                                   |   |           |   |   | 219,652   | 
|Goodwill                                          |  |        |          |                         |   | 4,159,159                     |  |                                          | 93,747  |                                   |   |           |   |   | 4,252,906 | 
|Identifiable intangible assets, net               |  |        |          |                         |   | 329,882                       |  |                                          | 3,887   |                                   |   |           |   |   | 333,769   | 
|Other noncurrent assets                           |  |        | 40,171    |                         |   | 232,008                       |  |                                          | 46      |                                   |   |           |   |   | 272,225   | 
|Investment in subsidiaries                        |  |        | 6,075,308 |                         |   |                              |  |                                          |        |                                   |   | (6,075,308 | ) |   |          | 
|                                                  |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|Total assets                                      |  | $      | 6,263,129 |                         | $ | 7,087,111                     |  | $                                        | 207,377 |                                   | $ | (6,107,372 | ) | $ | 7,450,245 | 
|                                                  |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|                                                  |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|LIABILITIES AND STOCKHOLDERS EQUITY              |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|Current liabilities (including intercompany)      |  | $      | 28,460    |                         | $ | 633,070                       |  | $                                        | 11,323  |                                   | $ | (32,064    | ) | $ | 640,789   | 
|Long-term debt, notes and convertible debentures  |  |        | 2,350,227 |                         |   | 2,594                         |  |                                          | 56      |                                   |   |           |   |   | 2,352,877 | 
|Deferred income tax liabilities, net-noncurrent   |  |        | 66,757    |                         |   | 285,361                       |  |                                          | 10,492  |                                   |   |           |   |   | 362,610   | 
|Other noncurrent liabilities                      |  |        |          |                         |   | 274,825                       |  |                                          | 1,459   |                                   |   |           |   |   | 276,284   | 
|Stockholders equity                              |  |        | 3,817,685 |                         |   | 5,891,261                     |  |                                          | 184,047 |                                   |   | (6,075,308 | ) |   | 3,817,685 | 
|                                                  |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|Total liabilities and stockholders equity        |  | $      | 6,263,129 |                         | $ | 7,087,111                     |  | $                                        | 207,377 |                                   | $ | (6,107,372 | ) | $ | 7,450,245 | 
|                                                  |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 

30

---



Note 13 - Guarantor Subsidiaries (Continued)

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

|                                                                                                      |  |                               |         |                         |   |                             |   |                                    |        |   |   |         |  
|----------------------------------------------------------------------------------------------------- |  | ----------------------------- | ------- | ----------------------- | - | --------------------------- | - | ---------------------------------- | ------ | - | - | ------- | -
|                                                                                                      |  | Three
 months ended March 31, |        
|                                                                                                      |  |                              
|2009:                                                                                                 |  | Parent                        |         | Guarantor
 Subsidiaries |   | Non-Guarantor
 Subsidiaries |   | Omnicare, Inc.
  and
 Subsidiaries |       
|                                                                                                      |  |                               |         |                         |   |                             |   |                                    |       
|Cash flows from operating activities:                                                                 |  |                               |         |                         |   |                             |   |                                    |        |   |   |         |  
|Net cash flows from operating activities                                                              |  | $                             | 10,113  |                         | $ | 114,092                     |   | $                                  | (3,287 | ) | $ | 120,918 |  
|                                                                                                      |  |                               |         |                         |   |                             |   |                                    |        |   |   |         |  
|                                                                                                      |  |                               |         |                         |   |                             |   |                                    |        |   |   |         |  
|Cash flows from investing activities:                                                                 |  |                               |         |                         |   |                             |   |                                    |        |   |   |         |  
|Acquisition of businesses, net of cash received                                                       |  |                               |        |                         |   | (31,710                     | ) |                                    |       |   |   | (31,710 | )
|Capital expenditures                                                                                  |  |                               |        |                         |   | (8,880                      | ) |                                    | 61     |   |   | (8,819  | )
|Transfer of cash to trusts for employee health and severance costs,
net
 of payments out of the trust |  |                               |        |                         |   | 1,448                       |   |                                    |       |   |   | 1,448   |  
|Other                                                                                                 |  |                               |        |                         |   | (2,394                      | ) |                                    |       |   |   | (2,394  | )
|                                                                                                      |  |                               |         |                         |   |                             |   |                                    |        |   |   |         |  
|Net cash flows used in investing activities                                                           |  |                               |        |                         |   | (41,536                     | ) |                                    | 61     |   |   | (41,475 | )
|                                                                                                      |  |                               |         |                         |   |                             |   |                                    |        |   |   |         |  
|                                                                                                      |  |                               |         |                         |   |                             |   |                                    |        |   |   |         |  
|Cash flows from financing activities:                                                                 |  |                               |         |                         |   |                             |   |                                    |        |   |   |         |  
|Net payments
    on revolving credit facility and term A loan                                         |  |                               | (75,000 | )                       |   |                            |   |                                    |       |   |   | (75,000 | )
|Payments on long-term borrowings and obligations                                                      |  |                               | (494    | )                       |   |                            |   |                                    |       |   |   | (494    | )
|(Decrease) increase in cash overdraft balance                                                         |  |                               | (2,711  | )                       |   | 1,308                       |   |                                    |       |   |   | (1,403  | )
|Payments for stock awards and exercise of stock options, net of stock
 tendered in payment            |  |                               | (1,870  | )                       |   |                            |   |                                    |       |   |   | (1,870  | )
|Excess tax benefits from stock-based compensation                                                     |  |                               | 438     |                         |   |                            |   |                                    |       |   |   | 438     |  
|Dividends paid                                                                                        |  |                               | (2,673  | )                       |   |                            |   |                                    |       |   |   | (2,673  | )
|Other                                                                                                 |  |                               | 74,350  |                         |   | (74,350                     | ) |                                    |       |   |   |        |  
|                                                                                                      |  |                               |         |                         |   |                             |   |                                    |        |   |   |         |  
|Net cash flows used in financing activities                                                           |  |                               | (7,960  | )                       |   | (73,042                     | ) |                                    |       |   |   | (81,002 | )
|                                                                                                      |  |                               |         |                         |   |                             |   |                                    |        |   |   |         |  
|                                                                                                      |  |                               |         |                         |   |                             |   |                                    |        |   |   |         |  
|Effect of exchange rate changes on cash                                                               |  |                               |        |                         |   |                            |   |                                    | 1,558  |   |   | 1,558   |  
|                                                                                                      |  |                               |         |                         |   |                             |   |                                    |        |   |   |         |  
|                                                                                                      |  |                               |         |                         |   |                             |   |                                    |        |   |   |         |  
|Net increase (decrease) in cash and cash equivalents                                                  |  |                               | 2,153   |                         |   | (486                        | ) |                                    | (1,668 | ) |   | (1      | )
|Cash and cash equivalents at beginning of period                                                      |  |                               | 145,178 |                         |   | 44,529                      |   |                                    | 25,383 |   |   | 215,090 |  
|                                                                                                      |  |                               |         |                         |   |                             |   |                                    |        |   |   |         |  
|Cash and cash equivalents at end of period                                                            |  | $                             | 147,331 |                         | $ | 44,043                      |   | $                                  | 23,715 |   | $ | 215,089 |  
|                                                                                                      |  |                               |         |                         |   |                             |   |                                    |        |   |   |         |  

31

---



Note 13 - Guarantor Subsidiaries (Continued)

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

|                                                                                                      |  |        |                              |                         |   |                             |   |                                   |         |   |   |         |   | 
|----------------------------------------------------------------------------------------------------- |  | ------ | ---------------------------- | ----------------------- | - | --------------------------- | - | --------------------------------- | ------- | - | - | ------- | - | 
|                                                                                                      |  |        | Three months ended March 31, |                        
|                                                                                                      |  |        |                              |                        
|2008:                                                                                                 |  | Parent |                              | Guarantor
 Subsidiaries |   | Non-Guarantor
 Subsidiaries |   | Omnicare, Inc.
 and
 Subsidiaries |        
|                                                                                                      |  |        |                              |                         |   |                             |   |                                   |         |   |   |         |  
|Cash flows from operating activities:                                                                 |  |        |                              |                         |   |                             |   |                                   |         |   |   |         |  
|Net cash flows from operating activities                                                              |  | $      | 10,759                       |                         | $ | 142,984                     |   | $                                 | (11,479 | ) | $ | 142,264 |  
|                                                                                                      |  |        |                              |                         |   |                             |   |                                   |         |   |   |         |   | 
|                                                                                                      |  |        |                              |                         |   |                             |   |                                   |         |   |   |         |   | 
|Cash flows from investing activities:                                                                 |  |        |                              |                         |   |                             |   |                                   |         |   |   |         |  
|Acquisition of businesses, net of cash received                                                       |  |        |                             |                         |   | (35,983                     | ) |                                   |        |   |   | (35,983 | )
|Capital expenditures                                                                                  |  |        |                             |                         |   | (12,242                     | ) |                                   | (197    | ) |   | (12,439 | )
|Transfer of cash to trusts for employee health and severance costs,
 net of payments out of the trust |  |        |                             |                         |   | (11,542                     | ) |                                   |        |   |   | (11,542 | )
|Other                                                                                                 |  |        |                             |                         |   | (32                         | ) |                                   |        |   |   | (32     | )
|                                                                                                      |  |        |                              |                         |   |                             |   |                                   |         |   |   |         |   | 
|Net cash flows used in investing activities                                                           |  |        |                             |                         |   | (59,799                     | ) |                                   | (197    | ) |   | (59,996 | )
|                                                                                                      |  |        |                              |                         |   |                             |   |                                   |         |   |   |         |   | 
|                                                                                                      |  |        |                              |                         |   |                             |   |                                   |         |   |   |         |   | 
|Cash flows from financing activities:                                                                 |  |        |                              |                         |   |                             |   |                                   |         |   |   |         |  
|Net payments on revolving credit facility and term A loan                                             |  |        | (50,000                      | )                       |   |                            |   |                                   |        |   |   | (50,000 | )
|Payments on long-term borrowings and obligations                                                      |  |        | (963                         | )                       |   |                            |   |                                   |        |   |   | (963    | )
|Increase (decrease) in cash overdraft balance                                                         |  |        | (900                         | )                       |   | 43                          |   |                                   |        |   |   | (857    | )
|Payments for stock awards and exercise of stock options, net of stock
 tendered in payment            |  |        | (3,584                       | )                       |   |                            |   |                                   |        |   |   | (3,584  | )
|Excess tax benefits from stock-based compensation                                                     |  |        | 82                           |                         |   |                            |   |                                   |        |   |   | 82      |  
|Dividends paid                                                                                        |  |        | (2,746                       | )                       |   |                            |   |                                   |        |   |   | (2,746  | )
|Other                                                                                                 |  |        | 92,923                       |                         |   | (92,923                     | ) |                                   |        |   |   |        |  
|                                                                                                      |  |        |                              |                         |   |                             |   |                                   |         |   |   |         |   | 
|Net cash flows from financing activities                                                              |  |        | 34,812                       |                         |   | (92,880                     | ) |                                   |        |   |   | (58,068 | )
|                                                                                                      |  |        |                              |                         |   |                             |   |                                   |         |   |   |         |   | 
|                                                                                                      |  |        |                              |                         |   |                             |   |                                   |         |   |   |         |   | 
|Effect of exchange rate changes on cash                                                               |  |        |                             |                         |   |                            |   |                                   | 2,612   |   |   | 2,612   |  
|                                                                                                      |  |        |                              |                         |   |                             |   |                                   |         |   |   |         |   | 
|                                                                                                      |  |        |                              |                         |   |                             |   |                                   |         |   |   |         |   | 
|Net increase (decrease) in cash and cash equivalents                                                  |  |        | 45,571                       |                         |   | (9,695                      | ) |                                   | (9,064  | ) |   | 26,812  |  
|Cash and cash equivalents at beginning of period                                                      |  |        | 171,779                      |                         |   | 70,088                      |   |                                   | 32,581  |   |   | 274,448 |  
|                                                                                                      |  |        |                              |                         |   |                             |   |                                   |         |   |   |         |   | 
|Cash and cash equivalents at end of period                                                            |  | $      | 217,350                      |                         | $ | 60,393                      |   | $                                 | 23,517  |   | $ | 301,260 |  
|                                                                                                      |  |        |                              |                         |   |                             |   |                                   |         |   |   |         |   | 

32

---



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
March 31, 2009 and December 31, 2008 for the balance sheets, as well as the
statements of income and the statements of cash flows for the three months
ended March 31, 2009 and 2008. Management believes 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.

33

---



Summary Consolidating Statements of Income -
Unaudited(in thousands)

|                                                                           |  |                              |         |                       |   |                               |   |                                          |           |                                   |   |         |   |   |           |  
|-------------------------------------------------------------------------- |  | ---------------------------- | ------- | --------------------- | - | ----------------------------- | - | ---------------------------------------- | --------- | --------------------------------- | - | ------- | - | - | --------- | -
|                                                                           |  | Three months ended March 31, |        
|                                                                           |  |                              |        
|2009:                                                                      |  | Parent                       |         | Guarantor
 Subsidiary |   | Non-
 Guarantor
 Subsidiaries |   | Consolidating/
 Eliminating
 Adjustments |           | Omnicare,
 Inc. and
 Subsidiaries |  
|                                                                           |  |                              |         |                       |   |                               |   |                                          |           |                                   |   |         |   |   |           |  
|Net sales                                                                  |  | $                            |        |                       | $ |                              |   | $                                        | 1,563,560 |                                   | $ |        |   | $ | 1,563,560 |  
|Cost of sales                                                              |  |                              |        |                       |   |                              |   |                                          | 1,165,036 |                                   |   |        |   |   | 1,165,036 |  
|Heartland matters                                                          |  |                              |        |                       |   |                              |   |                                          | 1,102     |                                   |   |        |   |   | 1,102     |  
|                                                                           |  |                              |         |                       |   |                               |   |                                          |           |                                   |   |         |   |   |           |  
|Gross profit                                                               |  |                              |        |                       |   |                              |   |                                          | 397,422   |                                   |   |        |   |   | 397,422   |  
|Selling, general and administrative
 expenses                              |  |                              | 6,938   |                       |   | 421                           |   |                                          | 217,815   |                                   |   |        |   |   | 225,174   |  
|Provision for doubtful accounts                                            |  |                              |        |                       |   |                              |   |                                          | 26,626    |                                   |   |        |   |   | 26,626    |  
|Restructuring and other related charges                                    |  |                              |        |                       |   |                              |   |                                          | 6,917     |                                   |   |        |   |   | 6,917     |  
|Litigation and other related professional
 fees                            |  |                              |        |                       |   |                              |   |                                          | 41,665    |                                   |   |        |   |   | 41,665    |  
|Heartland matters                                                          |  |                              |        |                       |   |                              |   |                                          | 891       |                                   |   |        |   |   | 891       |  
|Acquisition and other related costs                                        |  |                              |        |                       |   |                              |   |                                          | 839       |                                   |   |        |   |   | 839       |  
|                                                                           |  |                              |         |                       |   |                               |   |                                          |           |                                   |   |         |   |   |           |  
|Operating income (loss)                                                    |  |                              | (6,938  | )                     |   | (421                          | ) |                                          | 102,669   |                                   |   |        |   |   | 95,310    |  
|Investment income                                                          |  |                              | 436     |                       |   |                              |   |                                          | 1,971     |                                   |   |        |   |   | 2,407     |  
|Interest expense, including amortization of
 discount on convertible notes |  |                              | (37,828 | )                     |   |                              |   |                                          | (261      | )                                 |   |        |   |   | (38,089   | )
|                                                                           |  |                              |         |                       |   |                               |   |                                          |           |                                   |   |         |   |   |           |  
|Income (loss) before income taxes                                          |  |                              | (44,330 | )                     |   | (421                          | ) |                                          | 104,379   |                                   |   |        |   |   | 59,628    |  
|Income tax (benefit) expense                                               |  |                              | (16,970 | )                     |   | (161                          | ) |                                          | 45,865    |                                   |   |        |   |   | 28,734    |  
|Equity in net income of subsidiaries                                       |  |                              | 58,254  |                       |   |                              |   |                                          |          |                                   |   | (58,254 | ) |   |          |  
|                                                                           |  |                              |         |                       |   |                               |   |                                          |           |                                   |   |         |   |   |           |  
|Net income (loss)                                                          |  | $                            | 30,894  |                       | $ | (260                          | ) | $                                        | 58,514    |                                   | $ | (58,254 | ) | $ | 30,894    |  
|                                                                           |  |                              |         |                       |   |                               |   |                                          |           |                                   |   |         |   |   |           |  
|                                                                           |  |                              |         |                       |   |                               |   |                                          |           |                                   |   |         |   |   |           |  
|2008:                                                                      |  |                              |         |                       |   |                               |   |                                          |           |                                   |   |         |   |   |           |  
|                                                                           |  |                              |         |                       |   |                               |   |                                          |           |                                   |   |         |   |   |           |  
|Net sales                                                                  |  | $                            |        |                       | $ |                              |   | $                                        | 1,558,979 |                                   | $ |        |   | $ | 1,558,979 |  
|Cost of sales                                                              |  |                              |        |                       |   |                              |   |                                          | 1,177,763 |                                   |   |        |   |   | 1,177,763 |  
|Heartland matters                                                          |  |                              |        |                       |   |                              |   |                                          | 1,574     |                                   |   |        |   |   | 1,574     |  
|                                                                           |  |                              |         |                       |   |                               |   |                                          |           |                                   |   |         |   |   |           |  
|Gross profit                                                               |  |                              |        |                       |   |                              |   |                                          | 379,642   |                                   |   |        |   |   | 379,642   |  
|Selling, general and administrative
 expenses                              |  |                              | 1,948   |                       |   | 300                           |   |                                          | 234,349   |                                   |   |        |   |   | 236,597   |  
|Provision for doubtful accounts                                            |  |                              |        |                       |   |                              |   |                                          | 30,392    |                                   |   |        |   |   | 30,392    |  
|Restructuring and other related charges                                    |  |                              |        |                       |   |                              |   |                                          | 6,448     |                                   |   |        |   |   | 6,448     |  
|Litigation and other related professional
 fees                            |  |                              |        |                       |   |                              |   |                                          | 21,642    |                                   |   |        |   |   | 21,642    |  
|Heartland matters                                                          |  |                              |        |                       |   |                              |   |                                          | 319       |                                   |   |        |   |   | 319       |  
|                                                                           |  |                              |         |                       |   |                               |   |                                          |           |                                   |   |         |   |   |           |  
|Operating income (loss)                                                    |  |                              | (1,948  | )                     |   | (300                          | ) |                                          | 86,492    |                                   |   |        |   |   | 84,244    |  
|Investment income                                                          |  |                              | 574     |                       |   |                              |   |                                          | 2,037     |                                   |   |        |   |   | 2,611     |  
|Interest expense, including amortization of
 discount on convertible notes |  |                              | (41,051 | )                     |   |                              |   |                                          | (2,071    | )                                 |   |        |   |   | (43,122   | )
|                                                                           |  |                              |         |                       |   |                               |   |                                          |           |                                   |   |         |   |   |           |  
|Income (loss) before income taxes                                          |  |                              | (42,425 | )                     |   | (300                          | ) |                                          | 86,458    |                                   |   |        |   |   | 43,733    |  
|Income tax (benefit) expense                                               |  |                              | (16,768 | )                     |   | (120                          | ) |                                          | 34,471    |                                   |   |        |   |   | 17,583    |  
|Equity in net income of subsidiaries                                       |  |                              | 51,807  |                       |   |                              |   |                                          |          |                                   |   | (51,807 | ) |   |          |  
|                                                                           |  |                              |         |                       |   |                               |   |                                          |           |                                   |   |         |   |   |           |  
|Net income (loss)                                                          |  | $                            | 26,150  |                       | $ | (180                          | ) | $                                        | 51,987    |                                   | $ | (51,807 | ) | $ | 26,150    |  
|                                                                           |  |                              |         |                       |   |                               |   |                                          |           |                                   |   |         |   |   |           |  

34

---



Note 13 - Guarantor Subsidiaries (Continued)

Condensed Consolidating Balance Sheets(in thousands)

|                                                  |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|------------------------------------------------- |  | ------ | --------- | --------------------- | - | ----------------------------- |  | ---------------------------------------- | --------- | --------------------------------- | - | ---------- | - | - | --------- | 
|As of March 31, 2009 (Unaudited):                 |  | Parent |           | Guarantor
 Subsidiary |   | Non-
 Guarantor
 Subsidiaries |  | Consolidating/
 Eliminating
 Adjustments |           | Omnicare,
 Inc. and
 Subsidiaries |  
|                                                  |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|ASSETS                                            |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|Cash and cash equivalents                         |  | $      | 147,331   |                       | $ |                              |  | $                                        | 67,758    |                                   | $ |           |   | $ | 215,089   | 
|Restricted cash                                   |  |        |          |                       |   |                              |  |                                          | 2,872     |                                   |   |           |   |   | 2,872     | 
|Accounts receivable, net (including intercompany) |  |        |          |                       |   | 150                           |  |                                          | 1,364,836 |                                   |   | (150       | ) |   | 1,364,836 | 
|Unbilled receivables, CRO                         |  |        |          |                       |   |                              |  |                                          | 23,931    |                                   |   |           |   |   | 23,931    | 
|Inventories                                       |  |        |          |                       |   |                              |  |                                          | 410,043   |                                   |   |           |   |   | 410,043   | 
|Deferred income tax benefits, net-current         |  |        |          |                       |   |                              |  |                                          | 143,180   |                                   |   | (106       | ) |   | 143,074   | 
|Other current assets                              |  |        | 1,096     |                       |   |                              |  |                                          | 188,261   |                                   |   |           |   |   | 189,357   | 
|                                                  |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|Total current assets                              |  |        | 148,427   |                       |   | 150                           |  |                                          | 2,200,881 |                                   |   | (256       | ) |   | 2,349,202 | 
|                                                  |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|Properties and equipment, net                     |  |        |          |                       |   | 25                            |  |                                          | 222,951   |                                   |   |           |   |   | 222,976   | 
|Goodwill                                          |  |        |          |                       |   |                              |  |                                          | 4,272,741 |                                   |   |           |   |   | 4,272,741 | 
|Identifiable intangible assets, net               |  |        |          |                       |   |                              |  |                                          | 329,352   |                                   |   |           |   |   | 329,352   | 
|Other noncurrent assets                           |  |        | 37,403    |                       |   | 19                            |  |                                          | 229,880   |                                   |   |           |   |   | 267,302   | 
|Investment in subsidiaries                        |  |        | 6,065,238 |                       |   |                              |  |                                          |          |                                   |   | (6,065,238 | ) |   |          | 
|                                                  |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|Total assets                                      |  | $      | 6,251,068 |                       | $ | 194                           |  | $                                        | 7,255,805 |                                   | $ | (6,065,494 | ) | $ | 7,441,573 | 
|                                                  |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|                                                  |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|LIABILITIES AND STOCKHOLDERS EQUITY              |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|Current liabilities (including intercompany)      |  | $      | 42,995    |                       | $ | 84                            |  | $                                        | 599,700   |                                   | $ | (150       | ) | $ | 642,629   | 
|Long-term debt, notes and convertible debentures  |  |        | 2,283,413 |                       |   |                              |  |                                          | 2,330     |                                   |   |           |   |   | 2,285,743 | 
|Deferred income tax liabilities, net-noncurrent   |  |        | 73,108    |                       |   |                              |  |                                          | 308,311   |                                   |   | (106       | ) |   | 381,313   | 
|Other noncurrent liabilities                      |  |        |          |                       |   |                              |  |                                          | 280,336   |                                   |   |           |   |   | 280,336   | 
|Stockholders equity                              |  |        | 3,851,552 |                       |   | 110                           |  |                                          | 6,065,128 |                                   |   | (6,065,238 | ) |   | 3,851,552 | 
|                                                  |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|Total liabilities and stockholders equity        |  | $      | 6,251,068 |                       | $ | 194                           |  | $                                        | 7,255,805 |                                   | $ | (6,065,494 | ) | $ | 7,441,573 | 
|                                                  |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 

35

---



Note 13 - Guarantor Subsidiaries (Continued)

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

|                                                  |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|------------------------------------------------- |  | ------ | --------- | --------------------- | - | ----------------------------- |  | ---------------------------------------- | --------- | --------------------------------- | - | ---------- | - | - | --------- | 
|As of
 December 31, 2008:                         |  | Parent |           | Guarantor
 Subsidiary |   | Non-
 Guarantor
 Subsidiaries |  | Consolidating/
 Eliminating
 Adjustments |           | Omnicare,
 Inc. and
 Subsidiaries |  
|                                                  |  |        |           |                       |   |                               |  |                                          |           |                                   |  
|ASSETS                                            |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|Cash and cash equivalents                         |  | $      | 145,178   |                       | $ |                              |  | $                                        | 69,912    |                                   | $ |           |   | $ | 215,090   | 
|Restricted cash                                   |  |        |          |                       |   |                              |  |                                          | 1,891     |                                   |   |           |   |   | 1,891     | 
|Accounts receivable, net (including intercompany) |  |        |          |                       |   | 66                            |  |                                          | 1,367,155 |                                   |   | (66        | ) |   | 1,367,155 | 
|Unbilled receivables, CRO                         |  |        |          |                       |   |                              |  |                                          | 22,329    |                                   |   |           |   |   | 22,329    | 
|Inventories                                       |  |        |          |                       |   |                              |  |                                          | 452,748   |                                   |   |           |   |   | 452,748   | 
|Deferred income tax benefits, net-current         |  |        | 1,202     |                       |   |                              |  |                                          | 133,047   |                                   |   |           |   |   | 134,249   | 
|Other current assets                              |  |        | 1,270     |                       |   |                              |  |                                          | 176,961   |                                   |   |           |   |   | 178,231   | 
|                                                  |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|Total current assets                              |  |        | 147,650   |                       |   | 66                            |  |                                          | 2,224,043 |                                   |   | (66        | ) |   | 2,371,693 | 
|                                                  |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|Properties and equipment, net                     |  |        |          |                       |   | 26                            |  |                                          | 219,626   |                                   |   |           |   |   | 219,652   | 
|Goodwill                                          |  |        |          |                       |   |                              |  |                                          | 4,252,906 |                                   |   |           |   |   | 4,252,906 | 
|Identifiable intangible assets, net               |  |        |          |                       |   |                              |  |                                          | 333,769   |                                   |   |           |   |   | 333,769   | 
|Other noncurrent assets                           |  |        | 40,171    |                       |   | 19                            |  |                                          | 232,035   |                                   |   |           |   |   | 272,225   | 
|Investment in subsidiaries                        |  |        | 6,075,308 |                       |   |                              |  |                                          |          |                                   |   | (6,075,308 | ) |   |          | 
|                                                  |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|Total assets                                      |  | $      | 6,263,129 |                       | $ | 111                           |  | $                                        | 7,262,379 |                                   | $ | (6,075,374 | ) | $ | 7,450,245 | 
|                                                  |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|                                                  |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|LIABILITIES AND STOCKHOLDERS EQUITY              |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|Current liabilities (including intercompany)      |  | $      | 28,460    |                       | $ |                              |  | $                                        | 612,395   |                                   | $ | (66        | ) | $ | 640,789   | 
|Long-term debt, notes and convertible debentures  |  |        | 2,350,227 |                       |   |                              |  |                                          | 2,650     |                                   |   |           |   |   | 2,352,877 | 
|Deferred income tax liabilities, net-noncurrent   |  |        | 66,757    |                       |   |                              |  |                                          | 295,853   |                                   |   |           |   |   | 362,610   | 
|Other noncurrent liabilities                      |  |        |          |                       |   |                              |  |                                          | 276,284   |                                   |   |           |   |   | 276,284   | 
|Stockholders equity                              |  |        | 3,817,685 |                       |   | 111                           |  |                                          | 6,075,197 |                                   |   | (6,075,308 | ) |   | 3,817,685 | 
|                                                  |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|Total liabilities and stockholders
equity        |  | $      | 6,263,129 |                       | $ | 111                           |  | $                                        | 7,262,379 |                                   | $ | (6,075,374 | ) | $ | 7,450,245 | 
|                                                  |  |        |           |                       |   |                               |  |                                          |           |                                   |   |            |   |   |           | 

36

---



Note 13 - Guarantor Subsidiaries (Continued)

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

|                                                                                                      |  |                               |         |                       |   |                             |  |                                   |         |   |   |         |  
|----------------------------------------------------------------------------------------------------- |  | ----------------------------- | ------- | --------------------- | - | --------------------------- |  | --------------------------------- | ------- | - | - | ------- | -
|                                                                                                      |  | Three
 months ended March 31, |        
|                                                                                                      |  |                               |        
|2009:                                                                                                 |  | Parent                        |         | Guarantor
 Subsidiary |   | Non-Guarantor
 Subsidiaries |  | Omnicare,
 Inc. and
 Subsidiaries |        
|                                                                                                      |  |                               |         |                       |   |                             |  |                                   |        
|Cash flows from operating activities:                                                                 |  |                               |         |                       |   |                             |  |                                   |         |   |   |         |  
|Net cash flows from operating activities                                                              |  | $                             | 10,113  |                       | $ |                            |  | $                                 | 110,805 |   | $ | 120,918 |  
|                                                                                                      |  |                               |         |                       |   |                             |  |                                   |         |   |   |         |  
|                                                                                                      |  |                               |         |                       |   |                             |  |                                   |         |   |   |         |  
|Cash flows from investing activities:                                                                 |  |                               |         |                       |   |                             |  |                                   |         |   |   |         |  
|Acquisition of businesses, net of cash received                                                       |  |                               |        |                       |   |                            |  |                                   | (31,710 | ) |   | (31,710 | )
|Capital expenditures                                                                                  |  |                               |        |                       |   |                            |  |                                   | (8,819  | ) |   | (8,819  | )
|Transfer of cash to trusts for employee health and severance costs,
 net of payments out of the trust |  |                               |        |                       |   |                            |  |                                   | 1,448   |   |   | 1,448   |  
|Other                                                                                                 |  |                               |        |                       |   |                            |  |                                   | (2,394  | ) |   | (2,394  | )
|                                                                                                      |  |                               |         |                       |   |                             |  |                                   |         |   |   |         |  
|Net cash flows used in investing
activities                                                           |  |                               |        |                       |   |                            |  |                                   | (41,475 | ) |   | (41,475 | )
|                                                                                                      |  |                               |         |                       |   |                             |  |                                   |         |   |   |         |  
|                                                                                                      |  |                               |         |                       |   |                             |  |                                   |         |   |   |         |  
|Cash flows from financing activities:                                                                 |  |                               |         |                       |   |                             |  |                                   |         |   |   |         |  
|Net payments
    on revolving credit facility and term A loan                                         |  |                               | (75,000 | )                     |   |                            |  |                                   |        |   |   | (75,000 | )
|Payments on long-term borrowings and obligations                                                      |  |                               | (494    | )                     |   |                            |  |                                   |        |   |   | (494    | )
|(Decrease) increase in cash overdraft balance                                                         |  |                               | (2,711  | )                     |   |                            |  |                                   | 1,308   |   |   | (1,403  | )
|Payments for stock awards and exercise of stock options, net of stock
 tendered in payment            |  |                               | (1,870  | )                     |   |                            |  |                                   |        |   |   | (1,870  | )
|Excess tax benefits from stock-based compensation                                                     |  |                               | 438     |                       |   |                            |  |                                   |        |   |   | 438     |  
|Dividends paid                                                                                        |  |                               | (2,673  | )                     |   |                            |  |                                   |        |   |   | (2,673  | )
|Other                                                                                                 |  |                               | 74,350  |                       |   |                            |  |                                   | (74,350 | ) |   |        |  
|                                                                                                      |  |                               |         |                       |   |                             |  |                                   |         |   |   |         |  
|Net cash flows used in financing
activities                                                           |  |                               | (7,960  | )                     |   |                            |  |                                   | (73,042 | ) |   | (81,002 | )
|                                                                                                      |  |                               |         |                       |   |                             |  |                                   |         |   |   |         |  
|                                                                                                      |  |                               |         |                       |   |                             |  |                                   |         |   |   |         |  
|Effect of exchange rate changes on cash                                                               |  |                               |        |                       |   |                            |  |                                   | 1,558   |   |   | 1,558   |  
|                                                                                                      |  |                               |         |                       |   |                             |  |                                   |         |   |   |         |  
|                                                                                                      |  |                               |         |                       |   |                             |  |                                   |         |   |   |         |  
|Net increase (decrease) in cash and cash equivalents                                                  |  |                               | 2,153   |                       |   |                            |  |                                   | (2,154  | ) |   | (1      | )
|Cash and cash equivalents at beginning of period                                                      |  |                               | 145,178 |                       |   |                            |  |                                   | 69,912  |   |   | 215,090 |  
|                                                                                                      |  |                               |         |                       |   |                             |  |                                   |         |   |   |         |  
|Cash and cash equivalents at end of period                                                            |  | $                             | 147,331 |                       | $ |                            |  | $                                 | 67,758  |   | $ | 215,089 |  
|                                                                                                      |  |                               |         |                       |   |                             |  |                                   |         |   |   |         |  

37

---



Note 13 - Guarantor Subsidiaries (Continued)

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

|                                                                                                      |  |                              |         |                       |   |                             |  |                                   |         |   |   |         |  
|----------------------------------------------------------------------------------------------------- |  | ---------------------------- | ------- | --------------------- | - | --------------------------- |  | --------------------------------- | ------- | - | - | ------- | -
|                                                                                                      |  | Three months ended March 31, |        
|                                                                                                      |  |                              |        
|2008:                                                                                                 |  | Parent                       |         | Guarantor
 Subsidiary |   | Non-Guarantor
 Subsidiaries |  | Omnicare, Inc.
 and
 Subsidiaries |        
|                                                                                                      |  |                              |         |                       |   |                             |  |                                   |        
|Cash flows from operating activities:                                                                 |  |                              |         |                       |   |                             |  |                                   |         |   |   |         |  
|Net cash flows from operating activities                                                              |  | $                            | 10,759  |                       | $ |                            |  | $                                 | 131,505 |   | $ | 142,264 |  
|                                                                                                      |  |                              |         |                       |   |                             |  |                                   |         |   |   |         |  
|                                                                                                      |  |                              |         |                       |   |                             |  |                                   |         |   |   |         |  
|Cash flows from investing activities:                                                                 |  |                              |         |                       |   |                             |  |                                   |         |   |   |         |  
|Acquisition of businesses, net of cash
 received                                                      |  |                              |        |                       |   |                            |  |                                   | (35,983 | ) |   | (35,983 | )
|Capital expenditures                                                                                  |  |                              |        |                       |   |                            |  |                                   | (12,439 | ) |   | (12,439 | )
|Transfer of cash to trusts for employee
 health and severance costs, net of payments out of the trust |  |                              |        |                       |   |                            |  |                                   | (11,542 | ) |   | (11,542 | )
|Other                                                                                                 |  |                              |        |                       |   |                            |  |                                   | (32     | ) |   | (32     | )
|                                                                                                      |  |                              |         |                       |   |                             |  |                                   |         |   |   |         |  
|Net cash flows used in investing activities                                                           |  |                              |        |                       |   |                            |  |                                   | (59,996 | ) |   | (59,996 | )
|                                                                                                      |  |                              |         |                       |   |                             |  |                                   |         |   |   |         |  
|                                                                                                      |  |                              |         |                       |   |                             |  |                                   |         |   |   |         |  
|Cash flows from financing activities:                                                                 |  |                              |         |                       |   |                             |  |                                   |         |   |   |         |  
|Net payments on revolving credit facility and
 term A loan                                            |  |                              | (50,000 | )                     |   |                            |  |                                   |        |   |   | (50,000 | )
|Payments on long-term borrowings and
 obligations                                                     |  |                              | (963    | )                     |   |                            |  |                                   |        |   |   | (963    | )
|Increase (decrease) in cash overdraft
 balance                                                        |  |                              | (900    | )                     |   |                            |  |                                   | 43      |   |   | (857    | )
|Payments for stock awards and exercise of
 stock options, net of stock tendered in payment            |  |                              | (3,584  | )                     |   |                            |  |                                   |        |   |   | (3,584  | )
|Excess tax benefits from stock-based
 compensation                                                    |  |                              | 82      |                       |   |                            |  |                                   |        |   |   | 82      |  
|Dividends paid                                                                                        |  |                              | (2,746  | )                     |   |                            |  |                                   |        |   |   | (2,746  | )
|Other                                                                                                 |  |                              | 92,923  |                       |   |                            |  |                                   | (92,923 | ) |   |        |  
|                                                                                                      |  |                              |         |                       |   |                             |  |                                   |         |   |   |         |  
|Net cash flows from financing activities                                                              |  |                              | 34,812  |                       |   |                            |  |                                   | (92,880 | ) |   | (58,068 | )
|                                                                                                      |  |                              |         |                       |   |                             |  |                                   |         |   |   |         |  
|                                                                                                      |  |                              |         |                       |   |                             |  |                                   |         |   |   |         |  
|Effect of exchange rate changes on cash                                                               |  |                              |        |                       |   |                            |  |                                   | 2,612   |   |   | 2,612   |  
|                                                                                                      |  |                              |         |                       |   |                             |  |                                   |         |   |   |         |  
|                                                                                                      |  |                              |         |                       |   |                             |  |                                   |         |   |   |         |  
|Net increase (decrease) in cash and cash
 equivalents                                                 |  |                              | 45,571  |                       |   |                            |  |                                   | (18,759 | ) |   | 26,812  |  
|Cash and cash equivalents at beginning of
 period                                                     |  |                              | 171,779 |                       |   |                            |  |                                   | 102,669 |   |   | 274,448 |  
|                                                                                                      |  |                              |         |                       |   |                             |  |                                   |         |   |   |         |  
|Cash and cash equivalents at end of period                                                            |  | $                            | 217,350 |                       | $ |                            |  | $                                 | 83,910  |   | $ | 301,260 |  
|                                                                                                      |  |                              |         |                       |   |                             |  |                                   |         |   |   |         |  

38

---



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, 2008, which appear in the Companys
Annual Report on Form 10-K, (Omnicares 2008 Annual Report), which was filed
with the Securities and Exchange Commission on February 26, 2009.

|                                                                       
|-----------------------------------------------------------------------
|Overview of Three Months Ended March 31, 2009 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 (ALFs), retirement centers, independent
living communities, hospitals, hospice, and other healthcare settings and service
providers. At March 31, 2009, Omnicare served long-term care facilities as well
as chronic care and other settings comprising approximately 1,425,000 beds,
including approximately 56,000 patients served by the patient assistance
programs of its specialty pharmacy services business. The comparable number at
December 31, 2008 was 1,435,000 (including approximately 68,000 patients served
by patient assistance programs). The comparable number at March 31, 2008 was
1,446,000 (including approximately 69,000 patients served by patient assistance
programs). Omnicare provides its pharmacy services in 47 states in the United
States, the District of Columbia and Canada at March 31, 2009. Omnicare also
provides comprehensive product development and research services for the pharmaceutical,
biotechnology, nutraceutical, medical devices and diagnostic industries in 31
countries worldwide. For further description of the Companys
business activities see the Business caption
of Part I, Item 1 of Omnicares 2008 Annual Report.

The following
summary table presents consolidated net sales and results of operations of
Omnicare for the three months ended March 31, 2009 and 2008 (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).

39

---



|                                                                                  |  |                                |           |                     |   |           |  
|--------------------------------------------------------------------------------- |  | ------------------------------ | --------- | ------------------- | - | --------- | -
|                                                                                  |  | Three months ended 
 March 31, |          
|                                                                                  |  |                                |          
|                                                                                  |  | 2009                           |           | 2008
as adjusted(a) |  
|                                                                                  |  |                                |           |                     |  
|                                                                                 
|Net sales                                                                         |  | $                              | 1,563,560 |                     | $ | 1,558,979 |  
|                                                                                  |  |                                |           |                     |   |           |  
|                                                                                  |  |                                |           |                     |   |           |  
|Net income                                                                        |  | $                              | 30,894    |                     | $ | 26,150    |  
|                                                                                  |  |                                |           |                     |   |           |  
|                                                                                  |  |                                |           |                     |   |           |  
|Earnings per share:                                                               |  |                                |           |                     |   |           |  
|Basic                                                                             |  | $                              | 0.27      |                     | $ | 0.22      |  
|                                                                                  |  |                                |           |                     |   |           |  
|Diluted                                                                           |  | $                              | 0.26      |                     | $ | 0.22      |  
|                                                                                  |  |                                |           |                     |   |           |  
|                                                                                  |  |                                |           |                     |   |           |  
|EBITDA(b)                                                                         |  | $                              | 125,254   |                     | $ | 113,759   |  
|                                                                                  |  |                                |           |                     |   |           |  
|                                                                                  |  |                                |           |                     |   |           |  
|EBITDA reconciliation to
 net cash flows from operating activities:               |  |                                |           |                     |   |           |  
|EBITDA(b)                                                                         |  | $                              | 125,254   |                     | $ | 113,759   |  
|(Subtract)/Add:                                                                   |  |                                |           |                     |   |           |  
|Interest expense, net of
 investment income                                       |  |                                | (28,885   | )                   |   | (34,211   | )
|Income tax provision                                                              |  |                                | (28,734   | )                   |   | (17,583   | )
|Changes in assets and
 liabilities, net of effects from acquisition of businesses |  |                                | 53,283    |                     |   | 80,299    |  
|                                                                                  |  |                                |           |                     |   |           |  
|Net cash flows from operating activities                                          |  | $                              | 120,918   |                     | $ | 142,264   |  
|                                                                                  |  |                                |           |                     |   |           |  

(a) Effective January 1, 2009, Omnicare adopted the provisions
    of FASB Staff Position (FSP) No. APB 14-1. Accounting for Convertible
    Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial
    Cash Settlement) (FSP APB 14-1).
    Financial statements for 2008 and prior periods have been restated for this
    change in accounting.

(b) EBITDA
  represents earnings before interest (net of investment income), income taxes,
  depreciation and amortization. Omnicare uses EBITDA primarily as an indicator
  of the Companys ability to service its debt, and believes that certain
  investors find EBITDA to be a useful financial measure for the same purpose.
  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 March 31, 2009 vs. 2008
|                                          

Total net sales for the three
months ended March 31, 2009 increased to $1,563.6 million from $1,559.0 million
in the comparable prior-year period. Net income for the three months ended
March 31, 2009 was $30.9 million versus $26.2 million earned in the comparable
2008 period. Diluted earnings per share for the three months ended March 31,
2009 were $0.26 versus $0.22 in the same prior-year period. EBITDA totaled $125.3
million for the three months ended March 31, 2009 as compared with $113.8
million for the same period of 2008.

40

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Net sales for
the quarter were favorably impacted primarily by drug price inflation, the
increased use of certain higher acuity drugs,  biologic agents and existing
drugs with new therapeutic indications, and
acquisitions, as well as growth in specialty pharmacy services. Partially
offsetting these factors were the unfavorable sales impact of the increased
availability and utilization of generic drugs, reductions in reimbursement and/or
utilization for certain drugs as well as competitive pricing issues, a lower
net number of beds served along with a year-over-year shift in mix towards
assisted living. Also, it should be noted that the March 31, 2009
quarter contained one less day than the prior leap-year period. See discussion
of sales and operating profit results in more detail at the Pharmacy Services
Segment and CRO Services Segment captions below.

The Company
continues to be impacted by the unilateral reduction in April 2006 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
reimbursement rates that resulted from Uniteds action, as compared with
reimbursement rates under the originally negotiated contract, reduced sales and
operating profit in the first quarter of 2009 by approximately $22 million
(approximately $14 million aftertax), and cumulatively since April 2006 by
approximately $318 million (approximately $184 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.

The Companys
consolidated gross profit of $397.4 million increased $17.8 million for the
three months ended March 31, 2009, from the same prior-year period amount of
$379.6 million. Gross profit as a percentage of total net sales of 25.4% in the
three months ended March 31, 2009, was higher than the 24.4% experienced during
the comparable 2008 period. Gross profit was favorably affected in the 2009
period largely due to the increased availability and utilization of higher
margin generic drugs, purchasing improvements, the continued integration of
acquisitions and productivity enhancements, and the favorable effect of drug
    price inflation. Partially
offsetting these factors were certain of the aforementioned items that reduced
net sales, primarily the reductions in reimbursement and/or utilization for
certain drugs, competitive pricing issues and the lower net number of beds
served.

Omnicares
consolidated selling, general and administrative (operating) expenses
for the three months ended March 31, 2009 of $225.2 million were lower than the
comparable prior-year amount of $236.6 million by $11.4 million. Operating
expenses as a percentage of net sales amounted to 14.4% in the first quarter
of 2009, representing a decrease from the 15.2% experienced in the comparable
prior-year period. Operating expenses for the quarter ended March 31, 2009 were
favorably impacted largely by continued progress in the Companys productivity
improvement initiatives, non-drug purchasing initiatives, reductions in employee
benefit costs and the continued integration of prior-period acquisitions. These
favorable items were partially offset by increased operating costs associated
with recent acquisitions.

The provision for doubtful accounts for the three months ended March
31, 2009 was $26.6 million versus $30.4 million in the comparable prior-year
period.

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Investment
income for the three months ended March 31, 2009 of $2.4 million was lower than
the $2.6 million earned in the comparable prior-year period, primarily due to
lower interest rates versus the prior year.

Interest
expense for the three months ended March 31, 2009 of $31.3 million is lower
than the $36.8 million in the comparable prior-year period, primarily due to
lower debt outstanding resulting from payments aggregating $125 million on the
Companys senior term A loan facility, maturing on July 28, 2010 (the Term
Loans) during the first quarter of 2008 through the first quarter of 2009,
payments of $39.1 million to pay off a term note payable in the fourth quarter
of 2008 and lower interest rates on variable rate loans.

The effective
income tax rate was 48.2% for the three months ended March 31, 2009, as
compared to the first quarter of 2008 rate of 40.2%. The year-over-year
increase in the effective tax rate is primarily attributable to certain
nondeductible litigation costs recognized in the 2009 period. The effective tax rates in 2009 and 2008 are higher
than the federal statutory rate largely as a result of the impact of state and
local income taxes and various nondeductible expenses (including a portion of the aforementioned litigation costs in 2009).

Special Items and Accounting Changes:

The three
months ended March 31, 2009 included the following charges totaling approximately
$60.0 million pretax ($43.8 million aftertax), which primarily impacted the
Pharmacy Services segment. Management believes that these items are either
infrequent occurrences or otherwise not related to Omnicares ordinary course
of business and/or are non-cash in nature:

(i) Operating
income included restructuring and other related charges of approximately $6.9
million pretax ($4.3 million aftertax), relating to the implementation of the
Omnicare Full Potential Plan, a major initiative primarily 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 (the Heartland Matters). In addressing and resolving the
Heartland Matters, the Company continues to experience increased costs and, as
a result, the three months ended March 31, 2009 included special charges of
$2.0 million pretax (approximately $1.1 million and $0.9 million was recorded
in the cost of sales and operating expense sections of the Consolidated
Statements of Income, respectively) ($1.2 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
continues to be reviewed by its outside advisors. As of March 31, 2009, the
Company has received no material insurance recoveries.

42

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(iii)
Operating income included special litigation and other related professional
fees of $41.7 million pretax ($32.5 million aftertax) for litigation-related
professional expenses primarily in connection with the Companys lawsuit
against United, certain other large customer disputes, the investigation by the
United States Attorneys Office, District of Massachusetts, the purported
class and derivative actions, 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. Also included in the $41.7 million is a charge of $35 million
pretax representing an addition to the settlement reserve established in connection
with the previously disclosed investigation by the United States Attorneys
Office, District of Massachusetts. This special litigation charge relates to
the Companys estimate of potential settlement amounts and associated costs
under Statement of Financial Accounting Standards (SFAS) No. 5, Accounting
for Contingencies. The
Company cannot predict the ultimate outcome of this matter. With respect to these
proceedings to which the Company is a party, including the investigation by the
United States Attorneys Office, District of Massachusetts, 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.

(iv) Operating
income included acquisition and other related costs of approximately $0.8
million pretax related to the implementation of the SFAS No. 141 (revised
2007), Business Combinations
(SFAS 141R) accounting change. These expenses were primarily related
to professional fees from acquisitions completed during the quarter. See further
discussion at the Acquisition note of the Notes to Consolidated Financial
Statements.

(v) Operating expenses included approximately
$1.7 million in pretax charges relating to the prior implementation of the SFAS
No. 123 (revised 2004), Share-Based Payment (SFAS 123R) accounting change,
which primarily relate to stock option expense. SFAS 123R requires the Company
to record compensation costs based on estimated fair values relating to
share-based payment transactions, including stock options, in its consolidated
financial statements.

(vi) The
Company recorded a $6.8 million non-cash increase in pretax interest expense
($4.2 million aftertax) related to the retrospective adoption of the FSP APB
    14-1 accounting change. See further discussion of FSP APB 14-1,
including this amortization of discount on convertible notes, at the Debt
note of the Notes to Consolidated Financial Statements.

The three
months ended March 31, 2008 included the following charges totaling
approximately $36.3 million pretax ($22.0 million aftertax), which primarily
impacted the Pharmacy Services segment. Management believes that these items
are either infrequent occurrences or otherwise not related to Omnicares
ordinary course of business and/or are non-cash in nature:

(i) Operating
income included restructuring and other related charges of approximately $6.4
million pretax ($3.9 million aftertax), relating to the implementation of the
Omnicare Full Potential Plan, a major initiative primarily designed to
re-engineer the pharmacy operating model to increase efficiency and enhance
customer growth. See further discussion at the

43

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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) In
addressing and resolving the Heartland Matters, the Company continues to experience
increased costs and as a result, the three months ended March 31, 2008 included
special charges of $1.9 million pretax (approximately $1.6 million and $0.3
million was recorded in the cost of sales and operating expense sections of the
Consolidated Statements of Income, respectively) ($1.1 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 continues to be reviewed by its outside advisors.
As of March 31, 2008, no receivables for insurance recoveries had been recorded
by the Company.

(iii) Operating income included special
litigation and other related professional fees of $21.6 million pretax ($13.0
million aftertax) for litigation-related professional expenses primarily in
connection with the Companys lawsuit against United, certain other large
customer disputes, the investigation by the United States Attorneys Office,
District of Massachusetts, the purported class and derivative actions, 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.

(iv) The
Company recorded a $6.3 million non-cash increase in pretax interest expense
($3.9 million aftertax) related to the retrospective adoption of FSP APB 14-1
accounting change. See further discussion of FSP APB 14-1, including this
amortization of discount on convertible notes, at the Debt note of the Notes
to Consolidated Financial Statements.

Pharmacy Services Segment

|                  |  |                               |           |      |   |           | 
|----------------- |  | ----------------------------- | --------- | ---- | - | --------- | 
|                  |  | Three months ended
 March 31, |          
|                  |  |                               |          
|                  |  | 2009                          |           | 2008 |  
|                  |  |                               |           |      |  
|Net sales         |  | $                             | 1,518,817 |      | $ | 1,509,806 | 
|                  |  |                               |           |      |   |           | 
|Operating
 income |  | $                             | 118,973   |      | $ | 109,235   | 
|                  |  |                               |           |      |   |           | 

Omnicares
Pharmacy Services segment recorded sales of $1,518.8 million for the three
months ended March 31, 2009, an increase from the comparable 2008 amount of
$1,509.8 million by $9.0 million, or 0.6%. At March 31, 2009, Omnicare served
long-term care facilities as well as chronic care and other settings comprising
approximately 1,425,000 beds, including approximately 56,000 patients served
    by the patient assistance programs of its specialty pharmacy business. The
comparable number at March 31, 2008 was 1,446,000 (including approximately 69,000
patients served by patient assistance programs). Pharmacy Services sales were
favorably impacted primarily by drug price inflation, the increased use of certain
    higher acuity drugs,

44

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biologic
agents and existing drugs with new therapeutic indications, and acquisitions,
    as well as growth in the specialty pharmacy services business. Partially
    offsetting these factors were the increased availability and utilization
    of generic drugs, reductions in reimbursement and/or utilization of certain
    drugs as well as competitive pricing issues, a lower net number of beds served,
    and a year-over-year shift in mix toward assisted living, which typically
    has lower penetration rates than skilled nursing facilities. Also, it should
    be noted that the March 31, 2009 quarter contained one less day than the
    prior leap-year period. 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 $119.0 million in the first quarter
of 2009, a $9.8 million increase as compared with the $109.2 million earned in
the comparable period of 2008. As a percentage of the segments sales,
operating income was 7.8% for the first quarter of 2009, compared with 7.2% in
2008. The 2009 quarter was favorably impacted largely by the increased
availability and utilization of higher margin generic drugs, drug price
inflation, growth in specialty pharmacy, lower bad debt expense, and purchasing
improvements, as well as by the continued progress in the Companys productivity
improvement initiatives and the continued integration of prior-period acquisitions.
Operating income in 2009 was unfavorably affected primarily by the operating
income effect of certain of the aforementioned items that reduced net sales and
the year-over-year impact of the previously mentioned special items.

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.

In 1997 Congress mandated a prospective payment system (PPS) for
reimbursement to skilled nursing facilities (SNFs) for their
Medicare-eligible residents during a Medicare Part A-covered stay. 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, including
pharmacy services. PPS initially resulted in a significant reduction of
reimbursement to SNFs. Although some of the reductions were subsequently
mitigated, the PPS fundamentally changed the payment for Medicare SNF services.

In recent years, SNFs have received the full market basket inflation
increase to annual rates. For fiscal year 2009, beginning October 1, 2008, SNFs
received a 3.4 percent inflation update that will increase overall payments to
SNFs by $780 million. The Centers for Medicare & Medicaid Services (CMS)
did not adopt a provision to recalibrate
case mix weights to compensate for increased expenditures resulting from
refinements made in January 2006, which would have cut overall SNF PPS payments
by $770 million in fiscal year 2009. While these rulemakings have not
decreased payments to SNFs, reimbursement changes could be adopted in
the future that could 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.

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

The Part D
drug benefit permits Medicare beneficiaries to enroll in prescription drug
plans offered by private entities which provide coverage of outpatient
prescription drugs (collectively, Part D Plans). Part D Plans include plans
providing the drug benefit on a stand-alone basis (known as prescription drug
plans, or PDPs) and Medicare Advantage plans providing drug coverage as a
supplement to an existing medical benefit under that Medicare Advantage plan
(known as MA-PDs). 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) have their prescription
drug costs covered by the Medicare drug benefit, unless they elect to opt out
of Part D coverage. Many nursing home residents Omnicare serves are dual
eligibles. In the first quarter of 2009, approximately 39% 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 for 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
does not exceed the premium subsidy, nor are they required to meet deductibles
or pay copayment amounts. Further, all dual eligibles who do not
affirmatively enroll in a Part D Plan are automatically enrolled into a PDP by
CMS on a random basis from among those PDPs meeting CMS criteria for low-income
premiums in the PDP region, unless they elect to opt out of Part D coverage.
Such dual eligible beneficiaries may select a different Part D Plan at any time
through the Part D enrollment process. Also, dual eligibles who are qualifying
covered retirees under an employer or union-sponsored qualified retiree
prescription drug plan (plans which offer an alternative to Part D coverage
supported by federal subsidies to the plan sponsor) will be determined to have
elected not to enroll in a Part D Plan, unless they affirmatively enroll in a
Part D Plan or contact CMS to indicate they wish to be auto-enrolled. 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, subject to prior authorization or similar utilization management
requirements for certain drugs. CMS requires the formularies of Part D Plans to
include the types of drugs most commonly needed by Medicare beneficiaries and
to offer an exceptions process to provide coverage for medically necessary
drugs.

The Company
obtains reimbursement for drugs it provides to enrollees of a given Part D Plan
pursuant to the agreement it negotiates with 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 and renegotiates these
    agreements in the ordinary course.  Further, the proportion of the Companys Part
    D business serviced under specific agreements may change over time based
    upon beneficiary choice, reassignment of dual eligibles to different Part
    D Plans or Part D Plan consolidation.

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As such, reimbursement under these agreements is subject tochange.
    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 any allowance for doubtful accounts),
particularly for copays. As of March 31, 2009, copays outstanding from Part D
Plans were approximately $17 million relating to 2006 and 2007. The
Company is pursuing solutions, including legal actions against certain Part D
payors, to collect outstanding copays, as well as certain rejected claims. Participants
in the long-term care pharmacy industry continue to address these issues with
CMS and the Part D Plans and attempt to develop solutions. Among other things,
on January 12, 2009, CMS finalized a change in its regulations requiring Part
D Plan sponsors to accept and act upon certain types of documentation, referred
to as
best available evidence, to correct copays for dual eligibles and
other low-income subsidy eligible beneficiaries. However, until
all administrative and payment issues are fully resolved, there can be
no assurance that the Part D drug benefit will not adversely impact
the Companys
results of operations, financial position or cash flows.

For Medicare
beneficiaries covered under a Medicare Part A stay, the Company receives
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 receives reimbursement from the state Medicaid programs for those Medicaid
beneficiaries not eligible for the Part D program, including those under age 65
who are not disabled, and for certain drugs specifically excluded from Medicare
Part D.

CMS has issued
subregulatory guidance on many aspects of the Part D program, 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. For 2007 and 2008, CMS instructed 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. The
Company reported information specified by CMS with respect to rebates received
by the Company for 2007 and the first quarter of 2008 to those Part D Plans
which agreed to maintain the confidentiality of such information. In November
2008, CMS suspended collection of the long-term care pharmacy rebate data from
Part D Plan sponsors for calendar years 2008 and 2009. Instead, CMS intends to
collect different non-rebate information to focus plan attention on network
pharmacy compliance and appropriate drug utilization management. The new data
would include the number and the cost of formulary versus non-formulary drugs
dispensed by each pharmacy (whether long-term care or non-long-term care) in
the Part D Plans pharmacy network. CMS will test the proposed reporting
requirements with a small number of Part D Plan sponsors prior to calendar year
2010, when the new reporting requirements will become effective. CMS also
issued a memo on November 25, 2008 reminding Part D Plan sponsors of the
requirement to (1) provide convenient access to network long-term care
pharmacies to all of their enrollees residing in long-term care facilities, and
(2) exclude payment for drugs that are covered under a Medicare Part A stay
that would otherwise satisfy the definition of a Part D drug. The Company will
continue to work with Part D Plan sponsors to ensure compliance with CMSs
evolving policies related to long-term care pharmacy services.

47

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On July 15,
2008, Congress enacted the Medicare Improvements for Patients and Providers
Act of 2008 (MIPPA). This law includes further reforms to the Part D
program. Among other things, as of January 1, 2010, the law requires that
long-term care pharmacies have between 30 and 90 days to submit claims to a
Part D Plan. As of January 1, 2009, Part D Plan sponsors must update the
prescription drug pricing data they use to pay pharmacies at least every seven
days. The law also expands the number of Medicare beneficiaries who are
entitled to premium and cost-sharing subsidies by modifying previous income and
asset requirements, eliminates late enrollment penalties for beneficiaries
entitled to these subsidies, and limits the sales and marketing activities in
which Part D Plan sponsors may engage. On September 18, 2008, CMS published
final regulations implementing many of the MIPPA Part D provisions, and the
agency published another interim final rule with comment period on January 16,
2009 implementing additional MIPPA provisions related to drug formularies and
protected classes of drugs. Additional legislative proposals are pending before
Congress that could further modify the Part D benefit, including proposals that
could impact the payment available or pricing for drugs under Part D Plans. The
Company cannot predict at this time whether such legislation will be enacted or
the form any such legislation would take. The Company can make no assurances
that future Part D legislation would not adversely impact its business.

Moreover, CMS continues to issue guidance on
and make other revisions to the Part D program. 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 this massive program are fully resolved, there can be no
assurance that the impact of the Part D rules, future legislative changes, 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. Approximately 1% of the Companys revenue is
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. Only suppliers that are winning bidders will be eligible to
provide competitively-bid items to Medicare beneficiaries in the selected
areas.

In mid-2007,
CMS conducted a first round of bidding for 10 DMEPOS product categories in 10
competitive bidding areas, and announced winning bidders in March 2008. In
light of concerns about implementation of the bidding program, in MIPPA
Congress terminated the contracts awarded by CMS in the first round of
competitive bidding, required that new bidding be conducted for the first
round, and required certain reforms to the bidding process. Among other things,
the law requires CMS to rebid those areas in 2009, with bidding for round two
delayed until 2011. The delay is being financed by reducing Medicare fee
schedule payments for all items covered by the round one bidding program by 9.5
percent nationwide effective January 1, 2009, followed by a 2 percent increase
in 2014 (with certain exceptions). The legislation also

48

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includes a
series of procedural improvements to the bidding process. CMS published an
interim final rule with comment period to implement the MIPPA competitive
bidding changes on January 16, 2009, and on April 17, 2009 announced that it is
proceeding with implementation of the January 16, 2009 rule after a brief
delay. The Company intends to participate in the new bidding process for round
one, and is assessing the potential impact of the fee schedule reductions on its
business.

CMS requires all
existing DMEPOS suppliers to submit proof of accreditation by a deemed
accreditation organization by September 30, 2009. MIPPA codifies the
requirement that all suppliers be accredited by September 30, 2009 and extends
the accreditation requirement to companies that subcontract with contract
suppliers under the competitive bidding program. The Company intends to comply
with all accreditation requirements for DMEPOS suppliers by the applicable
deadline.

On January 2,
2009, CMS published a final rule requiring certain Medicare DMEPOS suppliers to
furnish CMS with a $50,000 surety bond, although the required bond amount will
be higher for certain high-risk suppliers with previous adverse legal
actions. A separate surety bond will be required for each National Provider
Identifier obtained for DMEPOS billing purposes, with limited exceptions. CMS
did not establish exceptions from the bond requirement for pharmacies or for
nursing facilities that bill for Medicare DMEPOS services provided to their own
residents. Current suppliers must comply with the surety bond requirement by
October 2, 2009, while new enrolling suppliers or suppliers seeking to change
ownership after the effective date must meet this requirement by May 4, 2009.
The Company intends to comply with the surety bond requirement by the
applicable deadline.

With respect
to Medicaid, states have considerable latitude in setting payment rates for
nursing facilities. States also have 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. The
Deficit Reduction Act (DRA), enacted in 2006, 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 in a way that adversely impacts the Company.

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,

49

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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 with comment period to implement changes to the upper limit
rules. Among other things, the final rule: established a new federal upper
limit calculation for multiple source drugs based on 250 percent of the lowest
AMP in a drug class; required CMS to post AMP amounts on its web site; and
established a uniform definition for AMP. Additionally, the final rule provided
that sales of drugs to long-term care pharmacies for supply to nursing homes and
assisted living facilities (as well as associated discounts, rebates or 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).
However, on December 19, 2007, the United States District Court for the
District of Columbia issued a preliminary injunction that enjoins CMS from
implementing provisions of the July 17, 2007 rule to the extent that it affects
Medicaid reimbursement rates for retail pharmacies under the Medicaid program.
The order also enjoins CMS from posting AMP data on a public website or disclosing
it to states. As a result of this preliminary injunction, CMS did not post AMPs
or new upper limit prices in late December 2007 based upon the July 17, 2007
final rule despite its earlier planned timetable, and the schedule for states
to implement the new upper limits has been delayed until further notice.
Separately, on March 14, 2008, CMS published an interim final rule with comment
period revising the Medicaid rebate definition of multiple source drug set
forth in the July 17, 2007 final rule. In short, the effect of the rule will be
that federal upper limits apply in all states unless the state finds that a
particular generic drug is not available within that state. While the rules
effective date was April 14, 2008, it was subject to public comment. CMS also
noted that the regulation is subject to the injunction by the United States
District Court for the District of Columbia to the extent that it may affect
Medicaid reimbursement rates for pharmacies. On October 7, 2008, CMS published
the final version of this rule, responding to public comments received on the
March 14, 2008 regulation. The final rule adopted the March 2008 interim final
rule with technical changes effective November 6, 2008, although it continues
to be subject to an injunction to the extent that it affects Medicaid pharmacy
reimbursement rates. Moreover, MIPPA delays
the adoption of the DRAs new federal upper limit payment rules for Medicaid
based on AMP for multiple source drugs and prevents CMS from publishing AMP
data until October 1, 2009; until then, upper limits will continue to be
determined under the pre-DRA rules. 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 prescription drugs. Until the litigation
regarding the final rule is resolved and new upper limit amounts are published
by CMS, the Company cannot predict the impact of the final rule on the
Companys business. Further, there can be no assurance that federal upper limit
payments under pre-DRA rules, changes under the DRA or other efforts by payors
to limit reimbursement for certain drugs will not adversely impact the
Companys business.

MIPPA also
seeks to promote e-prescribing by providing incentive payments for physicians
and other practitioners paid under the Medicare physician fee schedule who are
successful

50

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electronic
prescribers. Specifically, successful electronic prescribers are to receive a
2 percent bonus during 2009 and 2010, a 1 percent bonus for 2011 and 2012 and a
0.5 percent bonus for 2013; practitioners who are not successful electronic
prescribers are penalized by a 1 percent reduction from the current fee
schedule in 2012, a 1.5 percent reduction in 2013, and thereafter a 2 percent
reduction. CMS has announced that to be a successful electronic prescriber and
to receive an incentive payment for the 2009 e-prescribing reporting year, an
eligible professional must report, using a qualified e-prescribing system, one
of three e-prescribing measures in at least 50% of the cases in which the
measure is reportable by the eligible professional during 2009. CMS has issued
detailed guidelines on the specifications for qualified e-prescribing systems.
The Company is closely monitoring developments related to this initiative, and
will seek to make available systems under which prescribers may submit prescriptions
to the Companys pharmacies electronically so as to enable them to qualify for
the incentive payments.

Most recently, on February 17, 2009, President Obama signed into law
the American Recovery and Reinvestment Act of 2009. This $790 billion economic
stimulus package includes a number of health care policy provisions, including
approximately $19 billion in funding for health information technology
infrastructure and Medicare and Medicaid incentives to encourage doctors,
hospitals, and other providers to use health information technology to
electronically exchange patients health information. The law also strengthens
federal privacy and security provisions to protect personally-identifiable
health information. In addition, the legislation increases Federal Medical
Assistance Percentage (FMAP) payments by approximately $87 billion to help
support state Medicaid programs in the face of budget shortfalls. The law also
temporarily extends current Medicaid prompt payment requirements to nursing
facility and hospital claims, requiring state Medicaid programs to reimburse
providers for 90 percent of claims within 30 days of receipt and 99 percent of
claims within 90 days of receipt. The Company is reviewing the new law and assessing the potential impact
of the various provisions on the Company.

Two other
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 to 5.5 percent from January 1, 2008 through
September 30, 2011. On February 22, 2008, CMS published a final rule that
implements this legislation, and makes other clarifications to the standards
for determining the permissibility of provider tax arrangements. On June 30,
2008, legislation was enacted imposing a moratorium on implementation of
certain provisions of this rule until April 1, 2009. The American Recovery and
Reinvestment Act of 2009 extends this moratorium until July 1, 2009. Second, on
January 18, 2007, CMS published a proposed rule designed 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 May 29, 2007, CMS published a final rule to
implement this provision, but Congress blocked the rule through April 1, 2009.
The American Recovery and Reinvestment Act of 2009 expresses the sense of
Congress that the Secretary of Health and Human Services should not promulgate
the provider cost limit rule, citing a ruling by the United States District
Court for the District of Columbia that the final rule was improperly
promulgated.

Broader
changes in federal health care policy have been proposed by President Obama and
are expected to be considered by Congress this year. Specifically, on February
26, 2009, the Obama Administration released its proposed federal budget for
fiscal year (FY) 2010, which would establish a reserve fund of $633.8 billion
over 10 years to finance comprehensive health reform. The reserve fund would be
paid for by tax increases and health system savings. Among other things, the
plan would reduce payments to Medicare Advantage plans and bundle payments to
hospitals and certain post-acute providers for services provided within 30 days
after discharge from the hospital. The proposal would also increase the
Medicaid drug rebate level paid by pharmaceutical manufacturers to Medicaid for
brand-name drugs, apply the rebate levels paid by pharmaceutical manufacturers
to Medicaid on existing drugs to new formulations of those drugs, and allow
states to collect rebates from pharmaceutical manufacturers on drugs provided
through Medicaid managed care organizations. With regard to Medicare Part D,
the plan would impose higher premiums on certain higher-income beneficiaries
and expand oversight and program integrity activities related to the program.
The proposal also would establish a regulatory pathway for approval of
follow-on biologicals, take steps to promote generic drugs, and allow drug
reimportation. It should be noted that many provisions of the proposed budget
would require Congressional approval to implement and would take effect after
FY 2010.

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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 States 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 have required First
DataBank to cease publishing AWP two years after the settlement became effective
unless a competitor of First DataBank was then publishing AWP, and would have
required that First DataBank modify the manner in which it calculates AWP for
over 8,000 distinct drugs (NDCs) from 125% of the drugs wholesale
acquisition cost (WAC) price established by manufacturers to 120%
of WAC until First DataBank ceased publishing same. 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. The Court granted preliminary approval of both agreements. However
on January 22, 2008, the court held a hearing on a motion for final approval
of the proposed settlements, and after hearing various objections to the proposed
settlements indicated that it would not approve the settlements as proposed.
On May 29, 2008, the plaintiffs and First DataBank filed a new settlement that
included a reduction in the number of NDCs to which a new mark-up over WAC
would apply (20% vs. 25%) from over 8,000 to 1,356, and removed the provision
requiring that AWP no longer be published in the future. First DataBank also
agreed to contribute approximately $2 million to a settlement fund and for
legal fees. On July 15, 2008, Medi-Span and the plaintiffs in that litigation
also proposed an amended settlement agreement under which Medi-Span agreed to
reduce the mark-up over WAC (from 20% to 25%) for only the smaller number of
NDCs, the requirement that AWP not be published in the future was removed, and
Medi-Span agreed to pay $500,000 for the benefit of the plaintiff class. First
DataBank and Medi-Span, independent of these settlements, announced that they
would, of their own volition, reduce to 20% the markup on all drugs with a
mark-up higher than 20% and stop publishing AWP within two years after the
changes in mark-up are implemented (in the case of First DataBank) or within
two years after the settlement is finally approved (in the case of Medi-Span).
During June and July, 2008, the Court granted preliminary approval to the
revised settlements and approved the process for class notification. On
December 17, 2008, the Court held a hearing on the plaintiffs motion for
final approval of the two proposed settlements, and on March 17, 2009 the Court
released an opinion approving the proposed settlements, with a modification by
the Court requiring that the change in mark-ups take place 180 days after the
order approving the settlements is entered. The Court entered an order
approving the settlements on March 30, 2009. Notices of appeal of the Courts
order to the United States Court of Appeals for the First Circuit have been
filed by several entities; no briefing schedule for the appeal has as yet been
established. Additionally, motions for a stay of the Courts order pending
appeal have been filed, and are currently pending.

The Company is monitoring these
cases for further developments and evaluating potential implications and/or
actions that may be required, including any adverse effect on the Companys

52

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reimbursement
for drugs and biologicals and any actions that may be taken to offset or
otherwise mitigate such impact. There can be no assurance, however, that the
First DataBank and Medi-Span settlements and associated unilateral actions by
First DataBank and Medi-Span, if implemented, 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,
which could adversely affect the Company.

Longer term, funding for federal and state healthcare programs must
consider the aging of the population and the growth in enrollees as eligibility
is expanded; the escalation in drug costs owing to higher drug utilization
among seniors and the introduction of new, more efficacious but also more
expensive medications; the impact of the Medicare Part D program; 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 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. 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 believes 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.

CRO Services Segment

|                  |  |                               |        |  |   |        | 
|----------------- |  | ----------------------------- | ------ |  | - | ------ | 
|                  |  | Three months ended
 March 31, |       
|                  |  |                               |       
|                  |  |                               | 2009   |  |   | 2008   | 
|                  |  |                               |        |  |  
|                 
|Revenues          |  | $                             | 44,743 |  | $ | 49,173 | 
|                  |  |                               |        |  |   |        | 
|Operating
 income |  | $                             | 2,992  |  | $ | 2,668  | 
|                  |  |                               |        |  |   |        | 

Omnicares CRO
Services segment recorded revenues of $44.7 million for the three months ended
March 31, 2009, which decreased by $4.5 million, or 9.1% from the $49.2 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 $5.8 million

53

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and $7.4
million of reimbursable out-of-pockets in its CRO Services segment reported
revenue and cost of sales amounts for the three months ended March 31, 2009 and
2008, respectively. Revenues for 2009 were lower than in the same prior-year
period primarily due to the early termination and client-driven delays in the
commencement of certain projects during the first three months of 2009.

Operating
income in the CRO Services segment was $3.0 million in the first quarter of
2009 compared with $2.7 million in 2008, an increase of $0.3 million or 12.1%.
As a percentage of the segments revenue, operating income was 6.7% in the
first quarter of 2009 compared with 5.4% in the same period of 2008. This
increase is primarily attributable to operating expense control. Backlog at
March 31, 2009 was $273.7 million, representing a decrease of $29.2 million
from the December 31, 2008 backlog of $302.9 million, and a decrease of $35.7
million from the March 31, 2008 backlog of $309.4 million.

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. The
Company believes that drug manufacturers, in order to optimize their research
and development efforts, will continue to turn to contract research
organizations to assist them in drug research development and
commercialization.

Restructuring and Other Related Charges

Omnicare Full Potential Program

In 2006, the
Company commenced the implementation of the Omnicare Full Potential Plan, a
major initiative primarily 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
administrative and production functions will be transferred to regional support
centers (hubs) specifically designed and managed to perform these tasks, with
local pharmacies (spokes) focusing on time-sensitive services and
customer-facing processes. Additionally, in connection with this productivity
enhancement initiative, the Company is also right-sizing and consolidating
certain CRO operations.

This program
is expected to be completed over a multi-year 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 $93
million over this implementation period. The Company recorded restructuring and
other related charges for the Omnicare Full Potential Plan of approximately $7
million pretax (approximately $4 million aftertax) during the three months
ended March 31, 2009, and approximately $36 million pretax during the year
ended December 31, 2008 (approximately $6 million pretax in the three months
ended March 31, 2008), or cumulative aggregate restructuring and other related
charges of

54

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approximately
$90 million before taxes through the first quarter of 2009. The remainder of
the overall restructuring and other related charges will be recognized and
disclosed prospectively, as the remaining portions of the project are finalized
and implemented. Incremental capital expenditures related to this program are
expected to total approximately $50 million to $55 million over the entire
implementation period. The Company eliminated approximately 1,200 positions in
completing its initial phase of the program. The remainder of the program is
currently estimated to result in a net reduction of approximately 1,200 positions
(1,900 positions eliminated, net of 700 new positions filled in different
geographic locations as well as to perform new functions required by the
hub-and-spoke model of operations), of which approximately 270 positions had
been eliminated as of March 31, 2009. The foregoing reductions do not include
additional savings expected from lower levels of overtime and reduced temporary
labor. The Company currently estimates reductions in overtime, excess hours and
temporary help, as well as productivity gains, to equal an additional 820
full-time equivalents.

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.

While the
Company is working diligently to achieve the estimated savings as discussed
above, there can be no assurances as to the ultimate outcome of the program,
including the savings and/or related timing thereof, due to the inherent risks
associated with the implementation of a project of this magnitude and the
related new technologies. Specifically, the potential inability to successfully
mitigate implementation risks, including but not necessarily limited to,
dependence on third-party suppliers and consultants for the timely delivery of
technology as well as its performance at expected capacities, compliance with
federal, state and local regulatory requirements; reliance on information technology
and telecommunications support, timely completion of facility lease
transactions and/or leasehold improvements, and the ability to obtain adequate
staffing levels, individually or in the aggregate, could affect the overall
success of the program from a savings and/or timing standpoint.

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

2005 Program

In connection
with the previously disclosed consolidation plans and other productivity
initiatives to streamline pharmacy services (related, in part, to the
NeighborCare acquisition) and contract research organization operations,
including maximizing workforce and operating asset utilization, and producing a
more cost-efficient, operating infrastructure (the 2005 Program), the Company
had liabilities of $3.5 million at December 31, 2008, of which $0.3 million was
utilized in the three months ended March 31, 2009. The remaining liabilities of
$3.2 million at March 31, 2009 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.

55

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

Cash and cash
equivalents and restricted cash at March 31, 2009 were $218.0 million compared
with $217.0 million at December 31, 2008 (including restricted cash amounts of
$2.9 million and $1.9 million, respectively).

The Company
generated positive net cash flows from operating activities of $120.9 million
during the three months ended March 31, 2009, compared with net cash flows from
operating activities of $142.3 million during the three months ended March 31,
2008. Compared to the same prior-year period, cash flow from operating activities
was unfavorably impacted largely by the year-over-year reduction in cash
receipts, including the impact of a broad-based slowdown in Medicaid
reimbursements to nursing homes and pharmacies from the State of Illinois, as
well as one less day during the 2009 first quarter in comparison to the same
prior leap-year period. Further, tax payments increased during 2009 compared to
the same prior-year period largely in connection with the increased earnings of
the Company.

Net cash used
in investing activities was $41.5 million and $60.0 million for the three
months ended March 31, 2009 and 2008, respectively. Acquisitions of businesses,
primarily funded by operating cash flows, required outlays of $31.7 million
(including amounts payable pursuant to acquisition agreements relating to
pre-2009 acquisitions) in the first three months of 2009. Acquisitions of
businesses during the first three months of 2008 required $36.0 million of cash
payments (including amounts payable pursuant to acquisition agreements relating
to pre-2008 acquisitions) which were primarily funded by invested cash 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 and the implementation of the
Omnicare Full Potential Plan.

Net cash used
in financing activities was $81.0 million for the three months ended March 31,
2009 as compared to $58.1 million for the comparable prior-year period. During
the first three months of 2009 and 2008, the Company paid down $75 million and
$50 million, respectively, on the Term Loans.

At March 31,
2009, there were no outstanding borrowings under the $800 million revolving
credit facility, and $325 million in borrowings were outstanding under Term
Loans.

On February
12, 2009, 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 2009, which is consistent with the annual dividends per share
actually paid in 2008. Aggregate dividends paid of $2.7 million during the
three month period ended March 31, 2009 were relatively consistent with those
paid in the comparable prior-period.

There were no known material
commitments and contingencies outstanding at March 31, 2009, other than the
contractual obligations summarized in the Disclosures About Aggregate
Contractual Obligations and Off-Balance Sheet Arrangements caption below;
certain

56

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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
existing cash balances 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.
Additionally, the Company believes that external sources of financing,
including short- and long-term debt financings, are available. Due to turmoil
in the credit markets, Omnicare may not be able to refinance maturing debt at
terms that are as favorable as those from which the Company previously
benefited or at terms that are acceptable to Omnicare. In addition, no
assurances can be given regarding the Companys ability to obtain additional
financing in the future.

Disclosures About Aggregate Contractual Obligations and Off-Balance
Sheet Arrangements

Aggregate Contractual Obligations:

The following
table summarizes the Companys aggregate contractual obligations as of March
31, 2009, the nature of which is described in further detail at the Aggregate
Contractual Obligations caption
of the
MD&A section at Part II, Item 7 of Omnicares 2008 Annual
Report 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                                                     |  | $     | 2,647,500 |                   | $ |          |  | $         | 325,000 |               | $ | 475,000 |  | $ | 1,847,500 | 
|Capital lease obligations                                            |  |       | 4,418     |                   |   | 2,088     |  |           | 1,830   |               |   | 198     |  |   | 302       | 
|Operating lease obligations                                          |  |       | 152,547   |                   |   | 41,454    |  |           | 49,931  |               |   | 31,188  |  |   | 29,974    | 
|Purchase obligations                                                 |  |       | 50,638    |                   |   | 36,986    |  |           | 11,298  |               |   | 2,354   |  |   |          | 
|Other current obligations                                            |  |       | 306,377   |                   |   | 306,377   |  |           |        |               |   |        |  |   |          | 
|Other long-term obligations                                          |  |       | 280,336   |                   |   |          |  |           | 231,783 |               |   | 23,495  |  |   | 25,058    | 
|                                                                     |  |       |           |                   |   |           |  |           |         |               |   |         |  |   |           | 
|Subtotal                                                             |  |       | 3,441,816 |                   |   | 386,905   |  |           | 619,842 |               |   | 532,235 |  |   | 1,902,834 | 
|Future interest costs relating to debt and capital lease
obligations |  |       | 1,548,247 |                   |   | 114,598   |  |           | 216,307 |               |   | 200,948 |  |   | 1,016,394 | 
|                                                                     |  |       |           |                   |   |           |  |           |         |               |   |         |  |   |           | 
|Total contractual cash obligations                                   |  | $     | 4,990,063 |                   | $ | 501,503   |  | $         | 836,149 |               | $ | 733,183 |  | $ | 2,919,228 | 
|                                                                     |  |       |           |                   |   |           |  |           |         |               |   |         |  |   |           | 

As of March
31, 2009, the Company had approximately $26 million outstanding relating to
standby letters of credit, substantially all of which are subject to automatic
annual renewals.

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Off-Balance Sheet Arrangements:

A description of the Companys Off Balance Sheet Arrangements,
    for which there were no significant changes during the 2009 first quarter,
    is presented at the Off-Balance Sheet Arrangements caption of
Part II, Item 7 of Omnicares 2008 Annual Report.

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, cash flows 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 considered to be at increased risk of becoming 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 for
doubtful accounts on an ongoing basis for appropriateness. Judgment is used to
assess the collectability of account balances and the economic ability of
customers to pay.

The Company
computes and monitors its accounts receivable days sales outstanding (DSO), a
non-GAAP measure, 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

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receivable,
less contractual allowances and the allowance for doubtful accounts, to derive
average accounts receivable and dividing average accounts receivable by the
sales amount (excluding reimbursable out-of-pockets) for the related quarter.
The resultant percentage is multiplied by 92 days to derive the DSO amount.
Omnicares DSO approximated 81 days at March 31, 2009, which was higher
than the December 31, 2008 amount of 79 days by approximately 1.4 days, largely
due to a broad-based slowdown in Medicaid reimbursements to nursing homes and
pharmacies from the State of Illinois. Also unfavorably impacting the overall
DSO, as well as 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, and the continued aging of copays and rejected
claims. Further, the increase in the 181 days and over past-due receivable
balance from facility payors is partially attributable to the broad-based
slowdown in Medicaid reimbursements to nursing homes from the State of
Illinois. 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 $93 million
(excluding interest and prior to any allowance for doubtful accounts) is owed
to the Company by this group of customers as of March 31, 2009, of which
approximately $87 million is past-due based on applicable payment terms (a
significant portion of which is not reserved based on the relevant facts and
circumstances). The $93 million represents approximately 5 days of the overall
DSO at March 31, 2009. 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 any allowance for doubtful
accounts), particularly for copays. As of March 31, 2009, copays outstanding
from Part D Plans were approximately $17 million relating to 2006 and 2007. The
Company is pursuing solutions, including legal actions against certain Part D
payors, to collect outstanding copays, as well as certain rejected claims.
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 March 31, 2009 was $337.7 million, compared with
$333.0 million at December 31, 2008. The allowance for doubtful accounts
represented 19.8% and 19.6% of gross receivables (net of contractual
allowances) as of March 31, 2009 and December 31, 2008, respectively.
Unforeseen future developments could lead to changes in the Companys provision
for doubtful accounts 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 March 31, 2009 would result in an
increase to the provision for doubtful accounts and related allowance for
doubtful accounts on the balance sheet of approximately $17.0 million pretax.

The following
table is an aging of the Companys March 31, 2009 and December 31, 2008 gross
accounts receivable (net of allowances for contractual adjustments, and prior
to allowances for

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doubtful
accounts), aged based on payment terms and categorized based on the four
primary overall types of accounts receivable characteristics (in thousands):

|                                                                            |  |                                   |           |                              |   |         |  |   |           | 
|--------------------------------------------------------------------------- |  | --------------------------------- | --------- | ---------------------------- | - | ------- |  | - | --------- | 
|                                                                            |  | March 31, 2009                    |          
|                                                                            |  |                                   |          
|                                                                            |  | 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              |  | $                                 | 393,643   |                              | $ | 189,631 |  | $ | 583,274   | 
|Facility payors                                                             |  |                                   | 480,823   |                              |   | 368,385 |  |   | 849,208   | 
|Private Pay payors                                                          |  |                                   | 112,803   |                              |   | 135,624 |  |   | 248,427   | 
|CRO                                                                         |  |                                   | 21,656    |                              |   |        |  |   | 21,656    | 
|                                                                            |  |                                   |           |                              |   |         |  |   |           | 
|Total gross accounts receivable (net of
 contractual allowance adjustments) |  | $                                 | 1,008,925 |                              | $ | 693,640 |  | $ | 1,702,565 | 
|                                                                            |  |                                   |           |                              |   |         |  |   |           | 
|                                                                            |  |                                   |           |                              |   |         |  |   |           | 
|                                                                            |  | December 31, 2008                 |          
|                                                                            |  |                                   |          
|                                                                            |  | 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              |  | $                                 | 393,263   |                              | $ | 186,349 |  | $ | 579,612   | 
|Facility payors                                                             |  |                                   | 484,442   |                              |   | 357,281 |  |   | 841,723   | 
|Private Pay payors                                                          |  |                                   | 118,541   |                              |   | 132,640 |  |   | 251,181   | 
|CRO                                                                         |  |                                   | 27,608    |                              |   |        |  |   | 27,608    | 
|                                                                            |  |                                   |           |                              |   |         |  |   |           | 
|Total gross accounts receivable (net of
 contractual allowance adjustments) |  | $                                 | 1,023,854 |                              | $ | 676,270 |  | $ | 1,700,124 | 
|                                                                            |  |                                   |           |                              |   |         |  |   |           | 

Fair Value

On January 1,
2008, the Company adopted the provisions of SFAS No. 157, Fair Value Measurements (SFAS 157).
SFAS 157 defines a hierarchy which prioritizes the inputs in fair value
measurements. Level 1 measurements are measurements using quoted prices in
active markets for identical assets or liabilities. Level 2 measurements use
significant other observable inputs. Level 3 measurements are measurements
using significant unobservable inputs which require a company to develop its
own assumptions. In recording the fair value of assets and liabilities,
companies must use the most reliable measurement available. The impact to the
Companys consolidated results of operations, financial position and cash flows
upon adoption of SFAS 157 was not material.

See further discussion at the
Fair Value note of the Notes to Consolidated Financial Statements.

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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.

Acquisitions

Effective January 1, 2009, the Company adopted the
provisions of SFAS No. 141
(revised 2007), Business Combinations (SFAS 141R). SFAS 141R requires the
acquiring entity in a business combination to recognize all (and only) the
assets acquired and liabilities assumed in the transaction at fair value; and
establishes the acquisition-date fair value as the measurement objective for
all assets acquired and liabilities assumed, including earn-out provisions.

See further discussion at the Acquisitions note of
the Notes to Consolidated Financial Statements.

Interest
Expense

Effective January 1, 2009,
the Company retrospectively adopted the provisions of FSP APB 14-1. Among other
items, FSP APB 14-1 specifies that issuers of convertible debt instruments that
may be settled in cash upon conversion (including partial cash settlement)
should separately account for the liability and equity components in a manner
that reflects the entitys calculated nonconvertible debt borrowing rate
when the debt was issued. The 2009 implementation resulted in a non-cash increase
in pretax interest expense of approximately $7 million during the three months
ended March 31, 2009. Further, the Company reclassified approximately $441 million
of convertible debt and related deferred debt issuance costs to equity in accordance
with this new authoritative guidance.

See further discussion at the Debt note of the Notes
to Consolidated Financial Statements.

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

61

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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 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 and identifiable intangible assets; market
conditions; the outcome of audit, compliance, administrative, regulatory, 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.

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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
March 31, 2009 include $325.0 million outstanding under the variable-rate
Senior term A loan, due 2010, at an interest rate of 2.31% at March 31, 2009 (a
100 basis-point change in the interest rate would increase or decrease pretax
interest expense by approximately $3.3 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
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 3.98% at March 31, 2009 (a 100
basis-point change in the interest rate would increase or decrease pretax
interest expense by approximately $2.5 million per year). The Swap Agreement,
which matches the terms of the 6.125% Senior Notes, is designated and accounted
for as a fair value hedge. The Company is accounting for the Swap Agreement in
accordance with SFAS No. 133, as amended, so changes in the fair value of the
Swap Agreement are offset by changes in the recorded carrying value of the
related 6.125% Senior Notes. The fair value of the Swap Agreement is recorded
as a noncurrent asset or (liability), with an offsetting increase or
(decrease), respectively, to the book carrying value of the related 6.125%
Senior Notes, and amounted to approximately $7.4 million at the end of the 2009
first quarter. Additionally, at March 31, 2009, the fair value of Omnicares
variable rate debt facilities approximated 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):

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Fair Value of Financial Instruments

|                                                               |  |                |         |                   |   |            |  |              |         |  |   |         | 
|-------------------------------------------------------------- |  | -------------- | ------- | ----------------- | - | ---------- |  | ------------ | ------- |  | - | ------- | 
|                                                               |  | March 31, 2009 |         | December 31, 2008 |  
|                                                               |  |                |         |                   |  
|                                                               |  | Book Value     |         | Market Value      |   | Book Value |  | Market Value |        
|                                                               |  |                |         |                   |   |            |  |              |        
|Financial Instrument:                                          |  |                |         |                   |   |            |  |              |         |  |   |         | 
|6.125% senior subordinated notes, due 2013,
 gross             |  | $              | 250,000 |                   | $ | 224,400    |  | $            | 250,000 |  | $ | 208,800 | 
|6.75% senior subordinated notes, due 2013                      |  |                | 225,000 |                   |   | 205,900    |  |              | 225,000 |  |   | 189,000 | 
|6.875% senior subordinated notes, due 2015                     |  |                | 525,000 |                   |   | 471,100    |  |              | 525,000 |  |   | 446,000 | 
|4.00% junior
    subordinated convertible debentures, due 2033 |  |                |         |                   |   |            |  |              |         |  |   |         | 
|Carrying value                                                 |  |                | 197,524 |                   |   |           |  |              | 197,029 |  |   |        | 
|Unamortized debt discount                                      |  |                | 147,476 |                   |   |           |  |              | 147,971 |  |   |        | 
|                                                               |  |                |         |                   |   |            |  |              |        
|Principal amount                                               |  |                | 345,000 |                   |   | 228,500    |  |              | 345,000 |  |   | 250,800 | 
|3.25% convertible
    senior debentures, due 2035              |  |                |         |                   |   |            |  |              |         |  |   |         | 
|Carrying
        value                                         |  |                | 753,487 |                   |   |           |  |              | 747,185 |  |   |        | 
|Unamortized
        debt discount                              |  |                | 224,013 |                   |   |           |  |              | 230,315 |  |   |        | 
|                                                               |  |                |         |                   |   |            |  |              |        
|Principal
        amount                                       |  |                | 977,500 |                   |   | 637,800    |  |              | 977,500 |  |   | 565,100 | 

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, 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 consolidated
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 overall consolidated 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 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.

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(b) There were
no changes in the Companys internal control over financial reporting that
occurred during the Companys quarter ended March 31, 2009 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 January 16, 2009
the United States District Court for the Northern District of Illinois granted a motion for summary judgment
filed by the defendants. On January 21, 2009, the Company filed a Notice of
Appeal of the judgment and the related orders to the Seventh Circuit Court of
Appeals. The Company intends to pursue the appeal vigorously and seek reversal
of the judgment and the lower courts orders.

As previously
disclosed, the United States Attorneys Office, District of Massachusetts is conducting
an investigation relating to 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. Any actions resulting from this investigation could result in
civil or criminal proceedings against the Company. The Company believes that
it has complied with all applicable laws and regulations with respect to these
matters.

On October 27,
2008, the U.S. District Court in Boston, Massachusetts unsealed a qui tam complaint against the Company that
was originally filed under seal with the court on July 16, 2002. This action
was brought by Deborah Maguire as a private party qui tam relator on behalf of the federal government and
various state governments. On September 16, 2008, the U.S. Government filed a
Notice that it is not intervening in the action at this time.

65

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A qui tam action is always filed under seal.
Before a qui tam action is
unsealed, and typically following an investigation by the government initiated
after the filing of the qui tam
action, the government is required to notify the court of its decision whether
to intervene in the action. The government could seek to intervene in this qui tam action in the future with
permission from the court. Where the government ultimately declines to
intervene, the qui tam relators
may continue to pursue the litigation at their own expense on behalf of the
federal or state government and, if successful, would receive a portion of the
governments recovery. On April 2, 2009, counsel for Ms. Maguire served the Company
with the complaint relating to this action.

The action
brought by Ms. Maguire alleges civil violations of the False Claims Act, 31
U.S.C. (S) 3729 et seq. and various state false claims statutes based on
allegations that the Company: submitted claims for name brand drugs when
actually providing generic versions of the same drug to nursing homes; provided
consultant pharmacist services to its customers at below-market rates to induce
the referral of pharmaceutical business in violation of the Anti-Kickback
Statute, 42 U.S.C. 1320a-7b; and accepted discounts from drug manufacturers in
return for recommending that certain pharmaceuticals be prescribed to nursing
home residents in violation of the Anti-Kickback Statute. The unsealed action
seeks damages provided for in the False Claims Act and applicable state statutes.

In addition to the matters described above, on October 30 and 31, 2008, Omnicare was provided
    with copies of two complaints against Omnicare and other Pharmaceutical manufacturer
    defendants that were previously filed under seal with the U.S. District Court
    in Boston, Massachusetts. One complaint was brought by Bernard Lisitza, and
    the other by David Kammerer, both as private party qui
tam relators on behalf of the
federal
government and various state governments. The U.S. Government has notified the
court that it is not intervening in these actions at this time.

The action
brought by Mr. Kammerer alleges civil violations of the False Claims Act, 31
U.S.C. (S) 3729 et seq. and various state statutes based on allegations that
Omnicare accepted rebates, post-purchase discounts, grants and other forms of
remuneration from drug manufacturers in return for purchasing pharmaceuticals
from those manufacturers and taking steps to increase the purchase of those
manufacturers drugs in violation of the Anti-Kickback Statute, 42 U.S.C. (S)
1320a-7b and applicable state statutes. The action brought by Mr. Lisitza
alleges civil violations of the False Claims Act and various state statutes
based on allegations that Omnicare: accepted rebates from drug manufacturers in
return for recommending to physicians that certain pharmaceuticals be
prescribed to nursing home residents in violation of the Anti-Kickback Statute
and applicable state statutes; made false statements and omissions to
physicians in connection with its recommendations of those pharmaceuticals; and
substituted certain pharmaceuticals without physician authorization. The
unsealed actions seek damages provided for in the False Claims Act and
applicable state statutes. On March 27 and April 3, 2009, counsel for
Mr. Kammerer and Mr. Lisitza, respectively, served the Company with
the complaints relating to their respective actions against the Company.
The Company and counsel for each of Ms. Maguire and Messrs. Kammerer and
Lisitza have stipulated that the Company shall have until June 5, 2009 to
answer or otherwise respond to the complaints.

In addition to
the unsealed qui tam actions
described above, the Company is aware of two other qui tam complaints against it and other companies that have
been filed with the U.S. District Court in Boston, Massachusetts and remain
under seal.

On or about March 23, 2009, the Company reached an agreement in principle without admitting
liability, subject to board approval and reaching agreement on the global settlement described below, with
the U.S. Attorneys Office, District of Massachusetts, pursuant to which the Company would pay $75 million
to settle the claims raised in the two sealed complaints as well as the portion of Ms. Maguires complaint
described above that relates to the Companys provision of consultant pharmacist services and other claims
 covering similar conduct.  Pursuant to this agreement in principle, the Company may withdraw its
settlement offer of $75 million if it does not also reach a global settlement with the government of
any other actions and investigations pending against the Company covering conduct generally related to
the matters described in the remaining portions of the Maguire complaint and the Kammerer and Lisitza
complaints described above. There can be no assurance as to whether any such settlements will be reached.
  If any settlements are reached, there can be no assurance as to the scope or terms of, or the ultimate
cost to the Company of, any such settlements.

Omnicare recorded a special litigation charge of $35 million pretax in its financial
results for the three months ended March 31, 2009 in order to increase the settlement reserve it has
established in connection with the investigation by the U.S. Attorneys Office, District of Massachusetts
 and the related matters described above to $75 million. This special litigation charge and the settlement
 reserve relate to the Companys estimate of potential settlement amounts and associated costs under
SFAS No. 5, Accounting for Contingencies. The Company cannot predict the ultimate outcome of this
matter or the amount, if any, of additional charges that may be taken in the future in connection with
this matter.

The Company
believes that all of the allegations described above are without merit and
intends to vigorously defend itself in these actions if pursued.

66

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Information
pertaining to other Legal Proceedings involving the Company is further
discussed in the Commitments and Contingencies note of the Notes to
Consolidated Financial Statements of this Filing.

Although the
Company cannot predict the ultimate outcome of the matters described in the
preceding paragraphs and elsewhere in this Filing, 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.

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 laws and regulations to which the Company is subject,
including reviews of individual Omnicare pharmacys reimbursement documentation
and administrative practices.

ITEM 1A - RISK FACTORS

The Omnicare
2008 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. 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. Although
some of the reductions were subsequently mitigated, the PPS fundamentally
changed the payment for Medicare SNF services.

In recent
years, SNFs have received the full market basket increase to annual rates. For
fiscal year 2009, beginning October 1, 2008, SNFs received a 3.4 percent
inflation update that increases overall payments to SNFs by $780 million. CMS
did not adopt a provision included in its May 7, 2008 proposed rule to
recalibrate case mix weights to compensate for increased expenditures resulting
from refinements made in January 2006, which would have cut overall SNF PPS
payments by $770 million in fiscal year 2009. While these rulemakings have not
decreased payments to SNFs, reimbursement changes could be adopted in the
future that could 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.

Similarly, the
Medicare Part D prescription drug benefit significantly shifted the payor mix
for our pharmacy services. Effective January 1, 2006, the Part D drug benefit
permits Medicare

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beneficiaries
to enroll in Part D Plans for their drug coverage. 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) have their prescription drug costs covered by the
new Medicare drug benefit, unless they elect to opt out of Part D coverage.
Many nursing home residents Omnicare serves are dual eligibles, whose drug
costs were previously covered by state Medicaid programs. In the first quarter
of 2009, approximately 39% of Omnicares revenue was derived from beneficiaries
covered under the federal Medicare Part D program.

The Company
obtains reimbursement for drugs it provides to enrollees of a given Part D Plan
pursuant to the agreement it negotiates with 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 and renegotiate these agreements in the
    ordinary course. Further, the proportion of our Part D business serviced
    under specific agreements may change over time based upon beneficiary choice,
    reassignment of dual eligibles to different Part D Plans or Part D Plan consolidation.
    As such, reimbursement under these agreements is subject to change. Moreover,
    as expected in the transition to a 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 any allowance for doubtful accounts), particularly
    for copays. As of March 31, 2009, copays outstanding from Part D Plans were
    approximately $17 million relating to 2006 and 2007. The Company is pursuing
    solutions, including legal actions against certain Part D payors, to collect
    outstanding copays, as well as certain rejected claims. Participants in the
    long-term care pharmacy industry continue to address these issues with CMS
    and the Part D Plans and attempt to develop solutions. Among other things,
    on January 12, 2009, CMS finalized a change in its regulations requiring
    Part D Plan sponsors to accept and act upon certain types of documentation,
    referred to as best available
    evidence, to
correct co-pays for dual eligibles, and other low-income subsidy eligible
beneficiaries. However, until all administrative and payment issues are fully
resolved, there can be no assurance that the Part D Drug benefit
will not adversely impact our results of operations, financial position or cash
flows.

CMS has issued
subregulatory guidance on many aspects of the Part D program, 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. For 2007 and 2008, CMS
instructed 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. The Company reported information specified by CMS with respect to
rebates received by the Company for 2007 and the first quarter of 2008 to those
Part D Plans which agreed to maintain the confidentiality of such information.
In November 2008, CMS suspended collection of the long-term care pharmacy
rebate data from Part D Plan sponsors for calendar years 2008 and 2009.
Instead, CMS intends to collect different non-rebate information to focus plan
attention on

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network
pharmacy compliance and appropriate drug utilization management. The new data
would include the number and the cost of formulary versus non-formulary drugs
dispensed by each pharmacy (whether long-term care or non-long-term care) in
the Part D Plans pharmacy network. CMS will test the proposed reporting
requirements with a small number of Part D Plan sponsors prior to calendar year
2010, when the new reporting requirements will become effective. CMS also
issued a memo on November 25, 2008 reminding Part D Plan sponsors of the
requirement to (1) provide convenient access to network long-term care pharmacies
to all of their enrollees residing in long-term care facilities, and (2)
exclude payment for drugs that are covered under a Medicare Part A stay that
would otherwise satisfy the definition of a Part D drug. The Company will
continue to work with Part D Plan sponsors to ensure compliance with CMSs
evolving policies related to long-term care pharmacy services.

MIPPA includes
further reforms to the Part D program. As of January 1, 2009, the law also
requires Part D Plan sponsors to update the prescription drug pricing data they
use to pay pharmacies at least every seven days. As of January 1, 2010, the law
requires that long-term care pharmacies have between 30 and 90 days to submit
claims to a Part D Plan. The law also expands the number of Medicare beneficiaries
who will be entitled to premium and cost-sharing subsidies by modifying
previous income and asset requirements, eliminates late enrollment penalties
for beneficiaries entitled to these subsidies, and limits the sales and
marketing activities in which Part D Plan sponsors may engage, among other
things. On September 18, 2008, CMS published final regulations implementing
many of the MIPPA Part D provisions, and the agency published another interim
final rule with comment period on January 16, 2009 implementing additional
MIPPA provisions related to drug formularies and protected classes of drugs.
Additional legislative proposals are pending before Congress that could further
modify the Part D benefit, including proposals that could impact the payment available
or pricing for drugs under Part D Plans. We cannot predict at this time whether
such legislation will be enacted or the form any such legislation would take.
We can make no assurances that future Part D legislation would not adversely
impact our business.

Moreover, CMS
continues to issue guidance on and make revisions to the Part D program. 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 Part D rules, future
legislative changes, 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 DMEPOS under Medicare Part B. Approximately 1% of our revenue is
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. Only suppliers that are winning bidders will be eligible to
provide competitively-bid items to Medicare beneficiaries in the selected
areas.

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In mid-2007,
CMS conducted a first round of bidding for 10 DMEPOS product categories in 10
competitive bidding areas, and announced winning bidders in March 2008. In
light of concerns about implementation of the bidding program, in MIPPA
Congress terminated the contracts awarded by CMS in the first round of
competitive bidding, required that new bidding be conducted for the first
round, and required certain reforms to the bidding process. The law requires
CMS to rebid those areas in 2009, with bidding for round two delayed until
2011. The delay is being financed by reducing Medicare fee schedule payments
for all items covered by the round one bidding program by 9.5 percent
nationwide effective January 1, 2009, followed by a 2 percent increase in 2014
(with certain exceptions). The legislation also includes a series of procedural
improvements to the bidding process. CMS published an interim final rule with
comment period to implement the MIPPA competitive bidding changes on January
16, 2009, and on April 17, 2009 announced that it is proceeding with
implementation of the January 16, 2009 rule after a brief delay. We intend to
participate in the new bidding process for round one, and are assessing the
impact of the fee schedule reductions on our business. There is no assurance
that we will be a successful bidder in the DMEPOS competitive bidding process.

With respect
to Medicaid, states have considerable latitude in setting payment rates for
nursing facility services. States also have 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. The DRA 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 in a way that
adversely impacts the Company.

The DRA also
changed the so-called federal upper limit payment rules for multiple source
prescription drugs covered under Medicaid. Like the current upper limit, it
only applies to drug ingredient costs and does not include dispensing fees,
which will continue to be determined by the states. First, the DRA redefined a
multiple source drug subject to the upper limit rules to be a covered
outpatient drug that has at least one other drug product that is therapeutically
equivalent. Thus, the federal upper limit is triggered when there are two or
more therapeutic equivalents, instead of three or more as was previously the
case. Second, effective January 1, 2007, the DRA changed the federal upper
payment limit from 150 percent of the lowest published price for a drug (which
is usually the average wholesale price) to 250 percent of the lowest average
manufacturer price (AMP). Congress expected these DRA provisions to reduce
federal and state Medicaid spending by $8.4 billion over five years. On July
17, 2007, CMS issued a final rule with comment period to implement changes to
the upper limit rules. Among other things, the final rule: established a new
federal upper limit calculation for multiple source drug based on 250 percent
of the lowest AMP in a drug class; required CMS to post AMP amounts on its web
site; and established a uniform definition for AMP. Additionally, the final
rule provided that

70

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sales of drugs
to long-term care pharmacies for supply to NHs and ALFs (as well as associated
discounts, rebates or 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). However, on December 19, 2007, the United States
District Court for the District of Columbia issued a preliminary injunction
that enjoins CMS from implementing provisions of the July 17, 2007 rule to the
extent that it affects Medicaid reimbursement rates for retail pharmacies under
the Medicaid program. The order also enjoins CMS from posting AMP data on a
public website or disclosing it to states. As a result of this preliminary
injunction, CMS did not post AMPs or new upper limit prices in late December
2007 based upon the July 17, 2007 final rule despite its earlier planned
timetable, and the schedule for states to implement the new upper limits has
been delayed until further notice. Separately, on March 14, 2008, CMS published
an interim final rule with comment period revising the Medicaid rebate
definition of multiple source drug set forth in the July 17, 2007 final rule.
In short, the effect of the rule will be that federal upper limits apply in all
states unless the state finds that a particular generic drug is not available
within that state. While the rules effective date was April 14, 2008, it is
subject to public comment. CMS also noted that the regulation is subject to the
injunction by the United States District Court for the District of Columbia to
the extent that it may affect Medicaid reimbursement rates for pharmacies. On
October 7, 2008, CMS published the final version of this rule, responding to
public comments received on the March 14, 2008 regulation. The final rule
adopted the March 2008 interim final rule with technical changes effective
November 6, 2008, although it continues to be subject to an injunction to the
extent that it affects Medicaid pharmacy reimbursement rates. Moreover, MIPPA
delays the adoption of the DRAs new federal upper limit payment rules for
Medicaid based on AMP for multiple source drugs and prevents CMS from
publishing AMP data until October 1, 2009; until then, upper limits will
continue to be determined under the pre-DRA rules. 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 prescription drugs. Until the litigation regarding the
final rule is resolved and new upper limit amounts are published by CMS, we
cannot predict the impact of the final rule on our business. Further, there can
be no assurance that federal upper limit payments under pre-DRA rules, changes
under the DRA or other efforts by payors to limit reimbursement for certain
drugs will not adversely impact our business.

On February
17, 2009, President Obama signed into law the American Recovery and
Reinvestment Act of 2009. This $790 billion economic stimulus package includes
a number of health care policy provisions, including approximately $19 billion
in funding for health information technology infrastructure and Medicare and
Medicaid incentives to encourage doctors, hospitals, and other providers to use
health information technology to electronically exchange patients health
information. The law also strengthens federal privacy and security provisions
to protect personally-identifiable health information. In addition, the
legislation increases Federal Medical Assistance Percentage (FMAP) payments
by approximately $87 billion to help support state Medicaid programs in the face
of budget shortfalls. The law also temporarily extends current Medicaid prompt
payment requirements to nursing facility and hospital claims, requiring state
Medicaid programs to reimburse providers for 90 percent of claims within 30
days of receipt and 99 percent of claims within 90 days of receipt. Omnicare is

71

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reviewing the
new law and assessing the potential impact of the various provisions on the
Company.

Two other
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 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 February 22, 2008, CMS published a final rule
that implements this legislation, and makes other clarifications to the
standards for determining the permissibility of provider tax arrangements. On
June 30, 2008, President Bush signed into law a supplemental appropriations
bill (P.L. 110-252) that imposes a moratorium on implementation of certain
provisions of this rule until April 1, 2009. The American Recovery and
Reinvestment Act of 2009 extends this moratorium until July 1, 2009. Second, on
January 18, 2007, CMS published a proposed rule designed 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 May 29, 2007, CMS published a final rule to
implement this provision, but Congress blocked the rule for one year in an
emergency fiscal year 2007 spending bill, H.R. 2206. The supplemental
appropriations bill, P.L. 110-252, further extends the moratorium on
implementation of the rule through April 1, 2009. The American Recovery and
Reinvestment Act of 2009 expresses the sense of Congress that the Secretary of
Health and Human Services should not promulgate the provider cost limit rule,
citing a ruling by the United States District Court for the District of
Columbia that the final rule was improperly promulgated.

Broader
changes in federal health care policy have been proposed by President Obama and
are expected to be considered by Congress this year. Specifically, on February
26, 2009, the Obama Administration released its proposed federal budget for
fiscal year (FY) 2010, which would establish a reserve fund of $633.8 billion
over 10 years to finance comprehensive health reform. The reserve fund would be
paid for by tax increases and health system savings. Among other things, the
plan would reduce payments to Medicare Advantage plans and bundle payments to
hospitals and certain post-acute providers for services provided within 30 days
after discharge from the hospital. The proposal would also increase the
Medicaid drug rebate level paid by pharmaceutical manufacturers to Medicaid for
brand-name drugs, apply the rebate levels paid by pharmaceutical manufacturers
to Medicaid on existing drugs to new formulations of those drugs, and allow
states to collect rebates from pharmaceutical manufacturers on drugs provided
through Medicaid managed care organizations. With regard to Medicare Part D,
the plan would impose higher premiums on certain higher-income beneficiaries
and expand oversight and program integrity activities related to the program.
The proposal also would establish a regulatory pathway for approval of
follow-on biologicals, take steps to promote generic drugs, and allow drug
reimportation. It should be noted that many provisions of the proposed budget
would require Congressional approval to implement and would take effect after
FY 2010.

Congressional
leaders have expressed their commitment to enacting major health reform
legislation this year, including expanded access to insurance, possibly with a
government health insurance option to compete with private plans. As part of
this reform, Congress may also seek

72

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to rein in
healthcare costs, which could include consideration of alternate healthcare
delivery systems, revised payment methodologies and changes in operational
requirements for healthcare providers. The actual legislative language of the
major federal reform proposals have not been released to date. 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 at the federal or state level, or the effect any future legislation
or regulation will have on our business.

Changes in the use
of the average wholesale price as a benchmark from which pricing in the
pharmaceutical industry is negotiated could adversely affect the Company.

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 States 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 have required
First DataBank to cease publishing AWP two years after the settlement became
effective unless a competitor of First DataBank was then publishing AWP, and
would have required that First DataBank modify the manner in which it
calculates AWP for over 8,000 distinct drugs (NDCs) from 125% of the drugs
wholesale acquisition cost (WAC) price established by manufacturers to 120%
of WAC until First DataBank ceased publishing same. 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.
The Court granted preliminary approval of both agreements. However on January
22, 2008, the court held a hearing on a motion for final approval of the
proposed settlements, and after hearing various objections to the proposed
settlements indicated that it would not approve the settlements as proposed. On
May 29, 2008, the plaintiffs and First DataBank filed a new settlement that
included a reduction in the number of NDCs to which a new mark-up over WAC
would apply (20% vs. 25%) from over 8,000 to 1,356, and removed the provision
requiring that AWP no longer be published in the future. First DataBank also
agreed to contribute approximately $2 million to a settlement fund and for
legal fees. On July 15, 2008, Medi-Span and the plaintiffs in that litigation
also proposed an amended settlement agreement under which Medi-Span agreed to
reduce the mark-up over WAC (from 20% to 25%) for only the smaller number of
NDCs, the requirement that AWP not be published in the future was removed, and
Medi-Span agreed to pay $500,000 for the benefit of the plaintiff class. First
DataBank and Medi-Span, independent of these settlements, announced that they
would, of their own volition, reduce to 20% the mark-up on all drugs with a
mark-up higher than 20% and stop publishing AWP within two years after the
changes in mark-up are implemented (in the case of First DataBank) or within
two years after the settlement is finally approved (in the case of Medi-Span).
During June and July, 2008, the Court granted preliminary approval to the
revised settlements and approved the process for class notification. On
December 17, 2008, the Court held a hearing on the plaintiffs motion for final

73

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approval of
the two proposed settlements, and on March 17, 2009 the Court released an
opinion approving the proposed settlements, with a modification by the Court
requiring that the change in mark-ups take place 180 days after the order
approving the settlements is entered. The Court entered an order approving the
settlements on March 30, 2009. Notices of appeal of the Courts order to
the United States Court of Appeals for the First Circuit have been filed by several
entities; no briefing schedule for the appeal has as yet been established.
Additionally, motions for a stay of the Courts order pending appeal have
been filed, and are currently pending.

The Company is
monitoring these cases for further developments and evaluating potential
implications and/or actions that may be required, including any adverse effect
on the Companys reimbursement for drugs and biologicals and any actions that
may be taken to offset or otherwise mitigate such impact. There can be no
assurance, however, that the First DataBank and Medi-Span settlements and
associated unilateral actions by First DataBank and Medi-Span, if implemented,
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, which could adversely affect the Company.

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

|    |                                                                        
|--- | -----------------------------------------------------------------------
|(c) | Purchases of
 Equity Securities by the Issuer and Affiliated Purchasers

A summary of
the Companys repurchases of Omnicare, Inc. common stock during the quarter
ended March 31, 2009 is as follows (in thousands, except per share data):

|                       |  |                                        |     |                                 |   |                                                                                         |  |                                                                                                                        |   |  |   |   | 
|---------------------- |  | -------------------------------------- | --- | ------------------------------- | - | --------------------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------- | - |  | - | - | 
|Period                 |  | Total Number 
 of Shares
 Purchased(a) |     | Average
 Price Paid 
 per Share |   | Number of 
 Shares
 Purchased as 
 Part of 
 Publicly 
 Announced 
 Plans or 
 Programs |  | Maximum Number (or 
 Approximate Dollar 
 Value) of Shares that 
 May Yet Be Purchased 
 Under the Plans or 
 Programs |  
|                       |  |                                        |     |                                 |   |                                                                                         |  |                                                                                                                        |  
|January 1 -
 31, 2009  |  |                                        |    |                                 | $ |                                                                                        |  |                                                                                                                        |  |  | $ |  | 
|February 1 -
 28, 2009 |  |                                        | 30  |                                 |   | 28.91                                                                                   |  |                                                                                                                        |  |  |   |  | 
|March 1 - 31,
 2009    |  |                                        | 95  |                                 |   | 23.64                                                                                   |  |                                                                                                                        |  |  |   |  | 
|                       |  |                                        |     |                                 |   |                                                                                         |  |                                                                                                                        |   |  |   |   | 
|Total                  |  |                                        | 125 |                                 | $ | 24.90                                                                                   |  |                                                                                                                        |  |  | $ |  | 
|                       |  |                                        |     |                                 |   |                                                                                         |  |                                                                                                                        |   |  |   |   | 

|    |                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | During the
 first quarter of 2009, the Company purchased 125 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.

74

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ITEM 6 - EXHIBITS

See Index of
Exhibits.

75

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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: April
 30, 2009 | By: | /s/ | David W.
 Froesel, Jr.    
|                      |     |    
|                      |     |     | David W.
 Froesel, Jr.    
|                      |     |     | Senior Vice
 President and
|                      |     |     | Chief
 Financial Officer  
|                      |     |     | (Principal
 Financial and 
|                      |     |     | Accounting
 Officer)      

---



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)                                                                                  |  | Third
 Amended and Restated By-Laws of Omnicare, Inc.                                                                                        |  | Form 8-K
 December 23, 2008
|                                                                                       |  |                                                                                                                                              |  |                            
|(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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