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

FORM 10-Q

| |            |                                                                                            |  | 
| | ---------- | ------------------------------------------------------------------------------------------ |  | 
| | (Mark One) |                                                                                           
| | x          | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF 
 THE SECURITIES EXCHANGE ACT OF 1934  |  | 
| |            | For
 the quarterly period ended June 30, 2009                                              |  | 
| |            | or                                                                                         |  | 
| | o          | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF 
 THE SECURITIES EXCHANGE ACT OF 1934 |  | 
| |            | For
 the transition period from __________ to __________.                                  |  | 
| |            |                                                                                            |  | 
| |            | Commission
 File Number 1-8269                                                             |  | 

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

|Delaware                                                                            |  | 31-1001351                           
|----------------------------------------------------------------------------------- |  | -------------------------------------
|                                                                                    |  |                                      
|(State
 or other jurisdiction of                                                    |  | (I.R.S.
 Employer Identification No.)
|incorporation
 or organization)                                                     |  |                                      
|                                                                                    |  |                                      
|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 | 119,357,454       |  | June
 30, 2009

---



OMNICARE, INC. AND

SUBSIDIARY COMPANIES

FORM 10-Q QUARTERLY REPORT JUNE 30, 2009

INDEX

|         |                                                                                        |      | 
|-------- | -------------------------------------------------------------------------------------- | ---- | 
|         |                                                                                        | PAGE
|         | PART I - FINANCIAL INFORMATION:                                                        |      | 
|         |                                                                                        |      | 
|ITEM 1.  | FINANCIAL STATEMENTS (UNAUDITED)                                                       |      | 
|         |                                                                                        |      | 
|         | Consolidated Statements of Income                                                     |      | 
|         | Three and six months ended 
June 30, 2009
 and 2008                                   | 3    | 
|         |                                                                                        |      | 
|         | Consolidated Balance Sheets                                                           |      | 
|         | June 30, 2009 and December 31,
2008                                                    | 4    | 
|         |                                                                                        |      | 
|         | Consolidated Statements of Cash Flows                                                 |      | 
|         | Six months ended  June 30,
2009 and 2008                                              | 5    | 
|         |                                                                                        |      | 
|         | Notes to Consolidated Financial Statements                                             | 6    | 
|         |                                                                                        |      | 
|ITEM 2.  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
 RESULTS OF OPERATIONS | 45   | 
|         |                                                                                        |      | 
|ITEM 3.  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                             | 76   | 
|         |                                                                                        |      | 
|ITEM 4.  | CONTROLS AND PROCEDURES                                                                | 77   | 
|         |                                                                                        |      | 
|         |                                                                                        |      | 
|         | PART II - OTHER
 INFORMATION:                                                          |      | 
|         |                                                                                        |      | 
|ITEM 1.  | LEGAL PROCEEDINGS                                                                      | 78   | 
|         |                                                                                        |      | 
|ITEM 1A. | RISK FACTORS                                                                           | 81   | 
|         |                                                                                        |      | 
|ITEM 2.  | UNREGISTERED SALE OF EQUITY SECURITIES AND USE OF PROCEEDS                             | 88   | 
|         |                                                                                        |      | 
|ITEM 4.  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                    | 89   | 
|         |                                                                                        |      | 
|ITEM 6.  | EXHIBITS                                                                               | 89   | 

---



PART I - FINANCIAL INFORMATION:

ITEM 1. - FINANCIAL STATEMENTS

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

|                                                                                                                            |  |                               |           |                                  |   |           |   |                                  |           |   |   |           |  
|--------------------------------------------------------------------------------------------------------------------------- |  | ----------------------------- | --------- | -------------------------------- | - | --------- | - | -------------------------------- | --------- | - | - | --------- | -
|                                                                                                                            |  | Three months ended,
 June 30, |           | Six months ended
 June 30,       |  
|                                                                                                                            |  |                               |           |                                  |  
|                                                                                                                            |  | 2009                          |           | 2008
 as adjusted
 (Notes 2 & 3) |   | 2009      |   | 2008
 as adjusted
 (Notes 2 & 3) |          
|                                                                                                                            |  |                               |           |                                  |   |           |   |                                  |          
|Net sales                                                                                                                   |  | $                             | 1,540,507 |                                  | $ | 1,522,712 |   | $                                | 3,082,612 |   | $ | 3,053,150 |  
|                                                                                                                           
|Cost of sales                                                                                                               |  |                               | 1,168,778 |                                  |   | 1,149,864 |   |                                  | 2,320,546 |   |   | 2,309,445 |  
|Heartland repack matters (Note 11)                                                                                          |  |                               | 815       |                                  |   | 1,560     |   |                                  | 1,917     |   |   | 3,134     |  
|                                                                                                                            |  |                               |           |                                  |   |           |   |                                  |           |   |   |           |  
|Gross profit                                                                                                                |  |                               | 370,914   |                                  |   | 371,288   |   |                                  | 760,149   |   |   | 740,571   |  
|                                                                                                                            |  |                               |           |                                  |   |           |   |                                  |           |   |   |           |  
|Selling, general and administrative expenses                                                                                |  |                               | 203,491   |                                  |   | 226,951   |   |                                  | 419,624   |   |   | 453,178   |  
|Provision for doubtful accounts                                                                                             |  |                               | 22,710    |                                  |   | 24,093    |   |                                  | 47,981    |   |   | 52,245    |  
|Restructuring and other related charges (Note 10)                                                                           |  |                               | 5,883     |                                  |   | 10,784    |   |                                  | 12,800    |   |   | 17,232    |  
|Litigation and other related professional fees (Note 11)                                                                    |  |                               | 28,357    |                                  |   | 16,022    |   |                                  | 70,022    |   |   | 37,664    |  
|Heartland repack matters (Note 11)                                                                                          |  |                               | 381       |                                  |   | 180       |   |                                  | 1,272     |   |   | 499       |  
|Acquisition and other related costs (Note 4)                                                                                |  |                               | 2,011     |                                  |   |          |   |                                  | 2,850     |   |   |          |  
|                                                                                                                            |  |                               |           |                                  |   |           |   |                                  |           |   |   |           |  
|Operating income                                                                                                            |  |                               | 108,081   |                                  |   | 93,258    |   |                                  | 205,600   |   |   | 179,753   |  
|                                                                                                                            |  |                               |           |                                  |   |           |   |                                  |           |   |   |           |  
|Investment income                                                                                                           |  |                               | 1,032     |                                  |   | 1,959     |   |                                  | 3,439     |   |   | 4,570     |  
|Interest expense                                                                                                            |  |                               | (29,775   | )                                |   | (35,693   | ) |                                  | (61,062   | ) |   | (72,506   | )
|Amortization of discount on convertible notes (Note 6)                                                                      |  |                               | (6,927    | )                                |   | (6,421    | ) |                                  | (13,724   | ) |   | (12,721   | )
|                                                                                                                            |  |                               |           |                                  |   |           |   |                                  |           |   |   |           |  
|Income from continuing operations before income taxes                                                                       |  |                               | 72,411    |                                  |   | 53,103    |   |                                  | 134,253   |   |   | 99,096    |  
|Income tax provision                                                                                                        |  |                               | 30,417    |                                  |   | 19,609    |   |                                  | 60,031    |   |   | 38,065    |  
|                                                                                                                            |  |                               |           |                                  |   |           |   |                                  |           |   |   |           |  
|Income from continuing operations                                                                                           |  |                               | 41,994    |                                  |   | 33,494    |   |                                  | 74,222    |   |   | 61,031    |  
|Loss from discontinued
    operations, including impairment charge of $12,065 aftertax
    during the 2009 periods (Note 3) |  |                               | (13,275   | )                                |   | (559      | ) |                                  | (14,609   | ) |   | (1,946    | )
|                                                                                                                            |  |                               |           |                                  |   |           |   |                                  |           |   |   |           |  
|Net income                                                                                                                  |  | $                             | 28,719    |                                  | $ | 32,935    |   | $                                | 59,613    |   | $ | 59,085    |  
|                                                                                                                            |  |                               |           |                                  |   |           |   |                                  |           |   |   |           |  
|Earnings (loss) per common share - Basic :                                                                                  |  |                               |           |                                  |   |           |   |                                  |           |   |   |           |  
|Continuing operations                                                                                                       |  | $                             | 0.36      |                                  | $ | 0.28      |   | $                                | 0.64      |   | $ | 0.51      |  
|Discontinued operations                                                                                                     |  |                               | (0.11     | )                                |   | (0.00     | ) |                                  | (0.13     | ) |   | (0.02     | )
|                                                                                                                            |  |                               |           |                                  |   |           |   |                                  |           |   |   |           |  
|Net income                                                                                                                  |  | $                             | 0.25      |                                  | $ | 0.28      |   | $                                | 0.51      |   | $ | 0.50      |  
|                                                                                                                            |  |                               |           |                                  |   |           |   |                                  |           |   |   |           |  
|Earnings (loss) per common share - Diluted:                                                                                 |  |                               |           |                                  |   |           |   |                                  |           |   |   |           |  
|Continuing operations                                                                                                       |  | $                             | 0.36      |                                  | $ | 0.28      |   | $                                | 0.63      |   | $ | 0.51      |  
|Discontinued operations                                                                                                     |  |                               | (0.11     | )                                |   | (0.00     | ) |                                  | (0.12     | ) |   | (0.02     | )
|                                                                                                                            |  |                               |           |                                  |   |           |   |                                  |           |   |   |           |  
|Net income                                                                                                                  |  | $                             | 0.24      |                                  | $ | 0.28      |   | $                                | 0.51      |   | $ | 0.50      |  
|                                                                                                                            |  |                               |           |                                  |   |           |   |                                  |           |   |   |           |  
|Dividends per common share                                                                                                  |  | $                             | 0.0225    |                                  | $ | 0.0225    |   | $                                | 0.045     |   | $ | 0.045     |  
|                                                                                                                            |  |                               |           |                                  |   |           |   |                                  |           |   |   |           |  
|Weighted average number of common shares outstanding:                                                                       |  |                               |           |                                  |   |           |   |                                  |           |   |   |           |  
|Basic                                                                                                                       |  |                               | 116,852   |                                  |   | 117,901   |   |                                  | 116,652   |   |   | 118,874   |  
|                                                                                                                            |  |                               |           |                                  |   |           |   |                                  |           |   |   |           |  
|Diluted                                                                                                                     |  |                               | 117,640   |                                  |   | 118,672   |   |                                  | 117,490   |   |   | 119,606   |  
|                                                                                                                            |  |                               |           |                                  |   |           |   |                                  |           |   |   |           |  
|Comprehensive income                                                                                                        |  | $                             | 27,223    |                                  | $ | 32,131    |   | $                                | 57,898    |   | $ | 67,408    |  
|                                                                                                                            |  |                               |           |                                  |   |           |   |                                  |           |   |   |           |  

3

---



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

|                                                                                                                       |  |               |           |                                                 |   |           |  
|---------------------------------------------------------------------------------------------------------------------- |  | ------------- | --------- | ----------------------------------------------- | - | --------- | -
|                                                                                                                       |  | June 30, 2009 |           | December
 31,
 2008
 as adjusted
 (Notes 2 & 3) |  
|                                                                                                                       |  |               |           |                                                 |  
|ASSETS                                                                                                                 |  |               |           |                                                 |   |           |  
|Current assets:                                                                                                        |  |               |           |                                                 |   |           |  
|Cash and cash equivalents                                                                                              |  | $             | 273,766   |                                                 | $ | 214,668   |  
|Restricted cash                                                                                                        |  |               | 2,484     |                                                 |   | 1,891     |  
|Accounts receivable, less allowances of $322,375
(2008-$319,417)                                                       |  |               | 1,270,946 |                                                 |   | 1,337,558 |  
|Unbilled receivables, CRO                                                                                              |  |               | 23,093    |                                                 |   | 22,329    |  
|Inventories                                                                                                            |  |               | 338,453   |                                                 |   | 449,023   |  
|Deferred income tax benefits                                                                                           |  |               | 142,042   |                                                 |   | 134,249   |  
|Other current assets                                                                                                   |  |               | 181,184   |                                                 |   | 176,989   |  
|Current assets of discontinued operations                                                                              |  |               | 31,696    |                                                 |   | 34,986    |  
|                                                                                                                       |  |               |           |                                                 |   |           |  
|Total current assets                                                                                                   |  |               | 2,263,664 |                                                 |   | 2,371,693 |  
|                                                                                                                       |  |               |           |                                                 |   |           |  
|Properties and equipment, at cost less accumulated depreciation of
 $315,287 (2008-$300,880)                           |  |               | 210,245   |                                                 |   | 208,527   |  
|Goodwill                                                                                                               |  |               | 4,235,328 |                                                 |   | 4,211,221 |  
|Identifiable intangible assets, less accumulated amortization of
 $166,411 (2008-$149,538)                             |  |               | 311,793   |                                                 |   | 329,446   |  
|Rabbi trust assets for settlement of pension obligations                                                               |  |               | 130,506   |                                                 |   | 134,587   |  
|Other noncurrent assets                                                                                                |  |               | 128,644   |                                                 |   | 137,526   |  
|Noncurrent assets of discontinued operations                                                                           |  |               | 45,846    |                                                 |   | 57,245    |  
|                                                                                                                       |  |               |           |                                                 |   |           |  
|Total noncurrent assets                                                                                                |  |               | 5,062,362 |                                                 |   | 5,078,552 |  
|                                                                                                                       |  |               |           |                                                 |   |           |  
|Total assets                                                                                                           |  | $             | 7,326,026 |                                                 | $ | 7,450,245 |  
|                                                                                                                       |  |               |           |                                                 |   |           |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                   |  |               |           |                                                 |   |           |  
|Current liabilities:                                                                                                   |  |               |           |                                                 |   |           |  
|Accounts payable                                                                                                       |  | $             | 240,328   |                                                 | $ | 333,728   |  
|Accrued employee compensation                                                                                          |  |               | 35,884    |                                                 |   | 50,082    |  
|Deferred revenue, CRO                                                                                                  |  |               | 14,798    |                                                 |   | 23,227    |  
|Current debt                                                                                                           |  |               | 1,438     |                                                 |   | 1,784     |  
|Other current liabilities                                                                                              |  |               | 246,444   |                                                 |   | 221,632   |  
|Current liabilities of discontinued operations                                                                         |  |               | 8,830     |                                                 |   | 10,336    |  
|                                                                                                                       |  |               |           |                                                 |   |           |  
|Total current liabilities                                                                                              |  |               | 547,722   |                                                 |   | 640,789   |  
|                                                                                                                       |  |               |           |                                                 |   |           |  
|Long-term debt, notes and convertible debentures (Note 6)                                                              |  |               | 2,212,114 |                                                 |   | 2,352,824 |  
|Deferred income tax liabilities                                                                                        |  |               | 553,553   |                                                 |   | 525,426   |  
|Other noncurrent liabilities                                                                                           |  |               | 278,829   |                                                 |   | 276,284   |  
|Noncurrent liabilities of discontinued operations                                                                      |  |               | 53        |                                                 |   | 53        |  
|                                                                                                                       |  |               |           |                                                 |   |           |  
|Total noncurrent liabilities                                                                                           |  |               | 3,044,549 |                                                 |   | 3,154,587 |  
|                                                                                                                       |  |               |           |                                                 |   |           |  
|Total liabilities                                                                                                      |  |               | 3,592,271 |                                                 |   | 3,795,376 |  
|                                                                                                                       |  |               |           |                                                 |   |           |  
|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, 126,692,600
 shares issued (2008-125,583,300 shares issued) |  |               | 126,693   |                                                 |   | 125,583   |  
|Paid-in capital (Note 6)                                                                                               |  |               | 2,255,393 |                                                 |   | 2,224,129 |  
|Retained earnings                                                                                                      |  |               | 1,551,692 |                                                 |   | 1,498,171 |  
|Treasury stock, at cost-7,335,100 shares (2008-7,135,300
shares)                                                       |  |               | (198,472  | )                                               |   | (193,178  | )
|Accumulated other comprehensive income (loss)                                                                          |  |               | (1,551    | )                                               |   | 164       |  
|                                                                                                                       |  |               |           |                                                 |   |           |  
|Total stockholders equity                                                                                             |  |               | 3,733,755 |                                                 |   | 3,654,869 |  
|                                                                                                                       |  |               |           |                                                 |   |           |  
|Total liabilities and stockholders equity                                                                             |  | $             | 7,326,026 |                                                 | $ | 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)

|                                                                                                        |  |                            |          |                                  |   |          |  
|------------------------------------------------------------------------------------------------------- |  | -------------------------- | -------- | -------------------------------- | - | -------- | -
|                                                                                                        |  | Six months ended
 June 30, |         
|                                                                                                        |  |                            |         
|                                                                                                        |  | 2009                       |          | 2008
 as adjusted
 (Notes 2 & 3) |  
|                                                                                                        |  |                            |          |                                  |  
|Cash flows from operating activities:                                                                   |  |                            |          |                                  |   |          |  
|Net income                                                                                              |  | $                          | 59,613   |                                  | $ | 59,085   |  
|Loss from discontinued operations                                                                       |  |                            | 14,609   |                                  |   | 1,946    |  
|Adjustments to reconcile net income to net cash flows from operating
 activities:                       |  |                            |          |                                  |   |          |  
|Depreciation expense                                                                                    |  |                            | 25,467   |                                  |   | 23,612   |  
|Amortization expense                                                                                    |  |                            | 45,886   |                                  |   | 44,040   |  
|Changes in assets and liabilities, net of effects from acquisition and
 divestiture of businesses:      |  |                            |          |                                  |   |          |  
|Accounts receivable and unbilled receivables, net of
provision for
 doubtful accounts                   |  |                            | 72,831   |                                  |   | 33,758   |  
|Inventories                                                                                             |  |                            | 112,253  |                                  |   | 51,672   |  
|Other current and noncurrent assets                                                                     |  |                            | (11,583  | )                                |   | 29,054   |  
|Accounts payable                                                                                        |  |                            | (89,876  | )                                |   | (40,302  | )
|Accrued employee compensation                                                                           |  |                            | (13,865  | )                                |   | 4,312    |  
|Deferred revenue                                                                                        |  |                            | (8,412   | )                                |   | 706      |  
|Current and noncurrent liabilities                                                                      |  |                            | 55,357   |                                  |   | 19,362   |  
|                                                                                                        |  |                            |          |                                  |   |          |  
|Net cash flows from operating activities of
continuing operations                                       |  |                            | 262,280  |                                  |   | 227,245  |  
|Net cash flows from operating activities of
discontinued operations                                     |  |                            | 662      |                                  |   | 1,367    |  
|                                                                                                        |  |                            |          |                                  |   |          |  
|Net cash flows from operating activities                                                                |  |                            | 262,942  |                                  |   | 228,612  |  
|                                                                                                        |  |                            |          |                                  |   |          |  
|Cash flows from investing activities:                                                                   |  |                            |          |                                  |   |          |  
|Acquisition of businesses, net of cash
received                                                         |  |                            | (43,100  | )                                |   | (90,988  | )
|Capital expenditures                                                                                    |  |                            | (15,315  | )                                |   | (27,430  | )
|Transfer of cash to trusts for employee health and
severance costs,
 net of payments out of the trust   |  |                            | 843      |                                  |   | (11,589  | )
|Other                                                                                                   |  |                            | (1,789   | )                                |   | (6       | )
|                                                                                                        |  |                            |          |                                  |   |          |  
|Net cash flows used in investing activities of
continuing operations                                    |  |                            | (59,361  | )                                |   | (130,013 | )
|Net cash flows used in investing activities of
discontinued operations                                  |  |                            | (444     | )                                |   | (1,038   | )
|                                                                                                        |  |                            |          |                                  |   |          |  
|Net cash flows used in investing
activities                                                             |  |                            | (59,805  | )                                |   | (131,051 | )
|                                                                                                        |  |                            |          |                                  |   |          |  
|Cash flows from financing activities:                                                                   |  |                            |          |                                  |   |          |  
|Net payments on revolving credit facility and term A
loan                                               |  |                            | (150,000 | )                                |   | (50,000  | )
|Payments on long-term borrowings and
obligations                                                        |  |                            | (993     | )                                |   | (1,725   | )
|(Decrease) in cash overdraft balance                                                                    |  |                            | (137     | )                                |   | (3,606   | )
|Payments for Omnicare common stock
repurchases                                                          |  |                            |         |                                  |   | (100,165 | )
|Proceeds / (Payments) for stock awards and exercise
of stock options,
 net of stock tendered in payment |  |                            | 9,464    |                                  |   | (3,803   | )
|Excess tax benefits from stock-based
compensation                                                       |  |                            | 2,366    |                                  |   | 82       |  
|Dividends paid                                                                                          |  |                            | (5,352   | )                                |   | (5,412   | )
|                                                                                                        |  |                            |          |                                  |   |          |  
|Net cash flows used in financing activities of
continuing operations                                    |  |                            | (144,652 | )                                |   | (164,629 | )
|Net cash flows provided by financing activities of
discontinued
 operations                             |  |                            |         |                                  |   | 119      |  
|                                                                                                        |  |                            |          |                                  |   |          |  
|Net cash flows used in financing
activities                                                             |  |                            | (144,652 | )                                |   | (164,510 | )
|                                                                                                        |  |                            |          |                                  |   |          |  
|Effect of exchange rate changes on cash                                                                 |  |                            | 831      |                                  |   | 1,231    |  
|                                                                                                        |  |                            |          |                                  |   |          |  
|Net increase (decrease) in cash and cash equivalents                                                    |  |                            | 59,316   |                                  |   | (65,718  | )
|Less increase in cash and cash equivalents of discontinued
operations                                   |  |                            | 218      |                                  |   | 448      |  
|                                                                                                        |  |                            |          |                                  |   |          |  
|Increase (decrease) in cash and cash equivalents of continuing
 operations                              |  |                            | 59,098   |                                  |   | (66,166  | )
|Cash and cash equivalents at beginning of period                                                        |  |                            | 214,668  |                                  |   | 274,200  |  
|                                                                                                        |  |                            |          |                                  |   |          |  
|Cash and cash equivalents at end of period                                                              |  | $                          | 273,766  |                                  | $ | 208,034  |  
|                                                                                                        |  |                            |          |                                  |   |          |  

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 Change in Method
of Accounting for Convertible Debt note) of prior year amounts have been
made to conform with the current year presentation. The December 31, 2008 Balance
Sheet has been revised for a deferred income tax adjustment related to the
retrospective application of the provisions of Financial Accounting Standards
Board (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). Additionally,
the Company has discontinued a component of its pharmacy services business (see Discontinued
Operations
note). All amounts disclosed herein relate to the Companys continuing
operations unless otherwise stated.

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 six months ended June 30,
2009 were generated under the Part D program. The Company estimates that
approximately 25% of these Part D revenues during the six months ended June 30,
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

6

---



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.

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 June
30, 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 $96 million (excluding interest) is owed
to the Company by this group of customers as of June 30, 2009, of which approximately
$90 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

---



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 June 30, 2009 were as follows:

|                                                 |  |                                |         |                                               |           |                                      |  |                                 |       |  |   |   | 
|------------------------------------------------ |  | ------------------------------ | ------- | --------------------------------------------- | --------- | ------------------------------------ |  | ------------------------------- | ----- |  | - | - | 
|                                                 |  |                                |         |                                               | Based
 on |                                     
|                                                 |  |                                |         |                                               |           |                                     
|                                                 |  | Fair
 Value
 at June 30,
 2009 |         | Quoted
 Prices
 in Active
 Markets
 (Level 1) |           | Other
 Observable
 Inputs
 (Level 2) |  | Unobservable
 Inputs
 (Level 3) |      
|                                                 |  |                                |         |                                               |           |                                      |  |                                 |      
|Rabbi trust assets                               |  | $                              | 130,506 |                                               | $         | 130,506                              |  | $                               |      |  | $ |  | 
|Interest rate swap
 agreement - fair value hedge |  |                                | 2,228   |                                               |           |                                     |  |                                 | 2,228 |  |   |  | 
|Derivatives                                      |  |                                |        |                                               |           |                                     |  |                                 |      |  |   |  | 
|                                                 |  |                                |         |                                               |           |                                      |  |                                 |       |  |   |   | 
|Total                                            |  | $                              | 132,734 |                                               | $         | 130,506                              |  | $                               | 2,228 |  | $ |  | 
|                                                 |  |                                |         |                                               |           |                                      |  |                                 |       |  |   |   | 

In the second
quarter of 2009, the Company adopted the provisions of FSP No. FAS 107-1 and
APB 28-1, Interim Disclosures about Fair Value of Financial Instruments (FSP
FAS 107-1), which requires disclosures about fair value of financial
instruments for interim reporting periods. The fair value of the Companys
fixed-rate debt facilities is based on quoted market prices and is summarized
as follows (in thousands):

Fair Value of Financial Instruments

|                                                            |  |                |         |                    |   |             |  |               |         |  |   |         | 
|----------------------------------------------------------- |  | -------------- | ------- | ------------------ | - | ----------- |  | ------------- | ------- |  | - | ------- | 
|                                                            |  | June
 30, 2009 |         | December
 31, 2008 |  
|                                                            |  |                |         |                    |  
|Financial Instrument:                                       |  | Book
 Value    |         | Market
 Value      |   | Book
 Value |  | Market
 Value |        
|                                                            |  |                |         |                    |   |             |  |               |        
|                                                            |  |                |         |                    |   |             |  |               |        
|6.125% senior subordinated
 notes, due 2013, gross          |  | $              | 250,000 |                    | $ | 226,600     |  | $             | 250,000 |  | $ | 208,800 | 
|6.75% senior subordinated
 notes, due 2013                  |  |                | 225,000 |                    |   | 203,600     |  |               | 225,000 |  |   | 189,000 | 
|6.875% senior subordinated
 notes, due 2015                 |  |                | 525,000 |                    |   | 477,800     |  |               | 525,000 |  |   | 446,000 | 
|                                                            |  |                |         |                    |   |             |  |               |         |  |   |         | 
|4.00% junior subordinated
 convertible debentures, due 2033 |  |                |         |                    |   |             |  |               |         |  |   |         | 
|                                                            |  |                |         |                    |   |             |  |               |         |  |   |         | 
|Carrying value                                              |  |                | 198,030 |                    |   |             |  |               | 197,029 |  |   |         | 
|Unamortized debt discount                                   |  |                | 146,970 |                    |   |             |  |               | 147,971 |  |   |         | 
|                                                            |  |                |         |                    |   |             |  |               |         |  |   |         | 
|Principal amount                                            |  |                | 345,000 |                    |   | 244,600     |  |               | 345,000 |  |   | 250,800 | 
|                                                            |  |                |         |                    |   |             |  |               |         |  |   |         | 
|3.25% convertible senior
 debentures, due 2035              |  |                |         |                    |   |             |  |               |         |  |   |         | 
|                                                            |  |                |         |                    |   |             |  |               |         |  |   |         | 
|Carrying value                                              |  |                | 759,908 |                    |   |             |  |               | 747,185 |  |   |         | 
|Unamortized debt discount                                   |  |                | 217,592 |                    |   |             |  |               | 230,315 |  |   |         | 
|                                                            |  |                |         |                    |   |             |  |               |         |  |   |         | 
|Principal amount                                            |  |                | 977,500 |                    |   | 672,000     |  |               | 977,500 |  |   | 565,100 | 
|                                                            |  |                |         |                    |   |             |  |               |         |  |   |         | 
|                                                            |  |                |         |                    |   |             |  |               |         |  |   |         | 

8

---



Common Stock Repurchase Program

On March 27,
2008, the Company announced that its Board of Directors authorized a program to
repurchase, from time to time, shares of Omnicares outstanding common stock
having an aggregate value of up to $100 million, depending on market conditions
and other factors. During the first half of 2008, the Company repurchased
approximately 4.1 million shares at a cost of approximately $100 million. Accordingly,
the Company has utilized the full amount of share repurchase authority and
completed the program. These repurchases were made in open market or privately
negotiated transactions in compliance with Securities and Exchange Commission
Rule 10b-18 and other applicable legal requirements.

Accumulated Other Comprehensive Income (Loss)

The
accumulated other comprehensive income (loss) balances at June 30, 2009 and
December 31, 2008, net of aggregate applicable tax benefits of $5.1 million and
$2.5 million, respectively, by component and in the aggregate, follow (in
thousands):

|                                                                      |  |                |         |                    |   |         |  
|--------------------------------------------------------------------- |  | -------------- | ------- | ------------------ | - | ------- | -
|                                                                      |  | June 30,
 2009 |         | December 31,
 2008 |  
|                                                                      |  |                |         |                    |  
|Cumulative foreign
 currency translation adjustments                  |  | $              | 6,677   |                    | $ | 4,112   |  
|Unrealized gain on fair
 value of investments                         |  |                | 2,751   |                    |   | 7,340   |  
|Pension and postemployment
 benefits                                  |  |                | (10,979 | )                  |   | (11,288 | )
|                                                                      |  |                |         |                    |   |         |  
|Total accumulated other
 comprehensive (loss) income adjustments, net |  | $              | (1,551  | )                  | $ | 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.

Subsequent Events

In the second
quarter of 2009, the Company adopted the provisions of SFAS No. 165,
Subsequent Events (SFAS 165). SFAS 165 requires that entities disclose the
date through which subsequent events have been evaluated, as well as whether
that date is the date the financial statements were issued or the date the
financial statements were available to be issued. The Company evaluated
subsequent events through July 30, 2009, which is the date the financial
statements were issued, and noted no material subsequent events had occurred
through this date warranting revision to the financial statements.

9

---



Income Taxes

The effective
income tax rate was 42.0% and 44.7% for the three and six months ended June 30,
2009, respectively, as compared to the rate of 36.9% and 38.4%, respectively,
for the same prior-year period. The year-over-year increase in the effective
tax rate is primarily attributable to certain nondeductible litigation costs
recognized in the 2009 periods. 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 the 2009 periods).

Recently Issued Accounting Standards

In December
2008, the FASB issued 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.

In June 2009,
the FASB issued SFAS No. 166, Accounting for Transfers of Financial Assets 
an amendment of FASB Statement No. 140 (SFAS 166). SFAS 166 removes the
concept of a qualifying special-purpose entity from Statement 140 and removes
the exception from applying FASB Interpretation No. (FIN) 46 (revised
December 2003), Consolidation of Variable Interest Entities (FIN 46(R)), to
qualifying special purpose entities. This statement requires that a transferor
recognize and initially measure at fair value all assets obtained and liabilities
incurred as a result of a transfer of financial assets accounted for as a sale.
SFAS 166 is effective for an entitys first annual reporting period that begins
after November 15, 2009. The Company does not anticipate the effect of this
recently issued standard to be material to its consolidated results of
operations, financial position and cash flows.

In June 2009,
the FASB issued SFAS No. 167, Amendments to FIN 46(R) (SFAS 167). SFAS 167
amends FIN 46(R) to require an enterprise to perform an analysis to determine
whether the enterprises variable interest or interests give it a controlling
financial interest in a variable interest entity. SFAS 167 is effective for an
entitys first annual reporting period that begins after November 15, 2009. The
Company does not anticipate the effect of this recently issued standard to be
material to its consolidated results of operations, financial position and cash
flows.

In June 2009,
the FASB issued SFAS No. 168, The FASB Accounting Standards Codification and
the Hirearchy of Generally Accepted Accounting Principles - a replacement of
FASB Statement No. 162 (SFAS 168). SFAS 168 establishes the Codification as
the source of

10

---



authoritative
U.S. Generally Accepted Accounting Principles (GAAP) recognized by the FASB
to be applied by nongovernmental entities.

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. 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. Comparative financial statements
for prior years have been adjusted to apply the new method retrospectively. The
affected financial statement line items and the amount of the adjustments for
the three and six month periods ending June 30, 2008 and as of December 31,
2008 follow (in thousands):

Income Statement
Three and Six Months Ended June 30, 2008

|                                                        |  |                                     |        |                                   |   |         |  
|------------------------------------------------------- |  | ----------------------------------- | ------ | --------------------------------- | - | ------- | -
|                                                        |  | Three months
 ended
 June 30,
 2008 |        | Six months
 ended
 June 30,
 2008 |  
|                                                        |  |                                     |        |                                   |  
|                                                        |  |                                     |        |                                   |  
|Amortization of discount on
 convertible notes (Note 6) |  | $                                   | (6,421 | )                                 | $ | (12,721 | )
|                                                        |  |                                     |        |                                   |   |         |  
|Interest expense                                        |  |                                     | 234    |                                   |   | 468     |  
|                                                        |  |                                     |        |                                   |   |         |  
|Income from continuing
 operations before income taxes  |  |                                     | (6,187 | )                                 |   | (12,253 | )
|                                                       
|Income tax provision                                    |  |                                     | 2,317  |                                   |   | 4,589   |  
|                                                        |  |                                     |        |                                   |   |         |  
|                                                        |  |                                     |        |                                   |   |         |  
|Income from continuing
 operations                      |  | $                                   | (3,870 | )                                 | $ | (7,664  | )
|                                                        |  |                                     |        |                                   |   |         |  
|                                                        |  |                                     |        |                                   |   |         |  
|Earnings per share from
 continuing operations:         |  |                                     |        |                                   |   |         |  
|Basic                                                   |  | $                                   | (0.03  | )                                 | $ | (0.06   | )
|                                                        |  |                                     |        |                                   |   |         |  
|Diluted                                                 |  | $                                   | (0.03  | )                                 | $ | (0.06   | )
|                                                        |  |                                     |        |                                   |   |         |  
|Comprehensive income                                    |  | $                                   | (3,870 | )                                 | $ | (7,664  | )
|                                                        |  |                                     |        |                                   |   |         |  

11

---



Balance Sheet
As of December 31, 2008

|                                                           |  |                    |          |  
|---------------------------------------------------------- |  | ------------------ | -------- | -
|                                                           |  | December 31,
 2008 |         
|                                                           |  |                    |         
|                                                          
|Other noncurrent assets                                    |  | $                  | (9,473   | )
|                                                           |  |                    |          |  
|Total noncurrent assets                                    |  |                    | (9,473   | )
|                                                           |  |                    |          |  
|Total assets                                               |  |                    | (9,473   | )
|                                                           |  |                    |          |  
|Long-term debt, notes and
 convertible debentures (Note 6) |  |                    | (378,286 | )
|                                                           |  |                    |          |  
|Deferred income tax
 liabilities                           |  |                    | 135,328  |  
|                                                           |  |                    |          |  
|Total noncurrent
 liabilities                              |  |                    | (242,958 | )
|                                                           |  |                    |          |  
|Total liabilities                                          |  |                    | (242,958 | )
|                                                           |  |                    |          |  
|Paid-in capital (Note 6)                                   |  |                    | 278,502  |  
|                                                           |  |                    |          |  
|Retained earnings                                          |  |                    | (45,017  | )
|                                                           |  |                    |          |  
|Total stockholders equity                                 |  |                    | 233,485  |  
|                                                           |  |                    |          |  
|Total liabilities and
 stockholders equity                |  |                    | (9,473   | )

Statement of Cash Flows
Six Months Ended June 30, 2008

|                                               |  |                                  |        |  
|---------------------------------------------- |  | -------------------------------- | ------ | -
|                                               |  | Six months
 ended
 June 30, 2008 |       
|                                               |  |                                  |       
|Cash flows from operating
 activities:         |  |                                  |        |  
|                                               |  |                                  |        |  
|Net income                                     |  | $                                | (7,664 | )
|                                               |  |                                  |        |  
|Amortization expense                           |  |                                  | 12,721 |  
|                                               |  |                                  |        |  
|Change in other current and
 noncurrent assets |  |                                  | (468   | )
|                                               |  |                                  |        |  
|Change in current and
 noncurrent liabilities  |  |                                  | (4,589 | )
|                                               |  |                                  |        |  
|Net cash flows from
 operating activities      |  |                                  |       |  

12

---



Note 3  Discontinued Operations

In the second
quarter of 2009, the Company commenced activities to divest certain home
healthcare and related ancillary businesses (the disposal group) that are
non-strategic in nature. The disposal group, historically part of Omnicares Pharmacy
Services segment, primarily represents ancillary businesses which accompanied
other more strategic assets obtained by Omnicare in connection with the
Companys institutional pharmacy acquisition program. The results from
continuing operations for all periods presented have been revised to reflect
the results of the disposal group as discontinued operations, including certain
expenses of the Company related to the divestiture. The Company anticipates
completing the divestiture within the following twelve months. Selected
financial data related to the discontinued operations of this disposal group
for the three and six months ended June 30, 2009 and 2008 follows:

|                                                  |  |                                |         |                             |   |        |   |      |         |   |   |        |  
|------------------------------------------------- |  | ------------------------------ | ------- | --------------------------- | - | ------ | - | ---- | ------- | - | - | ------ | -
|                                                  |  | Three
 months ended,
 June 30, |         | Six
 months ended
 June 30, |  
|                                                  |  |                                |         |                             |  
|                                                  |  | 2009                           |         | 2008                        |   | 2009   |   | 2008 |        
|                                                  |  |                                |         |                             |   |        |   |      |        
|Net sales                                         |  | $                              | 19,818  |                             | $ | 27,440 |   | $    | 41,273  |   | $ | 55,981 |  
|                                                 
|Loss from operations of
 disposal group, pretax   |  |                                | (2,008  | )                           |   | (912   | ) |      | (4,222  | ) |   | (3,172 | )
|Income tax benefit                                |  |                                | 798     |                             |   | 353    |   |      | 1,678   |   |   | 1,226  |  
|                                                  |  |                                |         |                             |   |        |   |      |         |   |   |        |  
|Loss from operations of
 disposal group, aftertax |  |                                | (1,210  | )                           |   | (559   | ) |      | (2,544  | ) |   | (1,946 | )
|                                                  |  |                                |         |                             |   |        |   |      |         |   |   |        |  
|                                                  |  |                                |         |                             |   |        |   |      |         |   |   |        |  
|Impairment charge, pretax                         |  |                                | (14,492 | )                           |   |       |   |      | (14,492 | ) |   |       |  
|Income tax benefit on impairment charge           |  |                                | 2,427   |                             |   |       |   |      | 2,427   |   |   |       |  
|                                                  |  |                                |         |                             |   |        |   |      |         |   |   |        |  
|Impairment charge, aftertax                       |  |                                | (12,065 | )                           |   |       |   |      | (12,065 | ) |   |       |  
|                                                  |  |                                |         |                             |   |        |   |      |         |   |   |        |  
|                                                  |  |                                |         |                             |   |        |   |      |         |   |   |        |  
|Loss from discontinued
 operations, aftertax      |  | $                              | (13,275 | )                           | $ | (559   | ) | $    | (14,609 | ) | $ | (1,946 | )
|                                                  |  |                                |         |                             |   |        |   |      |         |   |   |        |  

Note 4  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 2009 implementation resulted in acquisition and other related
costs of approximately $2.0 million and

13

---



$2.9 million
pretax during the three and six months ended June 30, 2009, respectively, which
were primarily related to professional fees for acquisitions completed during
the six months ended June 30, 2009.

During the
first six months of 2009, Omnicare completed four 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 $43.1 million (including amounts payable pursuant to acquisition
agreements relating to pre-2009 acquisitions) in the six months ended June 30,
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 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 5 - Goodwill and Other Intangible Assets

Changes in the
carrying amount of goodwill for the six months ended June 30, 2009, by business
segment, are as follows (in thousands):

|                                                         |  |                    |           |               |   |        |  |   |          
|-------------------------------------------------------- |  | ------------------ | --------- | ------------- | - | ------ |  | - | ---------
|                                                         |  | Pharmacy
 Services |           | CRO
 Services |   | Total 
|                                                         |  |                    |           |               |   |       
|Balance as
 of December 31, 2008                         |  | $                  | 4,121,208 |               | $ | 90,013 |  | $ | 4,211,221
|Goodwill
 acquired in the six months ended June 30, 2009 |  |                    | 21,332    |               |   |       |  |   | 21,332   
|Other                                                    |  |                    | 1,308     |               |   | 1,467  |  |   | 2,775    
|                                                         |  |                    |           |               |   |        |  |   |          
|Balance as
 of June 30, 2009                             |  | $                  | 4,143,848 |               | $ | 91,480 |  | $ | 4,235,328
|                                                         |  |                    |           |               |   |        |  |   |          

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 June 30, 2009 net carrying amount of the Companys other identifiable
intangible assets of approximately $18 million from December 31, 2008 primarily
relates to amortization expense recorded during the six-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.

14

---



Note 6 - Debt

A summary of
debt follows (in thousands):

|                                                            |  |                |           |                    |   |           |  
|----------------------------------------------------------- |  | -------------- | --------- | ------------------ | - | --------- | -
|                                                            |  | June 30,
 2009 |           | December 31,
 2008 |  
|                                                            |  |                |           |                    |  
|Revolving
 loans, due 2010, $800 million                    |  | $              |          |                    | $ |          |  
|Senior term
 A loan, due 2010                               |  |                | 250,000   |                    |   | 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               |  |                | 3,386     |                    |   | 4,381     |  
|                                                            |  |                |           |                    |   |           |  
|Subtotal                                                    |  |                | 2,575,886 |                    |   | 2,726,881 |  
|Add interest
 rate swap agreement                           |  |                | 2,228     |                    |   | 6,013     |  
|(Subtract)
 unamortized debt discount                       |  |                | (364,562  | )                  |   | (378,286  | )
|(Subtract)
 current portion of debt                         |  |                | (1,438    | )                  |   | (1,784    | )
|                                                            |  |                |           |                    |   |           |  
|Total
 long-term debt, net                                  |  | $              | 2,212,114 |                    | $ | 2,352,824 |  
|                                                            |  |                |           |                    |   |           |  

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 June 30,
2009, there was no outstanding balance under the Companys $800 million
revolving credit facility, maturing on July 28, 2010 (Revolving Loans),
and $250 million outstanding under the Companys senior term A loan facility,
maturing on July 28, 2010 (the Term Loans). The Company repaid $150
million on the Term Loans during the six months ended June 30, 2009. The interest
rate on the Term Loans was 2.07% at June 30, 2009. As of June 30, 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 $2.9 million and $3.6 million
of deferred debt issuance costs during the six months ended June 30, 2009 and
2008, respectively.

The estimated
floating interest rate on the interest rate swap agreement was 3.22% at June
30, 2009, as compared to the 6.125% stated rate on the corresponding senior
subordinated notes due 2013 with remaining principal outstanding of $250
million at June 30, 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

15

---



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 (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):

|                                        |  |                |           |                    |   |           |  
|--------------------------------------- |  | -------------- | --------- | ------------------ | - | --------- | -
|                                        |  | June 30,
 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               |  |                | (364,562  | )                  |   | (378,286  | )
|                                        |  |                |           |                    |   |           |  
|Net carrying value of
 convertible debt |  | $              | 957,938   |                    | $ | 944,214   |  
|                                        |  |                |           |                    |   |           |  

As of June 30,
2009, the remaining amortization period for the debt discount was approximately
24 and 6.5 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 was an increase in pretax interest expense of
approximately $6.9 million and $13.7 million ($4.3 million and $8.5 million
aftertax) for the three and six months ended June 30, 2009, respectively, and
$6.4 million and $12.7 million ($4.0 million and $8.0 million aftertax) for the
three and six months ended June 30, 2008, respectively.

Note 7 - Stock-Based Compensation

At June 30,
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 and six months ended June 30, 2009 and 2008 is as follows (in thousands):

16

---



|                                        |  |                               |       |                            |   |       |  |      |        |  |   |       
|--------------------------------------- |  | ----------------------------- | ----- | -------------------------- | - | ----- |  | ---- | ------ |  | - | ------
|                                        |  | Three months ended,
 June 30, |       | Six months ended
 June 30,
|                                        |  |                               |       |                           
|                                        |  | 2009                          |       | 2008                       |   | 2009  |  | 2008
|                                        |  |                               |       |                            |   |       |  |     
|Stock awards                            |  | $                             | 5,136 |                            | $ | 5,369 |  | $    | 10,651 |  | $ | 11,064
|Stock
 options                          |  |                               | 1,334 |                            |   | 1,214 |  |      | 2,651  |  |   | 2,245 
|                                        |  |                               |       |                            |   |       |  |      |        |  |   |       
|Total
 stock-based compensation expense |  | $                             | 6,470 |                            | $ | 6,583 |  | $    | 13,302 |  | $ | 13,309
|                                        |  |                               |       |                            |   |       |  |      |        |  |   |       

The assumptions used to value
stock options granted during the periods ended June 30, 2009 and 2008 are as
follows:

|                                     |  |      |      |      |  |      |   |  |  |  |  | 
|------------------------------------ |  | ---- | ---- | ---- |  | ---- | - |  |  |  |  | 
|                                     |  | 2009 |      | 2008 |  |      |   |  |  | 
|                                     |  |      |      |      |  |      |   |  |  | 
|Expected volatility                  |  |      | 36.3 | %    |  | 30.8 | % |  |  |  |  | 
|Risk-free interest rate              |  |      | 2.4  | %    |  | 3.1  | % |  |  |  |  | 
|Expected dividend yield              |  |      | 0.3  | %    |  | 0.4  | % |  |  |  |  | 
|Expected term of options
 (in years) |  |      | 4.8  |      |  | 4.7  |   |  |  |  |  | 

|                                        |  |                              |      |                            |   |      |  |      |      |  |   |     
|--------------------------------------- |  | ---------------------------- | ---- | -------------------------- | - | ---- |  | ---- | ---- |  | - | ----
|                                        |  | Three months ended
 June 30, |      | Six months ended
 June 30,
|                                        |  |                              |      |                           
|                                        |  | 2009                         |      | 2008                       |   | 2009 |  | 2008
|                                        |  |                              |      |                            |   |      |  |     
|Weighted average fair
 value per option |  | $                            | 9.10 |                            | $ | 7.50 |  | $    | 9.14 |  | $ | 7.44
|                                        |  |                              |      |                            |   |      |  |      |      |  |   |     

A summary of stock option
activity under the plans for the six months ended June 30, 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                          |  |        | 63     |                                     |   | 27.63                                            |  |                             |     |  |   |      
|Options
 exercised                        |  |        | (1,039 | )                                   |   | 15.42                                            |  |                             |     |  |   |      
|Options
 forfeited                        |  |        | (24    | )                                   |   | 34.48                                            |  |                             |     |  |   |      
|                                          |  |        |        |                                     |   |                                                  |  |                             |     |  |   |      
|Options
 outstanding, end of period       |  |        | 6,348  |                                     | $ | 32.59                                            |  |                             | 5.2 |  | $ | 9,080
|                                          |  |        |        |                                     |   |                                                  |  |                             |     |  |   |      
|Options
 exercisable, end of period       |  |        | 5,133  |                                     | $ | 32.88                                            |  |                             | 4.4 |  | $ | 7,801
|                                          |  |        |        |                                     |   |                                                  |  |                             |     |  |   |      

The total exercise date
intrinsic value of options exercised during the six months ended June 30, 2009
was $10.2 million.

17

---



A summary of
non-vested restricted stock awards for the six months ended June 30, 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                         |  |        | 67    |                                       |   | 25.37
|Shares
 vested                          |  |        | (464  | )                                     |   | 32.29
|Shares
 forfeited                       |  |        | (8    | )                                     |   | 45.89
|                                        |  |        |       |                                       |   |      
|Non-vested
 shares, end of period       |  |        | 1,762 |                                       | $ | 34.35
|                                        |  |        |       |                                       |   |      

As of June 30,
2009, there was approximately $57 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 five years. The total grant
date fair value of shares vested during the six months ended June 30, 2009
related to stock awards and stock options was approximately $16.7 million.

The Company
recorded charges relating to the prior implementation of SFAS 123R, which
primarily relate to stock option expense, of approximately $1.4 million and
$3.2 million for the three and six months ended June 30, 2009, respectively,
and $1.2 million and $2.4 million for the three and six months ended June 30,
2008, respectively.

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 $3.6 million for the three and six months ended June 30, 2009, respectively,
and $1.7 million and $3.6 million for the three and six months ended June 30,
2008, respectively.

18

---



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 and six months ended June 30,
2009 and 2008 (pretax, in thousands):

|                                                                     |  |                               |       |                            |   |       |   |      |       |   |   |        |  
|-------------------------------------------------------------------- |  | ----------------------------- | ----- | -------------------------- | - | ----- | - | ---- | ----- | - | - | ------ | -
|                                                                     |  | Three months ended,
 June 30, |       | Six months ended
 June 30, |  
|                                                                     |  |                               |       |                            |  
|                                                                     |  | 2009                          |       | 2008                       |   | 2009  |   | 2008 |      
|                                                                     |  |                               |       |                            |   |       |   |      |      
|Service cost                                                         |  | $                             | 374   |                            | $ | 1,280 |   | $    | 749   |   | $ | 2,779  |  
|Interest
 cost                                                       |  |                               | 1,499 |                            |   | 2,374 |   |      | 2,998 |   |   | 4,759  |  
|Amortization
 of deferred amounts (primarily prior actuarial losses) |  |                               | 250   |                            |   | 3,674 |   |      | 500   |   |   | 7,347  |  
|Return on
 assets                                                    |  |                               | (60   | )                          |   | (54   | ) |      | (120  | ) |   | (108   | )
|Other                                                                |  |                               |      |                            |   |      |   |      |      |   |   | (268   | )
|                                                                     |  |                               |       |                            |   |       |   |      |       |   |   |        |  
|Net periodic pension cost                                            |  | $                             | 2,063 |                            | $ | 7,274 |   | $    | 4,127 |   | $ | 14,509 |  
|                                                                     |  |                               |       |                            |   |       |   |      |       |   |   |        |  

As of June 30, 2009, the
aggregate defined benefit plans liabilities total approximately $109 million.
During the first six 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
$131 million at June 30, 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 June 30, 2009.

19

---



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):

|                                                                                       |  |                             |         |                               |  |                             |  |   |       |  
|-------------------------------------------------------------------------------------- |  | --------------------------- | ------- | ----------------------------- |  | --------------------------- |  | - | ----- | -
|                                                                                       |  | Three months ended June 30, |        
|                                                                                       |  |                             |        
|2009:                                                                                  |  | Income
 (Numerator)         |         | Common
 Shares
 (Denominator) |  | Per
 Common
 Share
 Amounts | 
|                                                                                       | 
|Basic EPS                                                                              |  |                             |         |                               |  |                             |  |   |       |  
|Income from continuing operations                                                      |  | $                           | 41,994  |                               |  |                             |  | $ | 0.36  |  
|Loss from discontinued
    operations, including impairment charge of $12,065 aftertax |  |                             | (13,275 | )                             |  |                             |  |   | (0.11 | )
|                                                                                       |  |                             |         |                               |  |                             |  |   |       |  
|Net income                                                                             |  |                             | 28,719  |                               |  | 116,852                     |  | $ | 0.25  |  
|                                                                                       |  |                             |         |                               |  |                             |  |   |       |  
|Effect of Dilutive Securities                                                          |  |                             |         |                               |  |                             |  |   |       |  
|4.00% junior subordinated convertible debentures                                       |  |                             | 71      |                               |  | 275                         |  |   |       |  
|Stock options, warrants and awards                                                     |  |                             |        |                               |  | 513                         |  |   |       |  
|                                                                                       |  |                             |         |                               |  |                             |  |   |       |  
|Diluted EPS                                                                            |  |                             |         |                               |  |                             |  |   |       |  
|Income from continuing operations plus assumed conversions                             |  |                             | 42,065  |                               |  |                             |  | $ | 0.36  |  
|Loss from discontinued
    operations, including impairment charge of $12,065 aftertax |  |                             | (13,275 | )                             |  |                             |  |   | (0.11 | )
|                                                                                       |  |                             |         |                               |  |                             |  |   |       |  
|Net income plus assumed conversions                                                    |  | $                           | 28,790  |                               |  | 117,640                     |  | $ | 0.24  |  
|                                                                                       |  |                             |         |                               |  |                             |  |   |       |  
|                                                                                       |  |                             |         |                               |  |                             |  |   |       |  
|2008:                                                                                  |  |                             |         |                               |  |                             |  |   |       |  
|                                                                                       | 
|Basic EPS                                                                              |  |                             |         |                               |  |                             |  |   |       |  
|Income from continuing operations                                                      |  | $                           | 33,494  |                               |  |                             |  | $ | 0.28  |  
|Loss from discontinued operations                                                      |  |                             | (559    | )                             |  |                             |  |   | (0.00 | )
|                                                                                       |  |                             |         |                               |  |                             |  |   |       |  
|Net income                                                                             |  |                             | 32,935  |                               |  | 117,901                     |  | $ | 0.28  |  
|                                                                                       |  |                             |         |                               |  |                             |  |   |       |  
|Effect of Dilutive Securities                                                          |  |                             |         |                               |  |                             |  |   |       |  
|4.00% junior subordinated convertible debentures                                       |  |                             | 69      |                               |  | 275                         |  |   |       |  
|Stock options, warrants and awards                                                     |  |                             |        |                               |  | 496                         |  |   |       |  
|                                                                                       |  |                             |         |                               |  |                             |  |   |       |  
|Diluted EPS                                                                            |  |                             |         |                               |  |                             |  |   |       |  
|Income from continuing operations plus assumed conversions                             |  |                             | 33,563  |                               |  |                             |  | $ | 0.28  |  
|Loss from discontinued operations                                                      |  |                             | (559    | )                             |  |                             |  |   | (0.00 | )
|                                                                                       |  |                             |         |                               |  |                             |  |   |       |  
|Net income plus assumed conversions                                                    |  | $                           | 33,004  |                               |  | 118,672                     |  | $ | 0.28  |  
|                                                                                       |  |                             |         |                               |  |                             |  |   |       |  

20

---



|                                                                                       |  |                           |         |                               |  |                             |  |   |       |  
|-------------------------------------------------------------------------------------- |  | ------------------------- | ------- | ----------------------------- |  | --------------------------- |  | - | ----- | -
|                                                                                       |  | Six months ended June 30, |        
|                                                                                       |  |                           |        
|2009:                                                                                  |  | Income
 (Numerator)       |         | Common
 Shares
 (Denominator) |  | Per
 Common
 Share
 Amounts | 
|                                                                                       | 
|Basic EPS                                                                              |  |                           |         |                               |  |                             |  |   |       |  
|Income from continuing operations                                                      |  | $                         | 74,222  |                               |  |                             |  | $ | 0.64  |  
|Loss from discontinued
    operations, including impairment charge of $12,065 aftertax |  |                           | (14,609 | )                             |  |                             |  |   | (0.13 | )
|                                                                                       |  |                           |         |                               |  |                             |  |   |       |  
|Net income                                                                             |  |                           | 59,613  |                               |  | 116,652                     |  | $ | 0.51  |  
|                                                                                       |  |                           |         |                               |  |                             |  |   |       |  
|Effect of Dilutive Securities                                                          |  |                           |         |                               |  |                             |  |   |       |  
|4.00% junior subordinated convertible debentures                                       |  |                           | 142     |                               |  | 275                         |  |   |       |  
|Stock options, warrants and awards                                                     |  |                           |        |                               |  | 563                         |  |   |       |  
|                                                                                       |  |                           |         |                               |  |                             |  |   |       |  
|Diluted EPS                                                                            |  |                           |         |                               |  |                             |  |   |       |  
|Income from continuing operations plus assumed conversions                             |  |                           | 74,364  |                               |  |                             |  | $ | 0.63  |  
|Loss from discontinued
    operations, including impairment charge of $12,065 aftertax |  |                           | (14,609 | )                             |  |                             |  |   | (0.12 | )
|                                                                                       |  |                           |         |                               |  |                             |  |   |       |  
|Net income plus assumed conversions                                                    |  | $                         | 59,755  |                               |  | 117,490                     |  | $ | 0.51  |  
|                                                                                       |  |                           |         |                               |  |                             |  |   |       |  
|                                                                                       |  |                           |         |                               |  |                             |  |   |       |  
|2008:                                                                                  |  |                           |         |                               |  |                             |  |   |       |  
|                                                                                       | 
|Basic EPS                                                                              |  |                           |         |                               |  |                             |  |   |       |  
|Income from continuing operations                                                      |  | $                         | 61,031  |                               |  |                             |  | $ | 0.51  |  
|Loss from discontinued operations                                                      |  |                           | (1,946  | )                             |  |                             |  |   | (0.02 | )
|                                                                                       |  |                           |         |                               |  |                             |  |   |       |  
|Net income                                                                             |  |                           | 59,085  |                               |  | 118,874                     |  | $ | 0.50  |  
|                                                                                       |  |                           |         |                               |  |                             |  |   |       |  
|Effect of Dilutive Securities                                                          |  |                           |         |                               |  |                             |  |   |       |  
|4.00% junior subordinated convertible debentures                                       |  |                           | 139     |                               |  | 275                         |  |   |       |  
|Stock options, warrants and awards                                                     |  |                           |        |                               |  | 457                         |  |   |       |  
|                                                                                       |  |                           |         |                               |  |                             |  |   |       |  
|Diluted EPS                                                                            |  |                           |         |                               |  |                             |  |   |       |  
|Income from continuing operations plus assumed conversions                             |  |                           | 61,170  |                               |  |                             |  | $ | 0.51  |  
|Loss from discontinued operations                                                      |  |                           | (1,946  | )                             |  |                             |  |   | (0.02 | )
|                                                                                       |  |                           |         |                               |  |                             |  |   |       |  
|Net income plus assumed conversions                                                    |  | $                         | 59,224  |                               |  | 119,606                     |  | $ | 0.50  |  
|                                                                                       |  |                           |         |                               |  |                             |  |   |       |  

EPS is reported
independently for each amount presented. Accordingly, the sum of the individual
amounts may not necessarily equal the separately calculated amounts for the
corresponding period.

During the
three and six months ended June 30, 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 June 30, 2009 and 2008
totaled 6.2 million and 7.5 million, respectively, and for the six months ended
June 30, 2009 and 2008, totaled 6.2 million and 7.3 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-

21

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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.

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 $106
million. As presented in further detail below, the Company recorded
restructuring and other related charges for the Omnicare Full Potential Plan
    of approximately $6 million and $13 million pretax (approximately $4 million
    and $8 million aftertax) during the three and six months ended June 30, 2009,
respectively, and approximately $36 million pretax during the year ended
December 31, 2008 (approximately $11 million and $17 million pretax in the
three and six months ended June 30, 2008), or cumulative aggregate
restructuring and other related charges of approximately $96 million before
taxes through the second 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 500 positions had been eliminated
as of June 30, 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.
In addition, in July 2009, the Company implemented a temporary payroll
containment and reduction program across the organization designed to
facilitate the achievement of the productivity and efficiency goals associated
with the Full Potential Plan.

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.

22

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Details of the
Omnicare Full Potential Plan restructuring and other related charges follow
(pretax, in thousands):

|                                              |  |                                |        |                           |   |                        |  |                            |         |   |   |       | 
|--------------------------------------------- |  | ------------------------------ | ------ | ------------------------- | - | ---------------------- |  | -------------------------- | ------- | - | - | ----- | 
|Restructuring
 charges:                       |  | Balance at
 December 31,
 2008 |        | 2009
 Provision/
 Accrual |   | Utilized
 during
 2009 |  | Balance at
 June 30,
 2009 |        
|                                              |  |                                |        |                           |   |                        |  |                            |        
|Employee severance                            |  | $                              |       |                           | $ | 2,672                  |  | $                          | (2,570  | ) | $ | 102   | 
|Employment agreement
 buy-outs                |  |                                | 35     |                           |   | 113                    |  |                            | (148    | ) |   |      | 
|Lease terminations                            |  |                                | 8,885  |                           |   | 1,204                  |  |                            | (2,165  | ) |   | 7,924 | 
|Other assets, fees and
 facility exit costs   |  |                                | 2,394  |                           |   | 4,885                  |  |                            | (6,215  | ) |   | 1,064 | 
|                                              |  |                                |        |                           |   |                        |  |                            |         |   |   |       | 
|Total restructuring charges                   |  | $                              | 11,314 |                           |   | 8,874                  |  | $                          | (11,098 | ) | $ | 9,090 | 
|                                              |  |                                |        |                           |   |                        |  |                            |         |   |   |       | 
|                                              |  |                                |        |                           |   |                        |  |                            |         |   |   |       | 
|Other related charges                         |  |                                |        |                           |   | 3,926                  |  |                            |         |   |   |       | 
|                                              |  |                                |        |                           |   |                        |  |                            |         |   |   |       | 
|                                              |  |                                |        |                           |   |                        |  |                            |         |   |   |       | 
|Total restructuring and other related
charges |  |                                |        |                           | $ | 12,800                 |  |                            |         |   |   |       | 
|                                              |  |                                |        |                           |   |                        |  |                            |         |   |   |       | 

As of June 30,
2009, the Company has made cumulative payments of approximately $19 million of
severance and other employee-related costs for the Omnicare Full Potential
Plan. The remaining liabilities at June 30, 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).

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 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,

23

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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. (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

24

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for each of Ms. Maguire and Messrs. Kammerer
and Lisitza subsequently stipulated that the Company shall have until September
29, 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
June 24, 2009, the Company reached an agreement in principle, without admitting
liability, with the U.S. Attorneys Office, District of Massachusetts, pursuant
to which the Company would pay $98 million plus interest from June 24, 2009 to
settle the claims raised in the two sealed complaints, the Maguire, Kammerer
and Lisitza complaints and other similar claims. This agreement in principle is
subject to approval by the Companys board of directors and agreement on the
terms of the settlement documentation, including with respect to the similar
claims referred to above. There can be no assurance as to whether any final
settlement will be reached. If any final settlement is reached, there can be no
assurance as to the scope, terms or ultimate cost to the Company thereof.

Omnicare
recorded a special litigation charge of approximately $23 million and
approximately $58 million pretax in its financial results for the three and six
months ended June 30, 2009, respectively, 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 approximately $98 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

25

---



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 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 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,

26

---



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.

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

27

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The three and
six months ended June 30, 2009 included a $28.4 million pretax charge ($22.0
million after taxes) and a $70.0 million pretax charge ($54.5 million after
taxes), respectively, and the three and six months ended June 30, 2008 included
a $16.0 million pretax charge ($10.1 million after taxes) and a $37.7 million
pretax charge ($23.1 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 Repack
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 June 30, 2009 included special charges of approximately
$1.2 million pretax (approximately $0.8 million and approximately $0.4 million
was recorded in the cost of sales and operating expenses sections of the
Consolidated Statements of Income, respectively) ($0.7 million after taxes) for
additional costs precipitated by the quality control, product recall and fire
damage issues at Heartland (Repack Matters). The associated costs for the six
months ended June 30, 2009 totaled $3.2 million pretax ($1.9 million and $1.3
million was recorded in the cost of sales and operating expenses sections of
the Consolidated Statements of Income, respectively) ($2.0 million after
taxes). The three months ended June 30, 2008 included special charges of
approximately $1.7 million pretax (approximately $1.5 million and approximately
$0.2 million was recorded in the cost of sales and operating expenses sections
of the Consolidated Statements of Income, respectively) ($1.1 million after
taxes) for additional costs precipitated by the Repack Matters. The associated
costs for the six months ended June 30, 2008 totaled $3.6 million pretax ($3.1
million and $0.5 million was recorded in the cost of sales and operating
expenses sections of the

28

---



Consolidated
Statements of Income, respectively) ($2.2 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 June 30, 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 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.

29

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Note 12 - Segment Information

Based on the
management approach, as defined by SFAS No. 131, Disclosures about Segments
of an Enterprise and Related Information, Omnicare has two operating segments.
The Companys larger segment is Pharmacy Services. Pharmacy Services primarily
provides distribution of pharmaceuticals, related pharmacy consulting and other
ancillary services, data management services, medical supplies, and
distribution and patient assistance services for specialty pharmaceuticals. The
Companys customers are primarily skilled nursing, assisted living, hospice and
other providers of healthcare services in 47 states in the United States, the
District of Columbia and in Canada at June 30, 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 June 30, 2009, including the United States.

The table
below presents information about the segments as of and for the three and six
months ended June 30, 2009 and 2008, and should be read in conjunction with the
paragraph that follows (in thousands):

|                                                      |  |                             |           |               |   |                              |   |                      |         |   |   |           |  
|----------------------------------------------------- |  | --------------------------- | --------- | ------------- | - | ---------------------------- | - | -------------------- | ------- | - | - | --------- | -
|                                                      |  | Three months ended June 30, |          
|                                                      |  |                             |          
|2009:                                                 |  | Pharmacy
 Services          |           | CRO
 Services |   | Corporate and
 Consolidating |   | Consolidated
 Totals |        
|                                                      |  |                             |           |               |   |                              |   |                      |        
|Net sales                                             |  | $                           | 1,499,704 |               | $ | 40,803                       |   | $                    |        |   | $ | 1,540,507 |  
|Depreciation and amortization expense                 |  |                             | (21,385   | )             |   | (469                         | ) |                      | (13,983 | ) |   | (35,837   | )
|Restructuring and other related charges               |  |                             | (4,761    | )             |   | (653                         | ) |                      | (469    | ) |   | (5,883    | )
|Litigation and other related professional fees        |  |                             | (28,357   | )             |   |                             |   |                      |        |   |   | (28,357   | )
|Heartland repack matters                              |  |                             | (1,196    | )             |   |                             |   |                      |        |   |   | (1,196    | )
|Acquisition and other related costs                   |  |                             | (2,011    | )             |   |                             |   |                      |        |   |   | (2,011    | )
|Operating income (expense) from continuing operations |  |                             | 129,557   |               |   | 967                          |   |                      | (22,443 | ) |   | 108,081   |  
|Total assets                                          |  |                             | 6,724,776 |               |   | 162,785                      |   |                      | 438,465 |   |   | 7,326,026 |  
|Capital expenditures                                  |  |                             | (6,252    | )             |   | (222                         | ) |                      | (244    | ) |   | (6,718    | )

|                                                      |  |   |           |   |   |         |   |   |         |   |   |           |  
|----------------------------------------------------- |  | - | --------- | - | - | ------- | - | - | ------- | - | - | --------- | -
|2008:                                                 |  |   |           |   |   |         |   |   |         |   |   |           |  
|                                                      |  |   |           |   |   |         |   |   |         |   |   |           |  
|Net sales                                             |  | $ | 1,469,081 |   | $ | 53,631  |   | $ |        |   | $ | 1,522,712 |  
|Depreciation and amortization expense                 |  |   | (19,344   | ) |   | (450    | ) |   | (13,427 | ) |   | (33,221   | )
|Restructuring and other related charges               |  |   | (9,222    | ) |   | (600    | ) |   | (962    | ) |   | (10,784   | )
|Litigation and other related professional fees        |  |   | (16,022   | ) |   |        |   |   |        |   |   | (16,022   | )
|Heartland repack matters                              |  |   | (1,740    | ) |   |        |   |   |        |   |   | (1,740    | )
|Operating income (expense) from continuing operations |  |   | 118,415   |   |   | 3,800   |   |   | (28,957 | ) |   | 93,258    |  
|Total assets                                          |  |   | 6,915,425 |   |   | 194,286 |   |   | 362,528 |   |   | 7,472,239 |  
|Capital expenditures                                  |  |   | (13,714   | ) |   | (1,728  | ) |   | (81     | ) |   | (15,523   | )

30

---



|                                                      |  |                           |                    |   |   |               |   |   |                              |   |   |                      |  
|----------------------------------------------------- |  | ------------------------- | ------------------ | - | - | ------------- | - | - | ---------------------------- | - | - | -------------------- | -
|                                                      |  | Six months ended June 30, |                   
|                                                      |  |                           |                   
|2009:                                                 |  |                           | Pharmacy
 Services |   |   | CRO
 Services |   |   | Corporate and
 Consolidating |   |   | Consolidated
 Totals |  
|                                                      |  |                           |                    |   |   |               |   |   |                              |   |   |                      |  
|Net sales                                             |  | $                         | 2,997,066          |   | $ | 85,546        |   | $ |                             |   | $ | 3,082,612            |  
|Depreciation and amortization expense                 |  |                           | (42,227            | ) |   | (943          | ) |   | (28,183                      | ) |   | (71,353              | )
|Restructuring and other related charges               |  |                           | (10,759            | ) |   | (705          | ) |   | (1,336                       | ) |   | (12,800              | )
|Litigation and other related professional fees        |  |                           | (70,022            | ) |   |              |   |   |                             |   |   | (70,022              | )
|Heartland repack matters                              |  |                           | (3,189             | ) |   |              |   |   |                             |   |   | (3,189               | )
|Acquisition and other related costs                   |  |                           | (2,850             | ) |   |              |   |   |                             |   |   | (2,850               | )
|Operating income (expense) from continuing operations |  |                           | 250,739            |   |   | 3,959         |   |   | (49,098                      | ) |   | 205,600              |  
|Total assets                                          |  |                           | 6,724,776          |   |   | 162,785       |   |   | 438,465                      |   |   | 7,326,026            |  
|Capital expenditures                                  |  |                           | (13,775            | ) |   | (742          | ) |   | (798                         | ) |   | (15,315              | )

|                                                      |  |   |           |   |   |         |   |   |         |   |   |           |  
|----------------------------------------------------- |  | - | --------- | - | - | ------- | - | - | ------- | - | - | --------- | -
|2008:                                                 |  |   |           |   |   |         |   |   |         |   |   |           |  
|                                                      |  |   |           |   |   |         |   |   |         |   |   |           |  
|Net sales                                             |  | $ | 2,950,346 |   | $ | 102,804 |   | $ |        |   | $ | 3,053,150 |  
|Depreciation and amortization expense                 |  |   | (38,199   | ) |   | (889    | ) |   | (28,564 | ) |   | (67,652   | )
|Restructuring and other related charges               |  |   | (14,318   | ) |   | (1,374  | ) |   | (1,540  | ) |   | (17,232   | )
|Litigation and other related professional fees        |  |   | (37,664   | ) |   |        |   |   |        |   |   | (37,664   | )
|Heartland repack matters                              |  |   | (3,633    | ) |   |        |   |   |        |   |   | (3,633    | )
|Operating income (expense) from continuing operations |  |   | 229,901   |   |   | 6,468   |   |   | (56,616 | ) |   | 179,753   |  
|Total assets                                          |  |   | 6,915,425 |   |   | 194,286 |   |   | 362,528 |   |   | 7,472,239 |  
|Capital expenditures                                  |  |   | (25,106   | ) |   | (2,070  | ) |   | (254    | ) |   | (27,430   | )

In accordance
with Emerging Issues Task Force (EITF) Issue No. 01-14, Income Statement
Characterization of Reimbursements Received for Out-of-Pocket Expenses
Incurred (EITF No. 01-14), Omnicare included in its reported CRO segment net
sales amount, for the three and six month periods ended June 30, 2009,
reimbursable out-of-pockets totaling $5.2 million and $10.9 million,
respectively and $8.8 million and $16.2 million for the three and six months
ended June 30, 2008, respectively.

Note 13 - Guarantor Subsidiaries

The Companys
6.125% senior subordinated notes due 2013, the 6.75% senior subordinated notes
due 2013 and the 6.875% senior subordinated notes due 2015 are fully and
unconditionally guaranteed on an unsecured, joint and several basis by certain
wholly-owned subsidiaries of the Company (the Guarantor Subsidiaries). The
following condensed consolidating financial data illustrates the composition of
Omnicare, Inc. (Parent), the Guarantor Subsidiaries and the Non-Guarantor
Subsidiaries as of June 30, 2009 and December 31, 2008 for the balance sheets
as well as the three and six months ended June 30, 2009 and 2008 for the
statements of income, and the statements of cash flows for the six months ended
June 30, 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.

31

---



Note 13 - Guarantor Subsidiaries (Continued)

Summary Consolidating Statements of Income - Unaudited(in thousands)

|                                                                                   |  |                             |         |                         |   |                               |   |                                           |        |                                   |   |         |   |   |           |  
|---------------------------------------------------------------------------------- |  | --------------------------- | ------- | ----------------------- | - | ----------------------------- | - | ----------------------------------------- | ------ | --------------------------------- | - | ------- | - | - | --------- | -
|                                                                                   |  | Three months ended June 30, |        
|                                                                                   |  |                             |        
|2009:                                                                              |  | Parent                      |         | Guarantor
 Subsidiaries |   | Non-
 Guarantor
 Subsidiaries |   | Consolidating/
 Eliminating 
 Adjustments |        | Omnicare,
 Inc. and
 Subsidiaries |  
|                                                                                   |  |                             |         |                         |   |                               |   |                                           |        |                                   |  
|Net sales                                                                          |  | $                           |        |                         | $ | 1,496,113                     |   | $                                         | 44,394 |                                   | $ |        |   | $ | 1,540,507 |  
|Cost of sales                                                                      |  |                             |        |                         |   | 1,133,316                     |   |                                           | 35,462 |                                   |   |        |   |   | 1,168,778 |  
|Heartland matters                                                                  |  |                             |        |                         |   | 815                           |   |                                           |       |                                   |   |        |   |   | 815       |  
|                                                                                   |  |                             |         |                         |   |                               |   |                                           |        |                                   |   |         |   |   |           |  
|Gross profit                                                                       |  |                             |        |                         |   | 361,982                       |   |                                           | 8,932  |                                   |   |        |   |   | 370,914   |  
|Selling, general and administrative expenses                                       |  |                             | 1,603   |                         |   | 194,925                       |   |                                           | 6,963  |                                   |   |        |   |   | 203,491   |  
|Provision for doubtful accounts                                                    |  |                             |        |                         |   | 22,254                        |   |                                           | 456    |                                   |   |        |   |   | 22,710    |  
|Restructuring and other related charges                                            |  |                             |        |                         |   | 5,588                         |   |                                           | 295    |                                   |   |        |   |   | 5,883     |  
|Litigation and other related professional fees                                     |  |                             |        |                         |   | 28,357                        |   |                                           |       |                                   |   |        |   |   | 28,357    |  
|Repack matters                                                                     |  |                             |        |                         |   | 381                           |   |                                           |       |                                   |   |        |   |   | 381       |  
|Acquisition and other related costs                                                |  |                             |        |                         |   | 2,011                         |   |                                           |       |                                   |   |        |   |   | 2,011     |  
|                                                                                   |  |                             |         |                         |   |                               |   |                                           |        |                                   |   |         |   |   |           |  
|Operating income (loss)                                                            |  |                             | (1,603  | )                       |   | 108,466                       |   |                                           | 1,218  |                                   |   |        |   |   | 108,081   |  
|Investment income                                                                  |  |                             | 100     |                         |   | 932                           |   |                                           |       |                                   |   |        |   |   | 1,032     |  
|Interest expense, including amortization of discount on convertible
 notes         |  |                             | (36,513 | )                       |   | (188                          | ) |                                           | (1     | )                                 |   |        |   |   | (36,702   | )
|                                                                                   |  |                             |         |                         |   |                               |   |                                           |        |                                   |   |         |   |   |           |  
|Income (loss) from continuing operations before income
taxes                       |  |                             | (38,016 | )                       |   | 109,210                       |   |                                           | 1,217  |                                   |   |        |   |   | 72,411    |  
|Income tax (benefit) expense                                                       |  |                             | (14,519 | )                       |   | 44,455                        |   |                                           | 481    |                                   |   |        |   |   | 30,417    |  
|                                                                                   |  |                             |         |                         |   |                               |   |                                           |        |                                   |   |         |   |   |           |  
|Income from continuing operations                                                  |  |                             | (23,497 | )                       |   | 64,755                        |   |                                           | 736    |                                   |   |        |   |   | 41,994    |  
|Loss from discontinued operations, including impairment charge of $12,065 aftertax |  |                             |        |                         |   | (12,620                       | ) |                                           | (655   | )                                 |   |        |   |   | (13,275   | )
|Equity in net income of subsidiaries                                               |  |                             | 52,216  |                         |   |                              |   |                                           |       |                                   |   | (52,216 | ) |   |          |  
|                                                                                   |  |                             |         |                         |   |                               |   |                                           |        |                                   |   |         |   |   |           |  
|Net income                                                                         |  | $                           | 28,719  |                         | $ | 52,135                        |   | $                                         | 81     |                                   | $ | (52,216 | ) | $ | 28,719    |  
|                                                                                   |  |                             |         |                         |   |                               |   |                                           |        |                                   |   |         |   |   |           |  

|                                                                                   |  |   |         |   |   |           |   |   |        |   |   |         |   |   |           |  
|---------------------------------------------------------------------------------- |  | - | ------- | - | - | --------- | - | - | ------ | - | - | ------- | - | - | --------- | -
|2008:                                                                              |  |   |         |   |   |           |   |   |        |   |   |         |   |   |           |  
|                                                                                   |  |   |         |   |   |           |   |   |        |   |   |         |   |   |           |  
|Net sales                                                                          |  | $ |        |   | $ | 1,465,703 |   | $ | 57,009 |   | $ |        |   | $ | 1,522,712 |  
|Cost of sales                                                                      |  |   |        |   |   | 1,104,369 |   |   | 45,495 |   |   |        |   |   | 1,149,864 |  
|Heartland matters                                                                  |  |   |        |   |   | 1,560     |   |   |       |   |   |        |   |   | 1,560     |  
|                                                                                   |  |   |         |   |   |           |   |   |        |   |   |         |   |   |           |  
|Gross profit                                                                       |  |   |        |   |   | 359,774   |   |   | 11,514 |   |   |        |   |   | 371,288   |  
|Selling, general and administrative expenses                                       |  |   | 2,349   |   |   | 218,582   |   |   | 6,020  |   |   |        |   |   | 226,951   |  
|Provision for doubtful accounts                                                    |  |   |        |   |   | 23,679    |   |   | 414    |   |   |        |   |   | 24,093    |  
|Restructuring and other related charges                                            |  |   |        |   |   | 10,560    |   |   | 224    |   |   |        |   |   | 10,784    |  
|Litigation and other related professional fees                                     |  |   |        |   |   | 16,022    |   |   |       |   |   |        |   |   | 16,022    |  
|Repack matters                                                                     |  |   |        |   |   | 180       |   |   |       |   |   |        |   |   | 180       |  
|                                                                                   |  |   |         |   |   |           |   |   |        |   |   |         |   |   |           |  
|Operating income (loss)                                                            |  |   | (2,349  | ) |   | 90,751    |   |   | 4,856  |   |   |        |   |   | 93,258    |  
|Investment income                                                                  |  |   | 817     |   |   | 1,142     |   |   |       |   |   |        |   |   | 1,959     |  
|Interest expense, including amortization of discount on convertible
 notes         |  |   | (41,033 | ) |   | (270      | ) |   | (811   | ) |   |        |   |   | (42,114   | )
|                                                                                   |  |   |         |   |   |           |   |   |        |   |   |         |   |   |           |  
|Income (loss) from continuing operations before income
taxes                       |  |   | (42,565 | ) |   | 91,623    |   |   | 4,045  |   |   |        |   |   | 53,103    |  
|Income tax (benefit) expense                                                       |  |   | (15,985 | ) |   | 34,054    |   |   | 1,540  |   |   |        |   |   | 19,609    |  
|                                                                                   |  |   |         |   |   |           |   |   |        |   |   |         |   |   |           |  
|Income from continuing operations                                                  |  |   | (26,580 | ) |   | 57,569    |   |   | 2,505  |   |   |        |   |   | 33,494    |  
|Loss from discontinued operations, including impairment charge of $12,065 aftertax |  |   |        |   |   | (83       | ) |   | (476   | ) |   |        |   |   | (559      | )
|Equity in net income of subsidiaries                                               |  |   | 59,515  |   |   |          |   |   |       |   |   | (59,515 | ) |   |          |  
|                                                                                   |  |   |         |   |   |           |   |   |        |   |   |         |   |   |           |  
|Net income                                                                         |  | $ | 32,935  |   | $ | 57,486    |   | $ | 2,029  |   | $ | (59,515 | ) | $ | 32,935    |  
|                                                                                   |  |   |         |   |   |           |   |   |        |   |   |         |   |   |           |  

32

---



Note 13 -
Guarantor Subsidiaries (Continued)

Summary Consolidating Statements of Income - Unaudited
(in thousands)

|                                                                                   |  |                           |         |                         |   |                               |   |                                          |        |                                   |   |          |   |   |           |  
|---------------------------------------------------------------------------------- |  | ------------------------- | ------- | ----------------------- | - | ----------------------------- | - | ---------------------------------------- | ------ | --------------------------------- | - | -------- | - | - | --------- | -
|                                                                                   |  | Six months ended June 30, |        
|                                                                                   |  |                           |        
|2009:                                                                              |  | Parent                    |         | Guarantor
 Subsidiaries |   | Non-
 Guarantor
 Subsidiaries |   | Consolidating/
 Eliminating
 Adjustments |        | Omnicare,
 Inc. and
 Subsidiaries |  
|                                                                                   |  |                           |         |                         |   |                               |   |                                          |        |                                   |  
|Net sales                                                                          |  | $                         |        |                         | $ | 2,993,839                     |   | $                                        | 88,773 |                                   | $ |         |   | $ | 3,082,612 |  
|Cost of sales                                                                      |  |                           |        |                         |   | 2,249,159                     |   |                                          | 71,387 |                                   |   |         |   |   | 2,320,546 |  
|Heartland matters                                                                  |  |                           |        |                         |   | 1,917                         |   |                                          |       |                                   |   |         |   |   | 1,917     |  
|                                                                                   |  |                           |         |                         |   |                               |   |                                          |        |                                   |   |          |   |   |           |  
|Gross profit                                                                       |  |                           |        |                         |   | 742,763                       |   |                                          | 17,386 |                                   |   |         |   |   | 760,149   |  
|Selling, general and administrative expenses                                       |  |                           | 8,541   |                         |   | 399,228                       |   |                                          | 11,855 |                                   |   |         |   |   | 419,624   |  
|Provision for doubtful accounts                                                    |  |                           |        |                         |   | 47,075                        |   |                                          | 906    |                                   |   |         |   |   | 47,981    |  
|Restructuring and other related charges                                            |  |                           |        |                         |   | 12,505                        |   |                                          | 295    |                                   |   |         |   |   | 12,800    |  
|Litigation and other related professional fees                                     |  |                           |        |                         |   | 70,022                        |   |                                          |       |                                   |   |         |   |   | 70,022    |  
|Repack matters                                                                     |  |                           |        |                         |   | 1,272                         |   |                                          |       |                                   |   |         |   |   | 1,272     |  
|Acquisition and other related costs                                                |  |                           |        |                         |   | 2,850                         |   |                                          |       |                                   |   |         |   |   | 2,850     |  
|                                                                                   |  |                           |         |                         |   |                               |   |                                          |        |                                   |   |          |   |   |           |  
|Operating income (loss)                                                            |  |                           | (8,541  | )                       |   | 209,811                       |   |                                          | 4,330  |                                   |   |         |   |   | 205,600   |  
|Investment income                                                                  |  |                           | 536     |                         |   | 2,903                         |   |                                          |       |                                   |   |         |   |   | 3,439     |  
|Interest expense, including amortization of discount on convertible
 notes         |  |                           | (74,341 | )                       |   | (444                          | ) |                                          | (1     | )                                 |   |         |   |   | (74,786   | )
|                                                                                   |  |                           |         |                         |   |                               |   |                                          |        |                                   |   |          |   |   |           |  
|Income (loss) from continuing operations before income
taxes                       |  |                           | (82,346 | )                       |   | 212,270                       |   |                                          | 4,329  |                                   |   |         |   |   | 134,253   |  
|Income tax (benefit) expense                                                       |  |                           | (31,489 | )                       |   | 89,830                        |   |                                          | 1,690  |                                   |   |         |   |   | 60,031    |  
|                                                                                   |  |                           |         |                         |   |                               |   |                                          |        |                                   |   |          |   |   |           |  
|Income from continuing operations                                                  |  |                           | (50,857 | )                       |   | 122,440                       |   |                                          | 2,639  |                                   |   |         |   |   | 74,222    |  
|Loss from discontinued operations, including impairment charge of $12,065 aftertax |  |                           |        |                         |   | (13,238                       | ) |                                          | (1,371 | )                                 |   |         |   |   | (14,609   | )
|Equity in net income of subsidiaries                                               |  |                           | 110,470 |                         |   |                              |   |                                          |       |                                   |   | (110,470 | ) |   |          |  
|                                                                                   |  |                           |         |                         |   |                               |   |                                          |        |                                   |   |          |   |   |           |  
|Net income                                                                         |  | $                         | 59,613  |                         | $ | 109,202                       |   | $                                        | 1,268  |                                   | $ | (110,470 | ) | $ | 59,613    |  
|                                                                                   |  |                           |         |                         |   |                               |   |                                          |        |                                   |   |          |   |   |           |  

|                                                                           |  |   |         |   |   |           |   |   |         |   |   |          |   |   |           |  
|-------------------------------------------------------------------------- |  | - | ------- | - | - | --------- | - | - | ------- | - | - | -------- | - | - | --------- | -
|2008:                                                                      |  |   |         |   |   |           |   |   |         |   |   |          |   |   |           |  
|                                                                           |  |   |         |   |   |           |   |   |         |   |   |          |   |   |           |  
|Net sales                                                                  |  | $ |        |   | $ | 2,940,333 |   | $ | 112,817 |   | $ |         |   | $ | 3,053,150 |  
|Cost of sales                                                              |  |   |        |   |   | 2,219,779 |   |   | 89,666  |   |   |         |   |   | 2,309,445 |  
|Heartland matters                                                          |  |   |        |   |   | 3,134     |   |   |        |   |   |         |   |   | 3,134     |  
|                                                                           |  |   |         |   |   |           |   |   |         |   |   |          |   |   |           |  
|Gross profit                                                               |  |   |        |   |   | 717,420   |   |   | 23,151  |   |   |         |   |   | 740,571   |  
|Selling, general and administrative expenses                               |  |   | 4,297   |   |   | 435,521   |   |   | 13,360  |   |   |         |   |   | 453,178   |  
|Provision for doubtful accounts                                            |  |   |        |   |   | 51,402    |   |   | 843     |   |   |         |   |   | 52,245    |  
|Restructuring and other related charges                                    |  |   |        |   |   | 17,008    |   |   | 224     |   |   |         |   |   | 17,232    |  
|Litigation and other related professional fees                             |  |   |        |   |   | 37,664    |   |   |        |   |   |         |   |   | 37,664    |  
|Repack matters                                                             |  |   |        |   |   | 499       |   |   |        |   |   |         |   |   | 499       |  
|                                                                           |  |   |         |   |   |           |   |   |         |   |   |          |   |   |           |  
|Operating income (loss)                                                    |  |   | (4,297  | ) |   | 175,326   |   |   | 8,724   |   |   |         |   |   | 179,753   |  
|Investment income                                                          |  |   | 1,391   |   |   | 3,179     |   |   |        |   |   |         |   |   | 4,570     |  
|Interest expense, including amortization of discount on convertible
 notes |  |   | (82,084 | ) |   | (1,425    | ) |   | (1,718  | ) |   |         |   |   | (85,227   | )
|                                                                           |  |   |         |   |   |           |   |   |         |   |   |          |   |   |           |  
|Income (loss) from continuing operations before income
taxes               |  |   | (84,990 | ) |   | 177,080   |   |   | 7,006   |   |   |         |   |   | 99,096    |  
|Income tax (benefit) expense                                               |  |   | (32,753 | ) |   | 68,106    |   |   | 2,712   |   |   |         |   |   | 38,065    |  
|                                                                           |  |   |         |   |   |           |   |   |         |   |   |          |   |   |           |  
|Income from continuing operations                                          |  |   | (52,237 | ) |   | 108,974   |   |   | 4,294   |   |   |         |   |   | 61,031    |  
|Loss from discontinued operations                                          |  |   |        |   |   | (1,024    | ) |   | (922    | ) |   |         |   |   | (1,946    | )
|Equity in net income of subsidiaries                                       |  |   | 111,322 |   |   |          |   |   |        |   |   | (111,322 | ) |   |          |  
|                                                                           |  |   |         |   |   |           |   |   |         |   |   |          |   |   |           |  
|Net income                                                                 |  | $ | 59,085  |   | $ | 107,950   |   | $ | 3,372   |   | $ | (111,322 | ) | $ | 59,085    |  
|                                                                           |  |   |         |   |   |           |   |   |         |   |   |          |   |   |           |  

33

---



Note 13 - Guarantor Subsidiaries (Continued)

Condensed Consolidating Balance Sheets(in thousands)

|                                                    |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|--------------------------------------------------- |  | ------ | --------- | ----------------------- | - | ----------------------------- |  | ---------------------------------------- | ------- | --------------------------------- | - | ---------- | - | - | --------- | 
|As of June
 30, 2009 (Unaudited):                   |  | Parent |           | Guarantor
 Subsidiaries |   | Non-
 Guarantor
 Subsidiaries |  | Consolidating/
 Eliminating
 Adjustments |         | Omnicare,
 Inc. and
 Subsidiaries |  
|                                                    |  |        |           |                         |   |                               |  |                                          |         |                                   |  
|ASSETS                                              |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|Cash and cash equivalents                           |  | $      | 215,404   |                         | $ | 42,368                        |  | $                                        | 15,994  |                                   | $ |           |   | $ | 273,766   | 
|Restricted cash                                     |  |        |          |                         |   | 2,484                         |  |                                          |        |                                   |   |           |   |   | 2,484     | 
|Accounts receivable, net (including intercompany)   |  |        |          |                         |   | 1,253,755                     |  |                                          | 38,242  |                                   |   | (21,051    | ) |   | 1,270,946 | 
|Unbilled receivables, CRO                           |  |        |          |                         |   | 23,093                        |  |                                          |        |                                   |   |           |   |   | 23,093    | 
|Inventories                                         |  |        |          |                         |   | 331,098                       |  |                                          | 7,355   |                                   |   |           |   |   | 338,453   | 
|Deferred income tax
 benefits, net-current          |  |        |          |                         |   | 144,568                       |  |                                          | 150     |                                   |   | (2,676     | ) |   | 142,042   | 
|Other current assets                                |  |        | 1,209     |                         |   | 175,111                       |  |                                          | 4,864   |                                   |   |           |   |   | 181,184   | 
|Current assets from
 discontinued operations        |  |        |          |                         |   | 24,814                        |  |                                          | 6,882   |                                   |   |           |   |   | 31,696    | 
|                                                    |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|Total current assets                                |  |        | 216,613   |                         |   | 1,997,291                     |  |                                          | 73,487  |                                   |   | (23,727    | ) |   | 2,263,664 | 
|                                                    |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|Properties and equipment,
 net                      |  |        |          |                         |   | 206,102                       |  |                                          | 4,143   |                                   |   |           |   |   | 210,245   | 
|Goodwill                                            |  |        |          |                         |   | 4,161,904                     |  |                                          | 73,424  |                                   |   |           |   |   | 4,235,328 | 
|Identifiable intangible
 assets, net                |  |        |          |                         |   | 300,875                       |  |                                          | 10,918  |                                   |   |           |   |   | 311,793   | 
|Other noncurrent assets                             |  |        | 31,222    |                         |   | 227,876                       |  |                                          | 52      |                                   |   |           |   |   | 259,150   | 
|Noncurrent assets from discontinued operations      |  |        |          |                         |   | 22,070                        |  |                                          | 23,776  |                                   |   |           |   |   | 45,846    | 
|Investment in subsidiaries                          |  |        | 5,958,578 |                         |   |                              |  |                                          |        |                                   |   | (5,958,578 | ) |   |          | 
|                                                    |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|Total assets                                        |  | $      | 6,206,413 |                         | $ | 6,916,118                     |  | $                                        | 185,800 |                                   | $ | (5,982,305 | ) | $ | 7,326,026 | 
|                                                    |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|                                                    |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|LIABILITIES AND STOCKHOLDERS EQUITY                |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|Current liabilities (including intercompany)        |  | $      | 21,143    |                         | $ | 537,803                       |  | $                                        | 9,827   |                                   | $ | (21,051    | ) | $ | 547,722   | 
|Long-term debt, notes and convertible debentures    |  |        | 2,210,166 |                         |   | 1,945                         |  |                                          | 3       |                                   |   |           |   |   | 2,212,114 | 
|Deferred income tax liabilities, net-noncurrent     |  |        | 241,349   |                         |   | 304,709                       |  |                                          | 10,171  |                                   |   | (2,676     | ) |   | 553,553   | 
|Other noncurrent liabilities                        |  |        |          |                         |   | 278,829                       |  |                                          |        |                                   |   |           |   |   | 278,829   | 
|Noncurrent liabilities from discontinued operations |  |        |          |                         |   |                              |  |                                          | 53      |                                   |   |           |   |   | 53        | 
|Stockholders equity                                |  |        | 3,733,755 |                         |   | 5,792,832                     |  |                                          | 165,746 |                                   |   | (5,958,578 | ) |   | 3,733,755 | 
|                                                    |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|Total liabilities and stockholders
equity          |  | $      | 6,206,413 |                         | $ | 6,916,118                     |  | $                                        | 185,800 |                                   | $ | (5,982,305 | ) | $ | 7,326,026 | 
|                                                    |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 

34

---



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   |                         | $ | 44,109                        |  | $                                        | 25,381  |                                   | $ |           |   | $ | 214,668   | 
|Restricted cash                                     |  |        |          |                         |   | 1,891                         |  |                                          |        |                                   |   |           |   |   | 1,891     | 
|Accounts receivable, net (including intercompany)   |  |        |          |                         |   | 1,314,760                     |  |                                          | 54,862  |                                   |   | (32,064    | ) |   | 1,337,558 | 
|Unbilled receivables, CRO                           |  |        |          |                         |   | 22,329                        |  |                                          |        |                                   |   |           |   |   | 22,329    | 
|Inventories                                         |  |        |          |                         |   | 438,972                       |  |                                          | 10,051  |                                   |   |           |   |   | 449,023   | 
|Deferred income tax benefits, net-current           |  |        | 1,202     |                         |   | 132,991                       |  |                                          | 56      |                                   |   |           |   |   | 134,249   | 
|Other current assets                                |  |        | 1,270     |                         |   | 170,615                       |  |                                          | 5,104   |                                   |   |           |   |   | 176,989   | 
|Current assets from discontinued operations         |  |        |          |                         |   | 27,979                        |  |                                          | 7,007   |                                   |   |           |   |   | 34,986    | 
|                                                    |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|Total current assets                                |  |        | 147,650   |                         |   | 2,153,646                     |  |                                          | 102,461 |                                   |   | (32,064    | ) |   | 2,371,693 | 
|                                                    |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|Properties and equipment, net                       |  |        |          |                         |   | 203,882                       |  |                                          | 4,645   |                                   |   |           |   |   | 208,527   | 
|Goodwill                                            |  |        |          |                         |   | 4,138,754                     |  |                                          | 72,467  |                                   |   |           |   |   | 4,211,221 | 
|Identifiable intangible assets, net                 |  |        |          |                         |   | 325,559                       |  |                                          | 3,887   |                                   |   |           |   |   | 329,446   | 
|Other noncurrent assets                             |  |        | 40,171    |                         |   | 231,895                       |  |                                          | 47      |                                   |   |           |   |   | 272,113   | 
|Noncurrent assets from discontinued operations      |  |        |          |                         |   | 33,375                        |  |                                          | 23,870  |                                   |   |           |   |   | 57,245    | 
|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                         |  |                                          | 3       |                                   |   |           |   |   | 2,352,824 | 
|Deferred income tax liabilities, net-noncurrent     |  |        | 229,573   |                         |   | 285,361                       |  |                                          | 10,492  |                                   |   |           |   |   | 525,426   | 
|Other noncurrent liabilities                        |  |        |          |                         |   | 274,825                       |  |                                          | 1,459   |                                   |   |           |   |   | 276,284   | 
|Noncurrent liabilities from discontinued operations |  |        |          |                         |   |                              |  |                                          | 53      |                                   |   |           |   |   | 53        | 
|Stockholders equity                                |  |        | 3,654,869 |                         |   | 5,891,261                     |  |                                          | 184,047 |                                   |   | (6,075,308 | ) |   | 3,654,869 | 
|                                                    |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 
|Total liabilities and stockholders equity          |  | $      | 6,263,129 |                         | $ | 7,087,111                     |  | $                                        | 207,377 |                                   | $ | (6,107,372 | ) | $ | 7,450,245 | 
|                                                    |  |        |           |                         |   |                               |  |                                          |         |                                   |   |            |   |   |           | 

35

---



Note 13 - Guarantor Subsidiaries (Continued)

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

|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|----------------------------------------------------------------------------------------------------- |  | ------------------------- | -------- | ----------------------- | - | --------------------------- | - | --------------------------------- | ------- | - | - | -------- | -
|                                                                                                      |  | Six months ended June 30, |         
|                                                                                                      |  |                           |         
|2009:                                                                                                 |  | Parent                    |          | Guarantor
 Subsidiaries |   | Non-Guarantor
 Subsidiaries |   | Omnicare, Inc.
 and
 Subsidiaries |        
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |        
|Cash flows from operating activities:                                                                 |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|Net cash flows from operating activities                                                              |  | $                         | (24,797  | )                       | $ | 297,991                     |   | $                                 | (10,252 | ) | $ | 262,942  |  
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|Cash flows from investing activities:                                                                 |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|Acquisition of businesses, net of cash received                                                       |  |                           |         |                         |   | (43,100                     | ) |                                   |        |   |   | (43,100  | )
|Capital expenditures                                                                                  |  |                           |         |                         |   | (15,120                     | ) |                                   | (195    | ) |   | (15,315  | )
|Transfer of cash to trusts for employee health and severance costs,
 net of payments out of the trust |  |                           |         |                         |   | 843                         |   |                                   |        |   |   | 843      |  
|Other                                                                                                 |  |                           |         |                         |   | (2,233                      | ) |                                   |        |   |   | (2,233   | )
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|Net cash flows used in investing activities                                                           |  |                           |         |                         |   | (59,610                     | ) |                                   | (195    | ) |   | (59,805  | )
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|Cash flows from financing activities:                                                                 |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|Payments on line of credit facilities and term A loan                                                 |  |                           | (150,000 | )                       |   |                            |   |                                   |        |   |   | (150,000 | )
|Payments on long-term borrowings and obligations                                                      |  |                           | (993     | )                       |   |                            |   |                                   |        |   |   | (993     | )
|(Decrease) increase in cash overdraft balance                                                         |  |                           | (671     | )                       |   | 534                         |   |                                   |        |   |   | (137     | )
|Payments for stock awards and exercise of stock options, net of stock
 tendered in payment            |  |                           | 9,464    |                         |   |                            |   |                                   |        |   |   | 9,464    |  
|Excess tax benefits from stock-based compensation                                                     |  |                           | 2,366    |                         |   |                            |   |                                   |        |   |   | 2,366    |  
|Dividends paid                                                                                        |  |                           | (5,352   | )                       |   |                            |   |                                   |        |   |   | (5,352   | )
|Other                                                                                                 |  |                           | 240,209  |                         |   | (240,209                    | ) |                                   |        |   |   |         |  
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|Net cash flows used in financing activities                                                           |  |                           | 95,023   |                         |   | (239,675                    | ) |                                   |        |   |   | (144,652 | )
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|Effect of exchange rate changes on cash                                                               |  |                           |         |                         |   |                            |   |                                   | 831     |   |   | 831      |  
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|Net increase (decrease) in cash and cash equivalents                                                  |  |                           | 70,226   |                         |   | (1,294                      | ) |                                   | (9,616  | ) |   | 59,316   |  
|Less increase in cash and cash equivalents of discontinued
operations                                 |  |                           |         |                         |   | 447                         |   |                                   | (229    | ) |   | 218      |  
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|Increase (decrease) in cash and cash equivalents of continuing
 operations                            |  |                           | 70,226   |                         |   | (1,741                      | ) |                                   | (9,387  | ) |   | 59,098   |  
|Cash and cash equivalents at beginning of period                                                      |  |                           | 145,178  |                         |   | 44,109                      |   |                                   | 25,381  |   |   | 214,668  |  
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|Cash and cash equivalents at end of period                                                            |  | $                         | 215,404  |                         | $ | 42,368                      |   | $                                 | 15,994  |   | $ | 273,766  |  
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  

36

---



Note
13 - Guarantor Subsidiaries (Continued)

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

|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|----------------------------------------------------------------------------------------------------- |  | ------------------------- | -------- | ----------------------- | - | --------------------------- | - | --------------------------------- | ------- | - | - | -------- | -
|                                                                                                      |  | Six months ended June 30, |         
|                                                                                                      |  |                           |         
|2008:                                                                                                 |  | Parent                    |          | Guarantor
 Subsidiaries |   | Non-Guarantor
 Subsidiaries |   | Omnicare, Inc.
 and
 Subsidiaries |        
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |        
|Cash flows from operating activities:                                                                 |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|Net cash flows from operating activities                                                              |  | $                         | (20,886  | )                       | $ | 263,011                     |   | $                                 | (13,513 | ) | $ | 228,612  |  
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|Cash flows from investing activities:                                                                 |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|Acquisition of businesses, net of cash received                                                       |  |                           |         |                         |   | (90,988                     | ) |                                   |        |   |   | (90,988  | )
|Capital expenditures                                                                                  |  |                           |         |                         |   | (27,233                     | ) |                                   | (197    | ) |   | (27,430  | )
|Transfer of cash to trusts for employee health and severance costs,
 net of payments out of the trust |  |                           |         |                         |   | (11,589                     | ) |                                   |        |   |   | (11,589  | )
|Other                                                                                                 |  |                           |         |                         |   | (1,044                      | ) |                                   |        |   |   | (1,044   | )
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|Net cash flows used in investing activities                                                           |  |                           |         |                         |   | (130,854                    | ) |                                   | (197    | ) |   | (131,051 | )
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|Cash flows from financing activities:                                                                 |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|Payments on line of credit facilities and term A loan                                                 |  |                           | (50,000  | )                       |   |                            |   |                                   |        |   |   | (50,000  | )
|Payments on long-term borrowings and obligations                                                      |  |                           | (1,606   | )                       |   | (119                        | ) |                                   |        |   |   | (1,725   | )
|(Decrease) increase in cash overdraft balance                                                         |  |                           | (4,032   | )                       |   | 426                         |   |                                   |        |   |   | (3,606   | )
|Payments for Omnicare common stock repurchase                                                         |  |                           | (100,165 | )                       |   |                            |   |                                   |        |   |   | (100,165 | )
|Payments for stock awards and exercise of stock options, net of stock
 tendered in payment            |  |                           | (3,803   | )                       |   |                            |   |                                   |        |   |   | (3,803   | )
|Excess tax benefits from stock-based compensation                                                     |  |                           | 82       |                         |   |                            |   |                                   |        |   |   | 82       |  
|Dividends paid                                                                                        |  |                           | (5,412   | )                       |   |                            |   |                                   |        |   |   | (5,412   | )
|Other                                                                                                 |  |                           | 149,929  |                         |   | (149,810                    | ) |                                   |        |   |   | 119      |  
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|Net cash flows used in financing activities                                                           |  |                           | (15,007  | )                       |   | (149,503                    | ) |                                   |        |   |   | (164,510 | )
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|Effect of exchange rate changes on cash                                                               |  |                           |         |                         |   |                            |   |                                   | 1,231   |   |   | 1,231    |  
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|Net increase (decrease) in cash and cash equivalents                                                  |  |                           | (35,893  | )                       |   | (17,346                     | ) |                                   | (12,479 | ) |   | (65,718  | )
|Less increase in cash and cash equivalents of discontinued
operations                                 |  |                           |         |                         |   | 396                         |   |                                   | 52      |   |   | 448      |  
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|Increase (decrease) in cash and cash equivalents of continuing
 operations                            |  |                           | (35,893  | )                       |   | (17,742                     | ) |                                   | (12,531 | ) |   | (66,166  | )
|Cash and cash equivalents at beginning of period                                                      |  |                           | 171,779  |                         |   | 69,976                      |   |                                   | 32,445  |   |   | 274,200  |  
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  
|Cash and cash equivalents at end of period                                                            |  | $                         | 135,886  |                         | $ | 52,234                      |   | $                                 | 19,914  |   | $ | 208,034  |  
|                                                                                                      |  |                           |          |                         |   |                             |   |                                   |         |   |   |          |  

37

---



Note 13 - Guarantor Subsidiaries (Continued)

The Companys
3.25% convertible senior debentures due 2035 are fully and unconditionally
guaranteed on an unsecured basis by Omnicare Purchasing Company, LP, a
wholly-owned subsidiary of the Company (the Guarantor Subsidiary). The
following condensed consolidating financial data illustrates the composition of
Omnicare, Inc. (Parent), the Guarantor Subsidiary and the Non-Guarantor
Subsidiaries as of June 30, 2009 and December 31, 2008 for the balance sheets as
well as the three and six months ended June 30, 2009 and 2008 for the
statements of income, and the statements of cash flows for the six months ended
June 30, 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.

38

---



Note 13 - Guarantor Subsidiaries (Continued)

Summary Consolidating Statements of Income -
Unaudited(in thousands)

|                                                                                   |  |                             |         |                         |   |                               |   |                                          |           |                                    |   |         |   |   |           |  
|---------------------------------------------------------------------------------- |  | --------------------------- | ------- | ----------------------- | - | ----------------------------- | - | ---------------------------------------- | --------- | ---------------------------------- | - | ------- | - | - | --------- | -
|                                                                                   |  | Three months ended June 30, |        
|                                                                                   |  |                             |        
|2009:                                                                              |  | Parent                      |         | Guarantor
 Subsidiaries |   | Non-
 Guarantor
 Subsidiaries |   | Consolidating/
 Eliminating
 Adjustments |           | Omnicare, 
 Inc. and
 Subsidiaries |  
|                                                                                   |  |                             |         |                         |   |                               |   |                                          |           |                                    |  
|Net sales                                                                          |  | $                           |        |                         | $ |                              |   | $                                        | 1,540,507 |                                    | $ |        |   | $ | 1,540,507 |  
|Cost of sales                                                                      |  |                             |        |                         |   |                              |   |                                          | 1,168,778 |                                    |   |        |   |   | 1,168,778 |  
|Heartland matters                                                                  |  |                             |        |                         |   |                              |   |                                          | 815       |                                    |   |        |   |   | 815       |  
|                                                                                   |  |                             |         |                         |   |                               |   |                                          |           |                                    |   |         |   |   |           |  
|Gross profit                                                                       |  |                             |        |                         |   |                              |   |                                          | 370,914   |                                    |   |        |   |   | 370,914   |  
|Selling, general and administrative
 expenses                                      |  |                             | 1,603   |                         |   | 396                           |   |                                          | 201,492   |                                    |   |        |   |   | 203,491   |  
|Provision for doubtful accounts                                                    |  |                             |        |                         |   |                              |   |                                          | 22,710    |                                    |   |        |   |   | 22,710    |  
|Restructuring and other related charges                                            |  |                             |        |                         |   |                              |   |                                          | 5,883     |                                    |   |        |   |   | 5,883     |  
|Litigation and other related professional
 fees                                    |  |                             |        |                         |   |                              |   |                                          | 28,357    |                                    |   |        |   |   | 28,357    |  
|Repack matters                                                                     |  |                             |        |                         |   |                              |   |                                          | 381       |                                    |   |        |   |   | 381       |  
|Acquisition and other related costs                                                |  |                             |        |                         |   |                              |   |                                          | 2,011     |                                    |   |        |   |   | 2,011     |  
|                                                                                   |  |                             |         |                         |   |                               |   |                                          |           |                                    |   |         |   |   |           |  
|Operating income (loss)                                                            |  |                             | (1,603  | )                       |   | (396                          | ) |                                          | 110,080   |                                    |   |        |   |   | 108,081   |  
|Investment income                                                                  |  |                             | 100     |                         |   |                              |   |                                          | 932       |                                    |   |        |   |   | 1,032     |  
|Interest expense, including amortization of
 discount on convertible notes         |  |                             | (36,513 | )                       |   |                              |   |                                          | (189      | )                                  |   |        |   |   | (36,702   | )
|                                                                                   |  |                             |         |                         |   |                               |   |                                          |           |                                    |   |         |   |   |           |  
|Income (loss) from continuing operations
 before income taxes                      |  |                             | (38,016 | )                       |   | (396                          | ) |                                          | 110,823   |                                    |   |        |   |   | 72,411    |  
|Income tax (benefit) expense                                                       |  |                             | (14,519 | )                       |   | (154                          | ) |                                          | 45,090    |                                    |   |        |   |   | 30,417    |  
|                                                                                   |  |                             |         |                         |   |                               |   |                                          |           |                                    |   |         |   |   |           |  
|Income from continuing operations                                                  |  |                             | (23,497 | )                       |   | (242                          | ) |                                          | 65,733    |                                    |   |        |   |   | 41,994    |  
|Loss from discontinued operations, including impairment charge of $12,065 aftertax |  |                             |        |                         |   |                              |   |                                          | (13,275   | )                                  |   |        |   |   | (13,275   | )
|Equity in net income of subsidiaries                                               |  |                             | 52,216  |                         |   |                              |   |                                          |          |                                    |   | (52,216 | ) |   |          |  
|                                                                                   |  |                             |         |                         |   |                               |   |                                          |           |                                    |   |         |   |   |           |  
|Net income                                                                         |  | $                           | 28,719  |                         | $ | (242                          | ) | $                                        | 52,458    |                                    | $ | (52,216 | ) | $ | 28,719    |  
|                                                                                   |  |                             |         |                         |   |                               |   |                                          |           |                                    |   |         |   |   |           |  
|                                                                                   |  |                             |         |                         |   |                               |   |                                          |           |                                    |   |         |   |   |           |  
|2008:                                                                              |  |                             |         |                         |   |                               |   |                                          |           |                                    |   |         |   |   |           |  
|                                                                                   |  |                             |         |                         |   |                               |   |                                          |           |                                    |   |         |   |   |           |  
|Net sales                                                                          |  | $                           |        |                         | $ |                              |   | $                                        | 1,522,712 |                                    | $ |        |   | $ | 1,522,712 |  
|Cost of sales                                                                      |  |                             |        |                         |   |                              |   |                                          | 1,149,864 |                                    |   |        |   |   | 1,149,864 |  
|Heartland matters                                                                  |  |                             |        |                         |   |                              |   |                                          | 1,560     |                                    |   |        |   |   | 1,560     |  
|                                                                                   |  |                             |         |                         |   |                               |   |                                          |           |                                    |   |         |   |   |           |  
|Gross profit                                                                       |  |                             |        |                         |   |                              |   |                                          | 371,288   |                                    |   |        |   |   | 371,288   |  
|Selling, general and administrative
 expenses                                      |  |                             | 2,349   |                         |   | 346                           |   |                                          | 224,256   |                                    |   |        |   |   | 226,951   |  
|Provision for doubtful accounts                                                    |  |                             |        |                         |   |                              |   |                                          | 24,093    |                                    |   |        |   |   | 24,093    |  
|Restructuring and other related charges                                            |  |                             |        |                         |   |                              |   |                                          | 10,784    |                                    |   |        |   |   | 10,784    |  
|Litigation and other related professional
 fees                                    |  |                             |        |                         |   |                              |   |                                          | 16,022    |                                    |   |        |   |   | 16,022    |  
|Repack matters                                                                     |  |                             |        |                         |   |                              |   |                                          | 180       |                                    |   |        |   |   | 180       |  
|                                                                                   |  |                             |         |                         |   |                               |   |                                          |           |                                    |   |         |   |   |           |  
|Operating income (loss)                                                            |  |                             | (2,349  | )                       |   | (346                          | ) |                                          | 95,953    |                                    |   |        |   |   | 93,258    |  
|Investment income                                                                  |  |                             | 817     |                         |   |                              |   |                                          | 1,142     |                                    |   |        |   |   | 1,959     |  
|Interest expense, including amortization of
 discount on convertible notes         |  |                             | (41,033 | )                       |   |                              |   |                                          | (1,081    | )                                  |   |        |   |   | (42,114   | )
|                                                                                   |  |                             |         |                         |   |                               |   |                                          |           |                                    |   |         |   |   |           |  
|Income (loss) from continuing operations
 before income taxes                      |  |                             | (42,565 | )                       |   | (346                          | ) |                                          | 96,014    |                                    |   |        |   |   | 53,103    |  
|Income tax (benefit) expense                                                       |  |                             | (15,985 | )                       |   | (130                          | ) |                                          | 35,724    |                                    |   |        |   |   | 19,609    |  
|                                                                                   |  |                             |         |                         |   |                               |   |                                          |           |                                    |   |         |   |   |           |  
|Income from continuing operations                                                  |  |                             | (26,580 | )                       |   | (216                          | ) |                                          | 60,290    |                                    |   |        |   |   | 33,494    |  
|Loss from discontinued operations                                                  |  |                             |        |                         |   |                              |   |                                          | (559      | )                                  |   |        |   |   | (559      | )
|Equity in net income of subsidiaries                                               |  |                             | 59,515  |                         |   |                              |   |                                          |          |                                    |   | (59,515 | ) |   |          |  
|                                                                                   |  |                             |         |                         |   |                               |   |                                          |           |                                    |   |         |   |   |           |  
|Net income                                                                         |  | $                           | 32,935  |                         | $ | (216                          | ) | $                                        | 59,731    |                                    | $ | (59,515 | ) | $ | 32,935    |  
|                                                                                   |  |                             |         |                         |   |                               |   |                                          |           |                                    |   |         |   |   |           |  

39

---



Note
13 - Guarantor Subsidiaries (Continued)

Summary Consolidating Statements of Income -
Unaudited(in thousands)

|                                                                                   |  |                           |         |                         |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|---------------------------------------------------------------------------------- |  | ------------------------- | ------- | ----------------------- | - | ----------------------------- | - | ---------------------------------------- | --------- | --------------------------------- | - | -------- | - | - | --------- | -
|                                                                                   |  | Six months ended June 30, |        
|                                                                                   |  |                           |        
|2009:                                                                              |  | Parent                    |         | Guarantor
 Subsidiaries |   | Non-
 Guarantor
 Subsidiaries |   | Consolidating/
 Eliminating
 Adjustments |           | Omnicare,
 Inc. and
 Subsidiaries |  
|                                                                                   |  |                           |         |                         |   |                               |   |                                          |           |                                   |  
|Net sales                                                                          |  | $                         |        |                         | $ |                              |   | $                                        | 3,082,612 |                                   | $ |         |   | $ | 3,082,612 |  
|Cost of sales                                                                      |  |                           |        |                         |   |                              |   |                                          | 2,320,546 |                                   |   |         |   |   | 2,320,546 |  
|Heartland matters                                                                  |  |                           |        |                         |   |                              |   |                                          | 1,917     |                                   |   |         |   |   | 1,917     |  
|                                                                                   |  |                           |         |                         |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|Gross profit                                                                       |  |                           |        |                         |   |                              |   |                                          | 760,149   |                                   |   |         |   |   | 760,149   |  
|Selling, general and administrative
 expenses                                      |  |                           | 8,541   |                         |   | 817                           |   |                                          | 410,266   |                                   |   |         |   |   | 419,624   |  
|Provision for doubtful accounts                                                    |  |                           |        |                         |   |                              |   |                                          | 47,981    |                                   |   |         |   |   | 47,981    |  
|Restructuring and other related charges                                            |  |                           |        |                         |   |                              |   |                                          | 12,800    |                                   |   |         |   |   | 12,800    |  
|Litigation and other related professional
 fees                                    |  |                           |        |                         |   |                              |   |                                          | 70,022    |                                   |   |         |   |   | 70,022    |  
|Repack matters                                                                     |  |                           |        |                         |   |                              |   |                                          | 1,272     |                                   |   |         |   |   | 1,272     |  
|Acquisition and other related costs                                                |  |                           |        |                         |   |                              |   |                                          | 2,850     |                                   |   |         |   |   | 2,850     |  
|                                                                                   |  |                           |         |                         |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|Operating income (loss)                                                            |  |                           | (8,541  | )                       |   | (817                          | ) |                                          | 214,958   |                                   |   |         |   |   | 205,600   |  
|Investment income                                                                  |  |                           | 536     |                         |   |                              |   |                                          | 2,903     |                                   |   |         |   |   | 3,439     |  
|Interest expense, including amortization of
 discount on convertible notes         |  |                           | (74,341 | )                       |   |                              |   |                                          | (445      | )                                 |   |         |   |   | (74,786   | )
|                                                                                   |  |                           |         |                         |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|Income (loss) from continuing operations
 before income taxes                      |  |                           | (82,346 | )                       |   | (817                          | ) |                                          | 217,416   |                                   |   |         |   |   | 134,253   |  
|Income tax (benefit) expense                                                       |  |                           | (31,489 | )                       |   | (315                          | ) |                                          | 91,835    |                                   |   |         |   |   | 60,031    |  
|                                                                                   |  |                           |         |                         |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|Income from continuing operations                                                  |  |                           | (50,857 | )                       |   | (502                          | ) |                                          | 125,581   |                                   |   |         |   |   | 74,222    |  
|Loss from discontinued operations, including impairment charge of $12,065 aftertax |  |                           |        |                         |   |                              |   |                                          | (14,609   | )                                 |   |         |   |   | (14,609   | )
|Equity in net income of subsidiaries                                               |  |                           | 110,470 |                         |   |                              |   |                                          |          |                                   |   | (110,470 | ) |   |          |  
|                                                                                   |  |                           |         |                         |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|Net income                                                                         |  | $                         | 59,613  |                         | $ | (502                          | ) | $                                        | 110,972   |                                   | $ | (110,470 | ) | $ | 59,613    |  
|                                                                                   |  |                           |         |                         |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|                                                                                   |  |                           |         |                         |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|2008:                                                                              |  |                           |         |                         |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|                                                                                   |  |                           |         |                         |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|Net sales                                                                          |  | $                         |        |                         | $ |                              |   | $                                        | 3,053,150 |                                   | $ |         |   | $ | 3,053,150 |  
|Cost of sales                                                                      |  |                           |        |                         |   |                              |   |                                          | 2,309,445 |                                   |   |         |   |   | 2,309,445 |  
|Heartland matters                                                                  |  |                           |        |                         |   |                              |   |                                          | 3,134     |                                   |   |         |   |   | 3,134     |  
|                                                                                   |  |                           |         |                         |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|Gross profit                                                                       |  |                           |        |                         |   |                              |   |                                          | 740,571   |                                   |   |         |   |   | 740,571   |  
|Selling, general and administrative
 expenses                                      |  |                           | 4,297   |                         |   | 646                           |   |                                          | 448,235   |                                   |   |         |   |   | 453,178   |  
|Provision for doubtful accounts                                                    |  |                           |        |                         |   |                              |   |                                          | 52,245    |                                   |   |         |   |   | 52,245    |  
|Restructuring and other related charges                                            |  |                           |        |                         |   |                              |   |                                          | 17,232    |                                   |   |         |   |   | 17,232    |  
|Litigation and other related professional
 fees                                    |  |                           |        |                         |   |                              |   |                                          | 37,664    |                                   |   |         |   |   | 37,664    |  
|Repack matters                                                                     |  |                           |        |                         |   |                              |   |                                          | 499       |                                   |   |         |   |   | 499       |  
|                                                                                   |  |                           |         |                         |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|Operating income (loss)                                                            |  |                           | (4,297  | )                       |   | (646                          | ) |                                          | 184,696   |                                   |   |         |   |   | 179,753   |  
|Investment income                                                                  |  |                           | 1,391   |                         |   |                              |   |                                          | 3,179     |                                   |   |         |   |   | 4,570     |  
|Interest expense, including amortization of discount on convertible notes          |  |                           | (82,084 | )                       |   |                              |   |                                          | (3,143    | )                                 |   |         |   |   | (85,227   | )
|                                                                                   |  |                           |         |                         |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|Income (loss) from continuing operations
 before income taxes                      |  |                           | (84,990 | )                       |   | (646                          | ) |                                          | 184,732   |                                   |   |         |   |   | 99,096    |  
|Income tax (benefit) expense                                                       |  |                           | (32,753 | )                       |   | (250                          | ) |                                          | 71,068    |                                   |   |         |   |   | 38,065    |  
|                                                                                   |  |                           |         |                         |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|Income from continuing operations                                                  |  |                           | (52,237 | )                       |   | (396                          | ) |                                          | 113,664   |                                   |   |         |   |   | 61,031    |  
|Loss from discontinued operations                                                  |  |                           |        |                         |   |                              |   |                                          | (1,946    | )                                 |   |         |   |   | (1,946    | )
|Equity in net income of subsidiaries                                               |  |                           | 111,322 |                         |   |                              |   |                                          |          |                                   |   | (111,322 | ) |   |          |  
|                                                                                   |  |                           |         |                         |   |                               |   |                                          |           |                                   |   |          |   |   |           |  
|Net income                                                                         |  | $                         | 59,085  |                         | $ | (396                          | ) | $                                        | 111,718   |                                   | $ | (111,322 | ) | $ | 59,085    |  
|                                                                                   |  |                           |         |                         |   |                               |   |                                          |           |                                   |   |          |   |   |           |  

40

---



Note
13 - Guarantor Subsidiaries (Continued)

Condensed Consolidating Balance Sheets
(in thousands)

|                                                    |  |        |           |                         |   |                               |  |                                          |           |                                  |   |            |   |   |           | 
|--------------------------------------------------- |  | ------ | --------- | ----------------------- | - | ----------------------------- |  | ---------------------------------------- | --------- | -------------------------------- | - | ---------- | - | - | --------- | 
|As of June 30, 2009 (Unaudited):                    |  | Parent |           | Guarantor
 Subsidiaries |   | Non-
 Guarantor
 Subsidiaries |  | Consolidating/
 Eliminating
 Adjustments |           | Omnicare, Inc. and
 Subsidiaries |  
|                                                    |  |        |           |                         |   |                               |  |                                          |           |                                  |  
|ASSETS                                              |  |        |           |                         |   |                               |  |                                          |           |                                  |   |            |   |   |           | 
|Cash and cash equivalents                           |  | $      | 215,404   |                         | $ |                              |  | $                                        | 58,362    |                                  | $ |           |   | $ | 273,766   | 
|Restricted cash                                     |  |        |          |                         |   |                              |  |                                          | 2,484     |                                  |   |           |   |   | 2,484     | 
|Accounts receivable, net (including intercompany)   |  |        |          |                         |   | 40                            |  |                                          | 1,270,946 |                                  |   | (40        | ) |   | 1,270,946 | 
|Unbilled receivables, CRO                           |  |        |          |                         |   |                              |  |                                          | 23,093    |                                  |   |           |   |   | 23,093    | 
|Inventories                                         |  |        |          |                         |   |                              |  |                                          | 338,453   |                                  |   |           |   |   | 338,453   | 
|Deferred income tax benefits, net-current           |  |        |          |                         |   |                              |  |                                          | 144,718   |                                  |   | (2,676     | ) |   | 142,042   | 
|Other current assets                                |  |        | 1,209     |                         |   |                              |  |                                          | 179,975   |                                  |   |           |   |   | 181,184   | 
|Current assets from discontinued operations         |  |        |          |                         |   |                              |  |                                          | 31,696    |                                  |   |           |   |   | 31,696    | 
|                                                    |  |        |           |                         |   |                               |  |                                          |           |                                  |   |            |   |   |           | 
|Total current assets                                |  |        | 216,613   |                         |   | 40                            |  |                                          | 2,049,727 |                                  |   | (2,716     | ) |   | 2,263,664 | 
|                                                    |  |        |           |                         |   |                               |  |                                          |           |                                  |   |            |   |   |           | 
|Properties and equipment, net                       |  |        |          |                         |   | 23                            |  |                                          | 210,222   |                                  |   |           |   |   | 210,245   | 
|Goodwill                                            |  |        |          |                         |   |                              |  |                                          | 4,235,328 |                                  |   |           |   |   | 4,235,328 | 
|Identifiable intangible assets, net                 |  |        |          |                         |   |                              |  |                                          | 311,793   |                                  |   |           |   |   | 311,793   | 
|Other noncurrent assets                             |  |        | 31,222    |                         |   | 19                            |  |                                          | 227,909   |                                  |   |           |   |   | 259,150   | 
|Noncurrent assets from discontinued operations      |  |        |          |                         |   |                              |  |                                          | 45,846    |                                  |   |           |   |   | 45,846    | 
|Investment in subsidiaries                          |  |        | 5,958,578 |                         |   |                              |  |                                          |          |                                  |   | (5,958,578 | ) |   |          | 
|                                                    |  |        |           |                         |   |                               |  |                                          |           |                                  |   |            |   |   |           | 
|Total assets                                        |  | $      | 6,206,413 |                         | $ | 82                            |  | $                                        | 7,080,825 |                                  | $ | (5,961,294 | ) | $ | 7,326,026 | 
|                                                    |  |        |           |                         |   |                               |  |                                          |           |                                  |   |            |   |   |           | 
|                                                    |  |        |           |                         |   |                               |  |                                          |           |                                  |   |            |   |   |           | 
|LIABILITIES AND STOCKHOLDERS EQUITY                |  |        |           |                         |   |                               |  |                                          |           |                                  |   |            |   |   |           | 
|Current liabilities (including intercompany)        |  | $      | 21,143    |                         | $ | 3                             |  | $                                        | 526,616   |                                  | $ | (40        | ) | $ | 547,722   | 
|Long-term debt, notes and convertible debentures    |  |        | 2,210,166 |                         |   |                              |  |                                          | 1,948     |                                  |   |           |   |   | 2,212,114 | 
|Deferred income tax liabilities, net-noncurrent     |  |        | 241,349   |                         |   |                              |  |                                          | 314,880   |                                  |   | (2,676     | ) |   | 553,553   | 
|Other noncurrent liabilities                        |  |        |          |                         |   |                              |  |                                          | 278,829   |                                  |   |           |   |   | 278,829   | 
|Noncurrent liabilities from discontinued operations |  |        |          |                         |   |                              |  |                                          | 53        |                                  |   |           |   |   | 53        | 
|Stockholders equity                                |  |        | 3,733,755 |                         |   | 79                            |  |                                          | 5,958,499 |                                  |   | (5,958,578 | ) |   | 3,733,755 | 
|                                                    |  |        |           |                         |   |                               |  |                                          |           |                                  |   |            |   |   |           | 
|Total liabilities and stockholders equity          |  | $      | 6,206,413 |                         | $ | 82                            |  | $                                        | 7,080,825 |                                  | $ | (5,961,294 | ) | $ | 7,326,026 | 
|                                                    |  |        |           |                         |   |                               |  |                                          |           |                                  |   |            |   |   |           | 

41

---



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   |                         | $ |                              |  | $                                        | 69,490    |                                   | $ |           |   | $ | 214,668   | 
|Restricted cash                                     |  |        |          |                         |   |                              |  |                                          | 1,891     |                                   |   |           |   |   | 1,891     | 
|Accounts receivable, net (including intercompany)   |  |        |          |                         |   | 56                            |  |                                          | 1,337,558 |                                   |   | (56        | ) |   | 1,337,558 | 
|Unbilled receivables, CRO                           |  |        |          |                         |   |                              |  |                                          | 22,329    |                                   |   |           |   |   | 22,329    | 
|Inventories                                         |  |        |          |                         |   |                              |  |                                          | 449,023   |                                   |   |           |   |   | 449,023   | 
|Deferred income tax benefits, net-current           |  |        | 1,202     |                         |   |                              |  |                                          | 136,399   |                                   |   | (3,352     | ) |   | 134,249   | 
|Other current assets                                |  |        | 1,270     |                         |   |                              |  |                                          | 175,719   |                                   |   |           |   |   | 176,989   | 
|Current assets from discontinued operations         |  |        |          |                         |   |                              |  |                                          | 34,986    |                                   |   |           |   |   | 34,986    | 
|                                                    |  |        |           |                         |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|Total current assets                                |  |        | 147,650   |                         |   | 56                            |  |                                          | 2,227,395 |                                   |   | (3,408     | ) |   | 2,371,693 | 
|                                                    |  |        |           |                         |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|Properties and equipment, net                       |  |        |          |                         |   | 29                            |  |                                          | 208,498   |                                   |   |           |   |   | 208,527   | 
|Goodwill                                            |  |        |          |                         |   |                              |  |                                          | 4,211,221 |                                   |   |           |   |   | 4,211,221 | 
|Identifiable intangible assets, net                 |  |        |          |                         |   |                              |  |                                          | 329,446   |                                   |   |           |   |   | 329,446   | 
|Other noncurrent assets                             |  |        | 40,171    |                         |   | 19                            |  |                                          | 231,923   |                                   |   |           |   |   | 272,113   | 
|Noncurrent assets from discontinued operations      |  |        |          |                         |   |                              |  |                                          | 57,245    |                                   |   |           |   |   | 57,245    | 
|Investment in subsidiaries                          |  |        | 6,075,308 |                         |   |                              |  |                                          |          |                                   |   | (6,075,308 | ) |   |          | 
|                                                    |  |        |           |                         |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|Total assets                                        |  | $      | 6,263,129 |                         | $ | 104                           |  | $                                        | 7,265,728 |                                   | $ | (6,078,716 | ) | $ | 7,450,245 | 
|                                                    |  |        |           |                         |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|                                                    |  |        |           |                         |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|LIABILITIES AND STOCKHOLDERS EQUITY                |  |        |           |                         |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|Current liabilities (including intercompany)        |  | $      | 28,460    |                         | $ | 16                            |  | $                                        | 612,369   |                                   | $ | (56        | ) | $ | 640,789   | 
|Long-term debt, notes and convertible debentures    |  |        | 2,350,227 |                         |   |                              |  |                                          | 2,597     |                                   |   |           |   |   | 2,352,824 | 
|Deferred income tax liabilities, net-noncurrent     |  |        | 229,573   |                         |   |                              |  |                                          | 299,205   |                                   |   | (3,352     | ) |   | 525,426   | 
|Other noncurrent liabilities                        |  |        |          |                         |   |                              |  |                                          | 276,284   |                                   |   |           |   |   | 276,284   | 
|Noncurrent liabilities from discontinued operations |  |        |          |                         |   |                              |  |                                          | 53        |                                   |   |           |   |   | 53        | 
|Stockholders equity                                |  |        | 3,654,869 |                         |   | 88                            |  |                                          | 6,075,220 |                                   |   | (6,075,308 | ) |   | 3,654,869 | 
|                                                    |  |        |           |                         |   |                               |  |                                          |           |                                   |   |            |   |   |           | 
|Total liabilities and stockholders equity          |  | $      | 6,263,129 |                         | $ | 104                           |  | $                                        | 7,265,728 |                                   | $ | (6,078,716 | ) | $ | 7,450,245 | 
|                                                    |  |        |           |                         |   |                               |  |                                          |           |                                   |   |            |   |   |           | 

42

---



Note 13 - Guarantor Subsidiaries (Continued)

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

|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|---------------------------------------------------------------------------------------------------- |  | ------------------------- | -------- | ----------------------- | - | --------------------------- |  | --------------------------------- | -------- | - | - | -------- | -
|                                                                                                     |  | Six months ended June 30, |         
|                                                                                                     |  |                           |         
|2009:                                                                                                |  | Parent                    |          | Guarantor
 Subsidiaries |   | Non-Guarantor
 Subsidiaries |  | Omnicare, Inc.
 and
 Subsidiaries |         
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |         
|Cash flows from operating activities:                                                                |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|Net cash flows from operating activities                                                             |  | $                         | (24,797  | )                       | $ |                            |  | $                                 | 287,739  |   | $ | 262,942  |  
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|Cash flows from investing activities:                                                                |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|Acquisition of businesses, net of cash received                                                      |  |                           |         |                         |   |                            |  |                                   | (43,100  | ) |   | (43,100  | )
|Capital expenditures                                                                                 |  |                           |         |                         |   |                            |  |                                   | (15,315  | ) |   | (15,315  | )
|Transfer of cash to trusts for employee health and
severance costs, net of payments out of the trust |  |                           |         |                         |   |                            |  |                                   | 843      |   |   | 843      |  
|Other                                                                                                |  |                           |         |                         |   |                            |  |                                   | (2,233   | ) |   | (2,233   | )
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|Net cash flows used in investing activities                                                          |  |                           |         |                         |   |                            |  |                                   | (59,805  | ) |   | (59,805  | )
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|Cash flows from financing activities:                                                                |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|Payments on line of credit facilities and term A loan                                                |  |                           | (150,000 | )                       |   |                            |  |                                   |         |   |   | (150,000 | )
|Payments on long-term borrowings and obligations                                                     |  |                           | (993     | )                       |   |                            |  |                                   |         |   |   | (993     | )
|(Decrease) increase in cash overdraft balance                                                        |  |                           | (671     | )                       |   |                            |  |                                   | 534      |   |   | (137     | )
|Payments for stock awards and exercise of stock options, net of stock tendered in payment            |  |                           | 9,464    |                         |   |                            |  |                                   |         |   |   | 9,464    |  
|Excess tax benefits from stock-based compensation                                                    |  |                           | 2,366    |                         |   |                            |  |                                   |         |   |   | 2,366    |  
|Dividends paid                                                                                       |  |                           | (5,352   | )                       |   |                            |  |                                   |         |   |   | (5,352   | )
|Other                                                                                                |  |                           | 240,209  |                         |   |                            |  |                                   | (240,209 | ) |   |         |  
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|Net cash flows used in financing activities                                                          |  |                           | 95,023   |                         |   |                            |  |                                   | (239,675 | ) |   | (144,652 | )
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|Effect of exchange rate changes on cash                                                              |  |                           |         |                         |   |                            |  |                                   | 831      |   |   | 831      |  
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|Net increase (decrease) in cash and cash equivalents                                                 |  |                           | 70,226   |                         |   |                            |  |                                   | (10,910  | ) |   | 59,316   |  
|Less increase in cash and cash equivalents of discontinued
operations                                |  |                           |         |                         |   |                            |  |                                   | 218      |   |   | 218      |  
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|Increase (decrease) in cash and cash equivalents of continuing
 operations                           |  |                           | 70,226   |                         |   |                            |  |                                   | (11,128  | ) |   | 59,098   |  
|Cash and cash equivalents at beginning of period                                                     |  |                           | 145,178  |                         |   |                            |  |                                   | 69,490   |   |   | 214,668  |  
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|Cash and cash equivalents at end of period                                                           |  | $                         | 215,404  |                         | $ |                            |  | $                                 | 58,362   |   | $ | 273,766  |  
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  

43

---



Note 13 - Guarantor Subsidiaries (Continued)

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

|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|---------------------------------------------------------------------------------------------------- |  | ------------------------- | -------- | ----------------------- | - | --------------------------- |  | --------------------------------- | -------- | - | - | -------- | -
|                                                                                                     |  | Six months ended June 30, |         
|                                                                                                     |  |                           |         
|2008:                                                                                                |  | Parent                    |          | Guarantor
 Subsidiaries |   | Non-Guarantor
 Subsidiaries |  | Omnicare, Inc.
 and
 Subsidiaries |         
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |         
|Cash flows from operating activities:                                                                |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|Net cash flows from operating activities                                                             |  | $                         | (20,886  | )                       | $ |                            |  | $                                 | 249,498  |   | $ | 228,612  |  
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|Cash flows from investing activities:                                                                |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|Acquisition of businesses, net of cash received                                                      |  |                           |         |                         |   |                            |  |                                   | (90,988  | ) |   | (90,988  | )
|Capital expenditures                                                                                 |  |                           |         |                         |   |                            |  |                                   | (27,430  | ) |   | (27,430  | )
|Transfer of cash to trusts for employee health and
severance costs, net of payments out of the trust |  |                           |         |                         |   |                            |  |                                   | (11,589  | ) |   | (11,589  | )
|Other                                                                                                |  |                           |         |                         |   |                            |  |                                   | (1,044   | ) |   | (1,044   | )
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|Net cash flows used in investing activities                                                          |  |                           |         |                         |   |                            |  |                                   | (131,051 | ) |   | (131,051 | )
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|Cash flows from financing activities:                                                                |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|Payments on line of credit facilities and term A loan                                                |  |                           | (50,000  | )                       |   |                            |  |                                   |         |   |   | (50,000  | )
|Payments on long-term borrowings and obligations                                                     |  |                           | (1,606   | )                       |   |                            |  |                                   | (119     | ) |   | (1,725   | )
|(Decrease) increase in cash overdraft balance                                                        |  |                           | (4,032   | )                       |   |                            |  |                                   | 426      |   |   | (3,606   | )
|Payments for Omnicare common stock repurchase                                                        |  |                           | (100,165 | )                       |   |                            |  |                                   |         |   |   | (100,165 | )
|Payments for stock awards and exercise of stock options, net of stock tendered in payment            |  |                           | (3,803   | )                       |   |                            |  |                                   |         |   |   | (3,803   | )
|Excess tax benefits from stock-based compensation                                                    |  |                           | 82       |                         |   |                            |  |                                   |         |   |   | 82       |  
|Dividends paid                                                                                       |  |                           | (5,412   | )                       |   |                            |  |                                   |         |   |   | (5,412   | )
|Other                                                                                                |  |                           | 149,929  |                         |   |                            |  |                                   | (149,810 | ) |   | 119      |  
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|Net cash flows used in financing activities                                                          |  |                           | (15,007  | )                       |   |                            |  |                                   | (149,503 | ) |   | (164,510 | )
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|Effect of exchange rate changes on cash                                                              |  |                           |         |                         |   |                            |  |                                   | 1,231    |   |   | 1,231    |  
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|Net increase (decrease) in cash and cash equivalents                                                 |  |                           | (35,893  | )                       |   |                            |  |                                   | (29,825  | ) |   | (65,718  | )
|Less increase in cash and cash equivalents of discontinued
operations                                |  |                           |         |                         |   |                            |  |                                   | 448      |   |   | 448      |  
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|Increase (decrease) in cash and cash equivalents of continuing
 operations                           |  |                           | (35,893  | )                       |   |                            |  |                                   | (30,273  | ) |   | (66,166  | )
|Cash and cash equivalents at beginning of period                                                     |  |                           | 171,779  |                         |   |                            |  |                                   | 102,421  |   |   | 274,200  |  
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  
|Cash and cash equivalents at end of period                                                           |  | $                         | 135,886  |                         | $ |                            |  | $                                 | 72,148   |   | $ | 208,034  |  
|                                                                                                     |  |                           |          |                         |   |                             |  |                                   |          |   |   |          |  

44

---



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. All amounts disclosed herein relate to
the Companys continuing operations unless otherwise stated.

|                                                                               
|-------------------------------------------------------------------------------
|Overview of
 Three and Six Months Ended June 30, 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 June 30, 2009, Omnicare served long-term care facilities as well
as chronic care and other settings comprising approximately 1,384,000 beds
relating to continuing operations, including approximately 59,000 patients
served by the patient assistance programs of its specialty pharmacy services
business. The comparable number at December 31, 2008 was 1,390,000 relating to
continuing operations (including approximately 68,000 patients served by
patient assistance programs). The comparable number at June 30, 2008 was
1,392,000 relating to continuing operations (including approximately 70,000
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 June 30, 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 and six months ended June 30, 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).

45

---



|                                                                                                  |  |                               |           |                            |   |           |   |                          |           |   |   |           |  
|------------------------------------------------------------------------------------------------- |  | ----------------------------- | --------- | -------------------------- | - | --------- | - | ------------------------ | --------- | - | - | --------- | -
|                                                                                                  |  | Three months ended,
 June 30, |           | Six months ended
 June 30, |  
|                                                                                                  |  |                               |           |                            |  
|                                                                                                  |  | 2009 (b)                      |           | 2008 as
 adjusted (a)(b)   |   | 2009 (b)  |   | 2008 as
 adjusted (a)(b) |          
|                                                                                                  |  |                               |           |                            |   |           |   |                          |          
|                                                                                                 
|Net sales                                                                                         |  | $                             | 1,540,507 |                            | $ | 1,522,712 |   | $                        | 3,082,612 |   | $ | 3,053,150 |  
|                                                                                                  |  |                               |           |                            |   |           |   |                          |           |   |   |           |  
|                                                                                                  |  |                               |           |                            |   |           |   |                          |           |   |   |           |  
|Income from continuing operations                                                                 |  | $                             | 41,994    |                            | $ | 33,494    |   | $                        | 74,222    |   | $ | 61,031    |  
|Discontinued operations, including impairment charge of $12,065 aftertax for the 2009 periods(b)  |  |                               | (13,275   | )                          |   | (559      | ) |                          | (14,609   | ) |   | (1,946    | )
|                                                                                                  |  |                               |           |                            |   |           |   |                          |           |   |   |           |  
|Net income                                                                                        |  | $                             | 28,719    |                            | $ | 32,935    |   | $                        | 59,613    |   | $ | 59,085    |  
|                                                                                                  |  |                               |           |                            |   |           |   |                          |           |   |   |           |  
|                                                                                                  |  |                               |           |                            |   |           |   |                          |           |   |   |           |  
|Earnings (loss) per common share - Basic:(c)                                                      |  |                               |           |                            |   |           |   |                          |           |   |   |           |  
|Continuing operations                                                                             |  | $                             | 0.36      |                            | $ | 0.28      |   | $                        | 0.64      |   | $ | 0.51      |  
|Discontinued operations(b)                                                                        |  |                               | (0.11     | )                          |   | (0.00     | ) |                          | (0.13     | ) |   | (0.02     | )
|                                                                                                  |  |                               |           |                            |   |           |   |                          |           |   |   |           |  
|Net income                                                                                        |  | $                             | 0.25      |                            | $ | 0.28      |   | $                        | 0.51      |   | $ | 0.50      |  
|                                                                                                  |  |                               |           |                            |   |           |   |                          |           |   |   |           |  
|                                                                                                  |  |                               |           |                            |   |           |   |                          |           |   |   |           |  
|Earning (loss) per common share - Diluted:(c)                                                     |  |                               |           |                            |   |           |   |                          |           |   |   |           |  
|Continuing operations                                                                             |  | $                             | 0.36      |                            | $ | 0.28      |   | $                        | 0.63      |   | $ | 0.51      |  
|Discontinued operations(b)                                                                        |  |                               | (0.11     | )                          |   | (0.00     | ) |                          | (0.12     | ) |   | (0.02     | )
|                                                                                                  |  |                               |           |                            |   |           |   |                          |           |   |   |           |  
|Net income                                                                                        |  | $                             | 0.24      |                            | $ | 0.28      |   | $                        | 0.51      |   | $ | 0.50      |  
|                                                                                                  |  |                               |           |                            |   |           |   |                          |           |   |   |           |  
|                                                                                                  |  |                               |           |                            |   |           |   |                          |           |   |   |           |  
|EBITDA from continuing operations(d)                                                              |  | $                             | 136,991   |                            | $ | 120,058   |   | $                        | 263,229   |   | $ | 234,684   |  
|                                                                                                  |  |                               |           |                            |   |           |   |                          |           |   |   |           |  
|                                                                                                  |  |                               |           |                            |   |           |   |                          |           |   |   |           |  
|EBITDA from continuing operations reconciliation to net cash flows
 from operating activities:    |  |                               |           |                            |   |           |   |                          |           |   |   |           |  
|EBITDA from continuing operations(d)                                                              |  | $                             | 136,991   |                            | $ | 120,058   |   | $                        | 263,229   |   | $ | 234,684   |  
|(Subtract)/Add:                                                                                   |  |                               |           |                            |   |           |   |                          |           |   |   |           |  
|Interest expense, net of investment income                                                        |  |                               | (28,743   | )                          |   | (33,734   | ) |                          | (57,623   | ) |   | (67,936   | )
|Income tax provision                                                                              |  |                               | (30,417   | )                          |   | (19,609   | ) |                          | (60,031   | ) |   | (38,065   | )
|Changes in assets and liabilities, net of effects from acquisition
and divestitures of businesses |  |                               | 63,672    |                            |   | 18,937    |   |                          | 116,705   |   |   | 98,562    |  
|                                                                                                  |  |                               |           |                            |   |           |   |                          |           |   |   |           |  
|Net cash flows from operating activities of continuing
operations                                 |  | $                             | 141,503   |                            | $ | 85,652    |   | $                        | 262,280   |   | $ | 227,245   |  
|Net cash flows from operating activities of discontinued
operations                               |  |                               | 521       |                            |   | 696       |   |                          | 662       |   |   | 1,367     |  
|                                                                                                  |  |                               |           |                            |   |           |   |                          |           |   |   |           |  
|Net cash flows from operating activities                                                          |  | $                             | 142,024   |                            | $ | 86,348    |   | $                        | 262,942   |   | $ | 228,612   |  
|                                                                                                  |  |                               |           |                            |   |           |   |                          |           |   |   |           |  

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | Effective
 January 1, 2009, Omnicare adopted the provisions of Financial Accounting
 Standards Board (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 all prior periods presented have been restated for this change in
 accounting.                                                                                                                                                                                                                                                                                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | (b) | In the
 second quarter of 2009, the Company commenced activities to divest certain
 home healthcare and related ancillary businesses (the disposal group) that
 are non-strategic in nature. The disposal group, historically part of
 Omnicares Pharmacy Services segment, primarily represents ancillary
 businesses which accompanied other more strategic assets obtained by Omnicare
 in connection with the Companys institutional pharmacy acquisition program.
 The results from continuing operations for all periods presented have been
 revised to reflect the results of the disposal group as discontinued
 operations, including certain expenses of the Company related to the
 divestiture. The Company

46

---



| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | anticipates
 completing the divestiture within the following twelve months. See further
 discussion at the Discontinued Operations note of the Notes to Consolidated
 Financial Statements.                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (c) | Earnings per
 share is reported independently for each amount presented. Accordingly, the
 sum of the individual amounts may not necessarily equal the separately
 calculated amounts for the corresponding period.                                                                                                                                                                                                                                                                                                                                                                                                              
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | (d) | 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 June 30, 2009 vs. 2008
|                                          

Total net
sales for the three months ended June 30, 2009 increased to $1,540.5 million
from $1,522.7 million in the comparable prior-year period. Income from
continuing operations for the three months ended June 30, 2009 was $42.0
million versus $33.5 million earned in the comparable 2008 period. Diluted
earnings per share from continuing operations for the three months ended June
30, 2009 were $0.36 versus $0.28 in the same prior-year period. In total,
including discontinued operations, net income for the three months ended June
30, 2009 was $28.7 million, or $0.24 per share, as compared with $32.9 million,
or $0.28 per share, earned in the comparable prior-year period. EBITDA from
continuing operations totaled $137.0 million for the three months ended June
30, 2009 as compared with $120.1 million for the same period of 2008. In the second
quarter of 2009, the Company commenced activities to divest certain home
healthcare and related ancillary businesses that are non-strategic in nature.
The disposal group, historically part of Omnicares Pharmacy Services segment,
primarily represents ancillary businesses which accompanied other more
strategic assets obtained by Omnicare in connection with the Companys
institutional pharmacy acquisition program. The results from continuing
operations for all periods presented have been revised to reflect the results
of the disposal group as discontinued operations, including certain expenses of
the Company related to the divestiture. The Company anticipates completing the
divestiture within the following twelve months.

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 and lower sales in
the Companys clinical research business. See discussion of sales and operating
profit results in more detail at the Pharmacy Services Segment and CRO
Services Segment captions below.

47

---



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 second quarter of 2009 by approximately $26 million
(approximately $16 million aftertax), and cumulatively since April 2006 by
approximately $343 million (approximately $213 million aftertax). This matter
is currently the subject of litigation initiated by Omnicare and is before the
federal appellate court in the Seventh Circuit Court of Appeals. See further
discussion at the Legal Proceedings section at Part II, Item 1 of this Filing.

The Companys
consolidated gross profit of $370.9 million for the three months ended June 30,
2009, was relatively consistent with the same prior-year period amount of
$371.3 million. Gross profit as a percentage of total net sales of 24.1% in the
three months ended June 30, 2009, was slightly lower than the 24.4% experienced
during the comparable 2008 period. Gross profit was favorably affected in the
2009 period largely by 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. 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 June 30, 2009 of $203.5 million were lower than the
comparable prior-year amount of $227.0 million by $23.5 million. Operating
expenses as a percentage of net sales amounted to 13.2% in the second quarter
of 2009, representing a decrease from the 14.9% experienced in the comparable
prior-year period. Operating expenses for the quarter ended June 30, 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 June 30, 2009 was $22.7
million versus $24.1 million in the comparable prior-year period.

Investment
income for the three months ended June 30, 2009 of $1.0 million was lower than
the $2.0 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 June 30, 2009 of $29.8 million is lower than
the $35.7 million in the comparable prior-year period, primarily due to lower
debt outstanding resulting from payments aggregating $150 million on the
Companys senior term A loan facility, maturing on July 28, 2010 (the Term
Loans) during the second quarter of 2008 through the second 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.

48

---



The effective
income tax rate was 42.0% for the three months ended June 30, 2009, as compared
to the second quarter of 2008 rate of 36.9%. 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:

Financial results for the three
months ended June 30, 2009 from continuing operations included the following charges
    totaling approximately $45.8 million pretax ($32.8 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 $5.9
million pretax ($3.6 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 Repack Matters). In addressing and resolving these Repack
Matters, the Company continues to experience increased costs and, as a result,
the three months ended June 30, 2009 included special charges of $1.2 million
pretax (approximately $0.8 million and $0.4 million was recorded in the cost of
sales and operating expense sections of the Consolidated Statements of Income,
respectively) ($0.7 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 June 30, 2009, the Company has
received no material insurance recoveries.

(iii)
Operating income included special litigation and other related professional
fees of $28.4 million pretax ($22.0 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. Also included in the $28.4 million is a charge of $23 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

49

---



Standards
(SFAS) No. 5, Accounting for Contingencies. (SFAS 5) The Company cannot
predict the ultimate outcome of this matter. 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) Operating
income included acquisition and other related costs of approximately $2.0
million pretax ($1.3 million aftertax) 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 2009 acquisitions. See further discussion at the Acquisition note
    of the Notes to Consolidated Financial Statements.

(v) Operating
expenses included approximately $1.4 million in pretax charges ($0.9 million
    aftertax) 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 $6.9 million non-cash increase in pretax interest expense
($4.3 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.

Financial results for the three
months ended June 30, 2008 from continuing operations included the following charges
    totaling approximately $35.0 million pretax ($21.9 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 $10.8
million pretax ($6.7 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) In
addressing and resolving the Repack Matters, the Company continues to
experience increased costs and as a result, the three months ended June 30,
2008 included special charges of $1.7 million pretax (approximately $1.5 million
and $0.2 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 June 30, 2008, no receivables for insurance recoveries had been
recorded by the Company.

(iii) Operating income included special
litigation and other related professional fees of $16.0 million pretax ($10.1
million aftertax) for litigation-related professional expenses primarily in

50

---



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 $6.4 million non-cash increase in pretax interest expense
($4.0 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
 June 30, |          
|                                             |  |                              |          
|                                             |  | 2009                         |           | 2008 as
 adjusted (a) |  
|                                             |  |                              |           |                       |  
|                                             |  |                              |          
|Net sales                                    |  | $                            | 1,499,704 |                       | $ | 1,469,081 | 
|                                             |  |                              |           |                       |   |           | 
|Operating income from
 continuing operations |  | $                            | 129,557   |                       | $ | 118,415   | 
|                                             |  |                              |           |                       |   |           | 

|    |                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | As discussed
 elsewhere herein, during the second quarter of 2009, the Company commenced
 activities to divest certain non-core businesses within its pharmacy services
 segment. The financial results have been revised to reflect such businesses
 as discontinued operations.

Omnicares
Pharmacy Services segment recorded sales of $1,499.7 million for the three
months ended June 30, 2009, an increase from the comparable 2008 amount of
$1,469.1 million by $30.6 million, or 2.1%. At June 30, 2009, Omnicare served
long-term care facilities as well as chronic care and other settings comprising
approximately 1,384,000 beds relating to continuing operations, including
approximately 59,000 patients served by the patient assistance programs of its
specialty pharmacy business. The comparable number at June 30, 2008 was
1,392,000 relating to continuing operations (including approximately 70,000
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, 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 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, along with a year-over-year shift in mix
towards assisted living, which typically has lower penetration rates than
skilled nursing facilities. 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.

51

---



Operating
income of the Pharmacy Services segment was $129.6 million in the second
quarter of 2009, an $11.2 million increase as compared with the $118.4 million
earned in the comparable period of 2008. As a percentage of the segments
sales, operating income was 8.6% for the second quarter of 2009, compared with
8.1% 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 services, 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 increased 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. On May 12,
2009, CMS published its proposed SNF PPS rule for fiscal year 2010 that would
reduce Medicare SNF PPS payments by $390 million, or 1.2 percent, compared to
fiscal year 2009 levels. CMS is again proposing a recalibration of the case mix
weights that would reduce SNF PPS payments by 3.3 percent, which would more than
offset a proposed 2.1 percent market basket update. The rule has not yet been
finalized. If these or other reimbursement changes are adopted in the future
that have an adverse effect on the financial condition of the Companys
SNF clients, it could, in turn, adversely affect the timing or level of their
payments to Omnicare.

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.

52

---



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 six months ended June 30, 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 renegotiated 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
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 June
30, 2009, copays outstanding from

53

---



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.

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.

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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 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. According to a
tentative schedule CMS announced at a public meeting on June 4, 2009, while
bidding for the new round one of the program will take place later this year,
CMS does not expect the program to go into effect until January 1,

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2011. 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, many states are facing budget pressures that could result in
increased cost containment efforts on healthcare providers. 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, 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 wholesale acquisition cost) to 250 percent of the
lowest average

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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, Congressional action, 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 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

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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. Provisions of the rule were
repeatedly delayed; currently the enforcement is delayed until June 30, 2010.
Second, on May 29, 2007, CMS published a 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 would
save $120 million during the first year and $3.87 billion over five years, but
Congress blocked the rule through April 1, 2009. The American Recovery and
Reinvestment Act of 2009 expressed 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 healthcare policy have been proposed by President Obama and
are currently under consideration by Congress. Specifically, on February 26,
2009, the Obama Administration released its proposed federal budget for fiscal
year 2010, which would establish a reserve fund of
$633.8 billion over 10 years to finance comprehensive health reform.

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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. Many provisions of the proposed budget would require
Congressional approval to implement and would take effect after fiscal year 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 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.
Congressional committees currently are considering a variety of comprehensive
plans, which are subject to extensive revision during the legislative process
before a final plan emerges. Given the ongoing 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 the Companys business.

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

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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 were filed by several
entities, and motions to intervene in the case on appeal have also been filed
with the appellate court; briefing for the appeal was completed on July 13,
2009 and oral argument was held on July 28, 2009. The appeal is being considered on an expedited basis. Motions for a stay of the District Courts order pending appeal
have not been granted, but such a motion is subject to reconsideration by the
panel hearing the appeal. First DataBank and Medi-Span have indicated that they
will implement the changes in AWP on September 26, 2009. These changes or their
timing may be affected by a decision or stay by the Court of Appeals.

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.

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.

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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 any of these 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
 June 30, |       
|                  |  |                              |       
|                  |  | 2009                         |        | 2008 |  
|                  |  |                              |        |      |  
|                  |  |                              |        |      |   |        | 
|Revenues          |  | $                            | 40,803 |      | $ | 53,631 | 
|                  |  |                              |        |      |   |        | 
|Operating
 income |  | $                            | 967    |      | $ | 3,800  | 
|                  |  |                              |        |      |   |        | 

Omnicares CRO
Services segment recorded revenues of $40.8 million for the three months ended
June 30, 2009, which decreased by $12.8 million, or 23.9% from the $53.6
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 $5.2 million and $8.8 million of reimbursable
out-of-pockets in its CRO Services segment reported revenue and cost of sales
amounts for the three months ended June 30, 2009 and 2008, respectively.
Revenues for 2009 were lower than in the same prior-year period primarily due
to lower levels of new business added along with the early termination and
client-driven delays in the commencement of certain projects.

Operating
income in the CRO Services segment was $1.0 million in the second quarter of
2009 compared with $3.8 million in 2008, a decrease of $2.8 million or 73.7%.
As a percentage of the segments revenue, operating income was 2.4% in the
second quarter of 2009 compared with 7.1% in the same period of 2008. This
decrease is primarily attributable to the aforementioned reduction in sales.
Backlog at June 30, 2009 was $259.6 million, representing a decrease of $43.3
million from the December 31, 2008 backlog of $302.9 million, and a decrease of
$77.8 million from the June 30, 2008 backlog of $337.4 million.

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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.

|                                        
|----------------------------------------
|Six Months
 Ended June 30, 2009 vs. 2008
|                                        

Total net
sales for the six months ended June 30, 2009 increased to $3,082.6 million from
$3,053.2 million in the comparable prior-year period. Income from continuing
operations for the six months ended June 30, 2009 was $74.2 million versus
$61.0 million earned in the comparable 2008 period. Diluted earnings per share
from continuing operations for the six months ended June 30, 2009 were $0.63
versus $0.51 in the same prior-year period. In total, including discontinued
operations, net income for the six months ended June 30, 2009 was $59.6
million, or $0.51 per share, as compared with $59.1 million, or $0.50 per
share, earned in the comparable prior-year period. EBITDA from continuing
operations totaled $263.2 million for the six months ended June 30, 2009 as
compared with $234.7 million for the same period of 2008. In the second quarter
of 2009, the Company commenced activities to divest certain home healthcare and
related ancillary businesses that are non-strategic in nature. The disposal
group, historically part of Omnicares Pharmacy Services segment, primarily
represents ancillary businesses which accompanied other more strategic assets
obtained by Omnicare in connection with the Companys institutional pharmacy
acquisition program. The results from continuing operations for all periods
presented have been revised to reflect the results of the disposal group as
discontinued operations, including certain expenses of the Company related to
the divestiture. The Company anticipates completing the divestiture within the
following twelve months.

Net sales for
the six months ended June 30, 2009 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, a year-over-year shift in mix towards assisted living and lower
sales in the Companys clinical research business. 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 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 six months of 2009 by
approximately $48 million (approximately $29 million aftertax), and
cumulatively since April 2006 by approximately $343 million (approximately $213
million aftertax). This matter is currently the subject of litigation initiated
by Omnicare and is before the federal appellate court in the Seventh

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Circuit Court
of Appeals. See further discussion at the Legal Proceedings section at Part
II, Item 1 of this Filing.

The Companys
consolidated gross profit of $760.1 million increased $19.5 million for the six
months ended June 30, 2009, from the same prior-year period amount of $740.6
million. Gross profit as a percentage of total net sales of 24.7% in the six
months ended June 30, 2009, was higher than the 24.3% 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 operating expenses for the six months ended June 30, 2009 of
$419.6 million were lower than the comparable prior-year amount of $453.2
million by $33.6 million. Operating expenses as a percentage of net sales
amounted to 13.6% in the first half of 2009, representing a decrease from the
14.8% experienced in the comparable prior-year period. Operating expenses for
the six months ended June 30, 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 six months ended June 30, 2009 was $48.0 million
versus $52.2 million in the comparable prior-year period.

Investment
income for the six months ended June 30, 2009 of $3.4 million was lower than
the $4.6 million earned in the comparable prior-year period, primarily due to
lower interest rates versus the prior year.

Interest
expense for the six months ended June 30, 2009 of $61.1 million is lower than
the $72.5 million in the comparable prior-year period, primarily due to lower
debt outstanding resulting from payments aggregating $200 million on the Term
Loans throughout 2008 and through the first six months 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 44.7% for the six months ended June 30, 2009, as compared
to the rate of 38.4% for the same prior year period. 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).

63

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Special Items and Accounting Changes:

Financial results for the six months
ended June 30, 2009 from continuing operations included the following charges totaling
    approximately $105.8 million pretax ($76.6 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 $12.8
million pretax ($7.9 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 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 previously mentioned Repack Matters, the Company
continues to experience increased costs and, as a result, the six months ended
June 30, 2009 included special charges of $3.2 million pretax (approximately
$1.9 million and $1.3 million was recorded in the cost of sales and operating expense
sections of the Consolidated Statements of Income, respectively) ($2.0 million
aftertax) for these increased costs. The Company maintains product recall,
property and casualty and business interruption insurance, and the extent of
insurance recovery for these expenses continues to be reviewed by its outside
advisors. As of June 30, 2009, the Company has received no material insurance
recoveries.

(iii)
Operating income included special litigation and other related professional
fees of $70.0 million pretax ($54.5 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 $70.0 million is a charge of $58 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 SFAS 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, 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 $2.9
million pretax ($1.7 million aftertax) related to the implementation of the SFAS
    141R accounting change. These expenses were primarily related to professional
    fees from 2009 acquisitions. See further discussion at the Acquisition note
    of the Notes to Consolidated Financial Statements.

(v) Operating
expenses included approximately $3.2 million in pretax charges ($2.0 million
    aftertax) relating to the prior implementation of the SFAS 123R accounting
    change, which primarily relate to stock

64

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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 $13.7 million non-cash increase in pretax interest expense ($8.5
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.

Financial results for the six months
ended June 30, 2008 from continuing operations included the following charges totaling
    approximately $71.3 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 $17.2
million pretax ($10.6 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) In
addressing and resolving the Repack Matters, the Company continues to
experience increased costs and as a result, the six months ended June 30, 2008
included special charges of $3.6 million pretax (approximately $3.1 million and
$0.5 million was recorded in the cost of sales and operating expense sections
of the Consolidated Statements of Income, respectively) ($2.2 million aftertax)
for these increased costs. The Company maintains product recall, property and
casualty and business interruption insurance, and the extent of insurance
recovery for these expenses continues to be reviewed by its outside advisors.
As of June 30, 2008, no receivables for insurance recoveries had been recorded
by the Company.

(iii)
Operating income included special litigation and other related professional
fees of $37.7 million pretax ($23.1 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 $12.7 million non-cash increase in pretax interest expense
($8.0 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.

65

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Pharmacy Services Segment

|                                             |  |                            |           |                       |   |           | 
|-------------------------------------------- |  | -------------------------- | --------- | --------------------- | - | --------- | 
|                                             |  | Six months ended
 June 30, |          
|                                             |  |                            |          
|                                             |  | 2009                       |           | 2008 as
 adjusted (a) |  
|                                             |  |                            |           |                       |  
|                                             |  |                            |           |                       |   |           | 
|Net sales                                    |  | $                          | 2,997,066 |                       | $ | 2,950,346 | 
|                                             |  |                            |           |                       |   |           | 
|Operating income from
 continuing operations |  | $                          | 250,739   |                       | $ | 229,901   | 
|                                             |  |                            |           |                       |   |           | 

|    |                                                                                                                                                                                                                                                                                  
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | As discussed
 elsewhere herein, during the second quarter of 2009, the Company commenced
 activities to divest certain non-core businesses within its pharmacy services
 segment. The financial results have been revised to reflect such businesses
 as discontinued operations.

Omnicares
Pharmacy Services segment recorded sales of $2,997.1 million for the six months
ended June 30, 2009, an increase from the comparable 2008 amount of $2,950.3
million by $46.8 million, or 1.6%. At June 30, 2009, Omnicare served long-term
care facilities as well as chronic care and other settings comprising
approximately 1,384,000 beds relating to continuing operations, including
approximately 59,000 patients served by the patient assistance programs of its
specialty pharmacy business. The comparable number at June 30, 2008 was
1,392,000 relating to continuing operations (including approximately 70,000
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, 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 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 towards
assisted living, which typically has lower penetration rates than skilled
nursing facilities. 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 $250.7 million in the first six
months of 2009, a $20.8 million increase as compared with the $229.9 million
earned in the comparable period of 2008. As a percentage of the segments
sales, operating income was 8.4% for the first six months of 2009, compared with
7.8% in 2008. Operating income in 2009 was favorably impacted largely by the
increased availability and utilization of higher margin generic drugs, drug
price inflation, growth in specialty pharmacy services, 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.

66

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CRO Services Segment

|                  |  |                             |        |      |   |         | 
|----------------- |  | --------------------------- | ------ | ---- | - | ------- | 
|                  |  | Six months ended 
 June 30, |       
|                  |  |                             |       
|                  |  | 2009                        |        | 2008 |  
|                  |  |                             |        |      |  
|                  |  |                             |        |      |   |         | 
|Revenues          |  | $                           | 85,546 |      | $ | 102,804 | 
|                  |  |                             |        |      |   |         | 
|Operating
 income |  | $                           | 3,959  |      | $ | 6,468   | 
|                  |  |                             |        |      |   |         | 

Omnicares CRO
Services segment recorded revenues of $85.5 million for the six months ended
June 30, 2009, which decreased by $17.3 million, or 16.8% from the $102.8
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 $10.9 million and $16.2 million of reimbursable
out-of-pockets in its CRO Services segment reported revenue and cost of sales
amounts for the six months ended June 30, 2009 and 2008, respectively. Revenues
for 2009 were lower than in the same prior-year period primarily due to lower
levels of new business added along with the early termination and client-driven
delays in the commencement of certain projects.

Operating
income in the CRO Services segment was $4.0 million in the first six months of
2009 compared with $6.5 million in 2008, a decrease of $2.5 million or 38.5%.
As a percentage of the segments revenue, operating income was 4.6% in the
first six months of 2009 compared with 6.3% in the same period of 2008. This
decrease is primarily attributable to the aforementioned reduction in sales.

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)

67

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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 $106
million over this implementation period. The Company recorded restructuring and
other related charges for the Omnicare Full Potential Plan of approximately $6
million and $13 million pretax (approximately $4 million and $8 million
aftertax) during the three and six months ended June 30, 2009, respectively,
and approximately $36 million pretax during the year ended December 31, 2008
(approximately $11 million and $17 million pretax in the three and six months
ended June 30, 2008), or cumulative aggregate restructuring and other related
charges of approximately $96 million before taxes through the second 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 500 positions had been eliminated as of June 30, 2009. The
foregoing reductions do not include additional savings expected from lower
levels of overtime and reduced temporary labor. The aforementioned savings
anticipated upon completion of the program also include reductions in overtime,
excess hours and temporary help, and other productivity gains, equal to an
additional 820 full-time equivalents. In addition, in July 2009, the Company
implemented a temporary payroll containment and reduction program across the
organization designed to facilitate the achievement of the productivity and
efficiency goals associated with the Full Potential Plan.

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

68

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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.

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

Cash and cash
equivalents and restricted cash at June 30, 2009 were $276.3 million compared
with $216.6 million at December 31, 2008 (including restricted cash amounts of
$2.5 million and $1.9 million, respectively).

The Company
generated positive net cash flows from operating activities of continuing
operations of $262.3 million during the six months ended June 30, 2009,
compared with net cash flows from operating activities of $227.2 million during
the six months ended June 30, 2008. Compared to the same prior-year period,
cash flow from operating activities was favorably impacted by a reduction in
inventory and accounts receivable during the period.

Net cash used
in investing activities of continuing operations was $59.4 million and $130.0
million for the six months ended June 30, 2009 and 2008, respectively.
Acquisitions of businesses, primarily funded by operating cash flows, required
outlays of $43.1 million (including amounts payable pursuant to acquisition
agreements relating to pre-2009 acquisitions) in the first six months of 2009.
Acquisitions of businesses during the first six months of 2008 required $91.0
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 of continuing operations was $144.7 million for the six
months ended June 30, 2009 as compared to $164.6 million for the comparable
prior-year period. During the first six months of 2009 and 2008, the Company
paid down $150 million and $50 million, respectively, on the Term Loans.

At June 30,
2009, there were no outstanding borrowings under the $800 million revolving
credit facility, and $250 million in borrowings were outstanding under Term
Loans.

On May 22,
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 $5.4 million during the six
month period ended June 30, 2009 were relatively consistent with those paid in
the comparable prior-year period.

On March 27, 2008, the Company announced that its Board of Directors authorized
a program to repurchase, from time to time, shares of Omnicares outstanding
common stock having an aggregate value of up to $100 million, depending on
market conditions and other factors. During the first half of 2008, the Company
repurchased approximately 4.1 million shares at a cost of approximately $100
million. Accordingly, the Company has utilized the full amount of share
repurchase authority and completed the program. These repurchases were made in
open market or privately negotiated transactions in compliance with Securities
and Exchange Commission Rule 10b-18 and other applicable legal requirements.

69

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There were no
known material commitments and contingencies outstanding at June 30, 2009,
other than the contractual obligations summarized in the Disclosures About
Aggregate Contractual Obligations and Off-Balance Sheet Arrangements caption
below; certain acquisition-related payments potentially due in the future,
including deferred payments, indemnification payments and payments originating
from earnout and other provisions that may become payable; as well as the
matters discussed in the Commitments and Contingencies note of the Notes to
Consolidated Financial Statements, and the Legal Proceedings section at Part
II, Item 1 of this Filing.

The Company
believes that net cash flows from operating activities, credit facilities and
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 June 30,
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                                                     |  | $     | 2,572,500 |                   | $ |          |  | $         | 250,000 |               | $ | 475,000 |  | $ | 1,847,500 | 
|Capital lease obligations                                            |  |       | 3,386     |                   |   | 1,438     |  |           | 1,524   |               |   | 205     |  |   | 219       | 
|Operating lease obligations                                          |  |       | 147,512   |                   |   | 41,317    |  |           | 46,517  |               |   | 31,632  |  |   | 28,046    | 
|Purchase obligations                                                 |  |       | 57,321    |                   |   | 44,122    |  |           | 12,184  |               |   | 1,015   |  |   |          | 
|Other current obligations                                            |  |       | 245,457   |                   |   | 245,457   |  |           |        |               |   |        |  |   |          | 
|Other long-term obligations                                          |  |       | 278,829   |                   |   |          |  |           | 230,000 |               |   | 23,495  |  |   | 25,334    | 
|                                                                     |  |       |           |                   |   |           |  |           |         |               |   |         |  |   |           | 
|Subtotal                                                             |  |       | 3,305,005 |                   |   | 332,334   |  |           | 540,225 |               |   | 531,347 |  |   | 1,901,099 | 
|Future interest costs relating to debt and capital lease
obligations |  |       | 1,509,588 |                   |   | 110,313   |  |           | 210,384 |               |   | 192,914 |  |   | 995,977   | 
|                                                                     |  |       |           |                   |   |           |  |           |         |               |   |         |  |   |           | 
|Total contractual cash obligations                                   |  | $     | 4,814,593 |                   | $ | 442,647   |  | $         | 750,609 |               | $ | 724,261 |  | $ | 2,897,076 | 
|                                                                     |  |       |           |                   |   |           |  |           |         |               |   |         |  |   |           | 

As of June 30,
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 second 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 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 78 days at
June 30, 2009, which was lower than the December 31, 2008 amount of 79 days by
approximately 1 day. 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. 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 $96 million (excluding interest and prior
to any allowance for doubtful accounts) is owed to the Company by this group of
customers as of June 30, 2009, of which approximately $90 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 $96 million
represents approximately 6 days of the overall DSO at June 30, 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 June 30, 2009, copays outstanding from Part D Plans were

71

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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 June 30, 2009 was $322.4 million, compared with
$319.4 million at December 31, 2008. The allowance for doubtful accounts
represented 20.2% and 19.3% of gross receivables (net of contractual
allowances) as of June 30, 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 June 30, 2009 would result in an
increase to the provision for doubtful accounts and related allowance for
doubtful accounts on the balance sheet of approximately $15.9 million pretax.

The following
table is an aging of the Companys June 30, 2009, March 31, 2009 and December
31, 2008 gross accounts receivable (net of allowances for contractual
adjustments, and prior to allowances for doubtful accounts), aged based on
payment terms and categorized based on the four primary overall types of
accounts receivable characteristics (in thousands):

72

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|                                                                            |  |                                   |         |                            |   |         |  |   |           | 
|--------------------------------------------------------------------------- |  | --------------------------------- | ------- | -------------------------- | - | ------- |  | - | --------- | 
|                                                                            |  | June 30, 2009                     |        
|                                                                            |  |                                   |        
|                                                                            |  | Current and
 0-180 Days
 Past-Due |         | 181 Days andOver
 Past-Due |   | Total   | 
|                                                                            |  |                                   |         |                            |   |         | 
|Medicare (Part D and Part B), Medicaid and
 Third-Party payors              |  | $                                 | 340,069 |                            | $ | 175,802 |  | $ | 515,871   | 
|Facility payors                                                             |  |                                   | 446,817 |                            |   | 363,006 |  |   | 809,823   | 
|Private Pay payors                                                          |  |                                   | 110,231 |                            |   | 137,755 |  |   | 247,986   | 
|CRO                                                                         |  |                                   | 17,601  |                            |   | 2,040   |  |   | 19,641    | 
|                                                                            |  |                                   |         |                            |   |         |  |   |           | 
|Total gross accounts receivable (net of
 contractual allowance adjustments) |  | $                                 | 914,718 |                            | $ | 678,603 |  | $ | 1,593,321 | 
|                                                                            |  |                                   |         |                            |   |         |  |   |           | 

|                                                                            |  |                                   |         |                            |   |         |  |   |           | 
|--------------------------------------------------------------------------- |  | --------------------------------- | ------- | -------------------------- | - | ------- |  | - | --------- | 
|                                                                            |  | March 31, 2009                    |        
|                                                                            |  |                                   |        
|                                                                            |  | Current and
 0-180 Days
 Past-Due |         | 181 Days andOver
 Past-Due |   | Total   | 
|                                                                            |  |                                   |         |                            |   |         | 
|Medicare (Part D and Part B), Medicaid and
 Third-Party payors              |  | $                                 | 378,371 |                            | $ | 175,916 |  | $ | 554,287   | 
|Facility payors                                                             |  |                                   | 476,854 |                            |   | 363,254 |  |   | 840,108   | 
|Private Pay payors                                                          |  |                                   | 111,723 |                            |   | 132,241 |  |   | 243,964   | 
|CRO                                                                         |  |                                   | 21,656  |                            |   |        |  |   | 21,656    | 
|                                                                            |  |                                   |         |                            |   |         |  |   |           | 
|Total gross accounts receivable (net of
 contractual allowance adjustments) |  | $                                 | 988,604 |                            | $ | 671,411 |  | $ | 1,660,015 | 
|                                                                            |  |                                   |         |                            |   |         |  |   |           | 

|                                                                            |  |                                   |           |                            |   |         |  |   |           | 
|--------------------------------------------------------------------------- |  | --------------------------------- | --------- | -------------------------- | - | ------- |  | - | --------- | 
|                                                                            |  | December 31, 2008                 |          
|                                                                            |  |                                   |          
|                                                                            |  | Current and
 0-180 Days
 Past-Due |           | 181 Days andOver
 Past-Due |   | Total   | 
|                                                                            |  |                                   |           |                            |   |         | 
|Medicare (Part D and Part B), Medicaid and
 Third-Party payors              |  | $                                 | 377,765   |                            | $ | 173,307 |  | $ | 551,072   | 
|Facility payors                                                             |  |                                   | 479,185   |                            |   | 352,036 |  |   | 831,221   | 
|Private Pay payors                                                          |  |                                   | 117,543   |                            |   | 129,530 |  |   | 247,073   | 
|CRO                                                                         |  |                                   | 27,609    |                            |   |        |  |   | 27,609    | 
|                                                                            |  |                                   |           |                            |   |         |  |   |           | 
|Total gross accounts receivable (net of
 contractual allowance adjustments) |  | $                                 | 1,002,102 |                            | $ | 654,873 |  | $ | 1,656,975 | 
|                                                                            |  |                                   |           |                            |   |         |  |   |           | 

73

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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.

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; 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
and $14 million during the three and six months ended June 30, 2009, respectively.
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.

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Recently Issued Accounting Standards

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

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

In addition to
historical information, this report contains certain statements that constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These forward-looking statements include, but
are not limited to, all statements regarding the intent, belief or current
expectations regarding the matters discussed or incorporated by reference in
this document (including statements as to beliefs, expectations,
anticipations, intentions or similar words) and all statements which are
not statements of historical fact. Such forward-looking statements, together
with other statements that are not historical, are based on managements
current expectations and involve known and unknown risks, uncertainties, contingencies
and other factors that could cause results, performance or achievements to
differ materially from those stated. The most significant of these risks and
uncertainties are described in the Companys Form 10-K, Form 10-Q and Form 8-K
reports filed with the Securities and Exchange Commission and include, but are
not limited to: overall economic, financial, political and business conditions;
trends in the long-term healthcare, pharmaceutical and contract research
industries; the ability to attract new clients and service contracts and retain
existing clients and service contracts; the ability to consummate pending
acquisitions; trends for the continued growth of the Companys businesses;
trends in drug pricing; delays and reductions in reimbursement by the
government and other payors to customers and to the Company; the overall
financial condition of the Companys customers and the ability of the Company
to assess and react to such financial condition of its customers; the ability
of vendors and business partners to continue to provide products and services
to the Company; the continued successful integration of acquired companies; the
continued availability of suitable acquisition candidates; the ability to
attract and retain needed management; competition for qualified staff in the
healthcare industry; the demand for the Companys products and services;
variations in costs or expenses; the ability to implement productivity,
consolidation and cost reduction efforts and to realize anticipated benefits; the
ability of clinical research projects to produce revenues in future periods;
the potential impact of legislation, government regulations, and other
government action and/or executive orders, including those relating to Medicare
Part D, including its implementing regulations and any subregulatory guidance;
reimbursement and drug pricing policies and changes in the interpretation and
application of such policies, including changes in calculation of average
wholesale price; 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

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compared to
eventual outcomes; events or circumstances which result in an impairment of
assets, including but not limited to, goodwill and identifiable intangible
assets; the final outcome of divestiture activities; 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.

ITEM 3 - QUANTITATIVE AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Omnicares
primary market risk exposure relates to variable interest rate risk through its
borrowings. Accordingly, market risk loss is primarily defined as the potential
loss in earnings due to higher interest rates on variable-rate debt of the
Company. The modeling technique used by Omnicare for evaluating interest rate
risk exposure involves performing sensitivity analysis on the variable-rate
debt, assuming a change in interest rates of 100 basis-points. The Companys
debt obligations at June 30, 2009 include $250.0 million outstanding under the
variable-rate Senior term A loan, due 2010, at an interest rate of 2.07% at
June 30, 2009 (a 100 basis-point change in the interest rate would increase or
decrease pretax interest expense by approximately $2.5 million per year);
$250.0 million outstanding under its fixed-rate 6.125% Senior Notes, due 2013;
$225.0 million outstanding under its fixed-rate 6.75% Senior Notes, due 2013;
$525 million outstanding under its fixed-rate 6.875% Senior Notes, due 2015;
$345.0 million outstanding under its fixed-rate 4.00% Convertible Debentures,
due 2033; and $977.5 million outstanding under its fixed-rate 3.25% Convertible
Debentures, due 2035 (with an optional repurchase right of holders on December
15, 2015). In connection with its offering of $250.0 million of 6.125% Senior
Notes during 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 3.22% at
June 30, 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

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the related
6.125% Senior Notes, and amounted to approximately $2.2 million at the end of
the 2009 second quarter. Additionally, at June 30, 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):

Fair Value of Financial Instruments

|                                                            |  |               |         |                   |   |            |  |              |         |  |   |         | 
|----------------------------------------------------------- |  | ------------- | ------- | ----------------- | - | ---------- |  | ------------ | ------- |  | - | ------- | 
|                                                            |  | June 30, 2009 |         | December 31, 2008 |  
|                                                            |  |               |         |                   |  
|Financial
 Instrument:                                      |  | Book Value    |         | Market Value      |   | Book Value |  | Market Value |        
|                                                            |  |               |         |                   |   |            |  |              |        
|6.125% senior subordinated
 notes, due 2013, gross          |  | $             | 250,000 |                   | $ | 226,600    |  | $            | 250,000 |  | $ | 208,800 | 
|6.75% senior
 subordinated notes, due 2013                  |  |               | 225,000 |                   |   | 203,600    |  |              | 225,000 |  |   | 189,000 | 
|6.875% senior subordinated
 notes, due 2015                 |  |               | 525,000 |                   |   | 477,800    |  |              | 525,000 |  |   | 446,000 | 
|                                                            |  |               |         |                   |   |            |  |              |         |  |   |         | 
|4.00% junior subordinated
 convertible debentures, due 2033 |  |               |         |                   |   |            |  |              |         |  |   |         | 
|                                                            |  |               |         |                   |   |            |  |              |         |  |   |         | 
|Carrying value                                              |  |               | 198,030 |                   |   |            |  |              | 197,029 |  |   |         | 
|Unamortized debt discount                                   |  |               | 146,970 |                   |   |            |  |              | 147,971 |  |   |         | 
|                                                            |  |               |         |                   |   |            |  |              |         |  |   |         | 
|Principal amount                                            |  |               | 345,000 |                   |   | 244,600    |  |              | 345,000 |  |   | 250,800 | 
|                                                            |  |               |         |                   |   |            |  |              |         |  |   |         | 
|3.25% convertible senior
 debentures, due 2035              |  |               |         |                   |   |            |  |              |         |  |   |         | 
|                                                            |  |               |         |                   |   |            |  |              |         |  |   |         | 
|Carrying value                                              |  |               | 759,908 |                   |   |            |  |              | 747,185 |  |   |         | 
|Unamortized debt discount                                   |  |               | 217,592 |                   |   |            |  |              | 230,315 |  |   |         | 
|                                                            |  |               |         |                   |   |            |  |              |         |  |   |         | 
|Principal amount                                            |  |               | 977,500 |                   |   | 672,000    |  |              | 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

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

(b) There
were no changes in the Companys internal control over financial reporting that
occurred during the Companys quarter ended June 30, 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. On
June 9, 2009, the Company filed its appellate brief in the Seventh Circuit
Court of Appeals. On July 10, 2009, defendants filed their appellate brief, and
on July 23, 2009, the Company filed its reply brief. 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

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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. (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

79

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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 subsequently stipulated that the
Company shall have until September 29, 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
June 24, 2009, the Company reached an agreement in principle, without admitting
liability, with the U.S. Attorneys Office, District of Massachusetts, pursuant
to which the Company would pay $98 million plus interest from June 24, 2009 to
settle the claims raised in the two sealed complaints, the Maguire, Kammerer
and Lisitza complaints and other similar claims. This agreement in principle is
subject to approval by the Companys board of directors and agreement on the
terms of the settlement documentation, including with respect to the similar
claims referred to above. There can be no assurance as to whether any final
settlement will be reached. If any final settlement is reached, there can be no
assurance as to the scope, terms or ultimate cost to the Company thereof.

Omnicare
recorded a special litigation charge of $23 million and $58 million pretax in
its financial results for the three and six months ended June 30, 2009,
respectively, 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 $98 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.

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

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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 increased 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. On May 12, 2009, CMS published
its proposed SNF PPS rule for fiscal year 2010 that would reduce Medicare SNF
    PPS payments by $390 million, or 1.2 percent, compared to fiscal year 2009
    levels. CMS is again proposing a recalibration of the case mix weights that
    would reduce SNF PPS payments by 3.3 percent, which would more than offset
    a proposed 2.1 percent market basket update. The rule has not yet been finalized.
    If these or other reimbursement changes are adopted in the future that have
    an adverse effect on the financial condition of the Companys SNF clients, it 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 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

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Medicaid
programs. In the six months ended June 30, 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 June 30, 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 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

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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.

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

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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. According to a
tentative schedule CMS announced at a public meeting on June 4, 2009, while
bidding for the new round one of the program will take place later this year,
CMS does not expect the program to go into effect until January 1, 2011. 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, many states are facing budget pressures that could result in
increased cost containment efforts on healthcare providers. 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 wholesale acquisition cost) 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 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

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

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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. Provisions of
the rule were repeatedly delayed; currently enforcement is delayed until June
30, 2010. Second, on May 21, 2007, CMS published a 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 would save $120 million during the first year and $3.87 billion over five
years, 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 healthcare policy have been proposed by President Obama and
are currently under consideration by Congress this year. Specifically, on
February 26, 2009, the Obama Administration released its proposed federal
budget for fiscal year 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 fiscal year 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 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.
Congressional committees currently are considering a variety of comprehensive
plans, which are subject to extensive revision during the legislative process
before a final plan emerges. Given the ongoing 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.

86

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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 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 were filed by several entities, and motions
to intervene in the case on appeal have also been filed with the appellate
court; briefing for the appeal was completed on July 13, 2009 oral

87

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argument was held on
July 28, 2009. The appeal is being considered on expedited basis. Motions for
    a stay of the District Courts order pending appeal have not been granted,
    but such a motion is subject to reconsideration by the panel hearing the
    appeal. First DataBank and Medi-Span have indicated that they will implement
    the changes in AWP on September 26, 2009. These changes or their timing may
    be affected by a decision or stay by the Court of Appeals.

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 Companys 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 June 30, 2009 is as follows (in thousands, except per share data):

|                    |  |              |    |            |   |           |  |                      |   |                       |   |   | 
|------------------- |  | ------------ | -- | ---------- | - | --------- |  | -------------------- | - | --------------------- | - | - | 
|                    |  |              |    |            |   |           |  | Total Number         |   |                       |   |  
|                    |  |              |    |            |   |           |  | of Shares            |   |                       |   |  
|                    |  |              |    |            |   |           |  | Purchased as         |   | Maximum Number (or    |  
|                    |  |              |    |            |   |           |  | Part of              |   | Approximate Dollar    |  
|                    |  |              |    |            |   |           |  | Publicly             |   | Value) of Shares that |  
|                    |  | Total Number |    | Average    |   | Announced |  | May Yet Be Purchased |  
|                    |  | of Shares    |    | Price Paid |   | Plans or  |  | Under the Plans or   |  
|Period              |  | Purchased(a) |    | per Share  |   | Programs  |  | Programs             |  
|                    |  |              |    |            |   |           |  |                      |  
|April 1 -
 30, 2009 |  |              | 1  |            | $ | 25.20     |  |                      |  |                       | $ |  | 
|May 1 - 31,
 2009   |  |              | 97 |            |   | 27.89     |  |                      |  |                       |   |  | 
|June 1 - 30,
 2009  |  |              | 1  |            |   | 24.93     |  |                      |  |                       |   |  | 
|                    |  |              |    |            |   |           |  |                      |   |                       |   |   | 
|Total               |  |              | 99 |            | $ | 27.84     |  |                      |  |                       | $ |  | 
|                    |  |              |    |            |   |           |  |                      |   |                       |   |   | 

|    |                                                                                                                                                                                                                                                                                                                          
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | During the
 second quarter of 2009, the Company purchased 99 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.

88

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

(a) Omnicare
held its Annual Meeting of Stockholders on May 22, 2009.

(b) The names
of each director elected at this Annual Meeting, as well as the corresponding
number of shares voted for, against and abstained with respect to each nominee
follows. There were no broker non-votes.

|                              |  |           |             |               |  |            |  |  |         | 
|----------------------------- |  | --------- | ----------- | ------------- |  | ---------- |  |  | ------- | 
|                              |  | Votes For |             | Votes Against |  | Abstained  | 
|                              |  |           |             |               |  |            | 
|John T.
 Crotty               |  |           | 94,706,240  |               |  | 13,512,366 |  |  | 540,776 | 
|Joel F.
 Gemunder             |  |           | 101,486,214 |               |  | 6,741,784  |  |  | 531,384 | 
|Steven J.
 Heyer              |  |           | 96,544,344  |               |  | 11,673,190 |  |  | 541,848 | 
|Sandra E.
 Laney              |  |           | 105,166,132 |               |  | 3,058,471  |  |  | 534,779 | 
|Andrea R.
 Lindell, Ph.D., RN |  |           | 94,801,473  |               |  | 13,404,931 |  |  | 552,979 | 
|James D.
 Shelton             |  |           | 105,940,348 |               |  | 2,280,661  |  |  | 538,373 | 
|John H.
 Timoney              |  |           | 105,699,382 |               |  | 2,329,660  |  |  | 730,341 | 
|Amy Wallman                   |  |           | 105,942,396 |               |  | 2,280,730  |  |  | 536,257 | 

(c) The Stockholders approved an
amendment of Omnicares Annual Incentive Plan for Senior Executive Officers and
re-approved the performance criteria thereunder. A total of 94,102,250 votes
were cast in favor of the proposal; 14,026,580 votes were cast against it;
630,552 votes abstained; and there were no broker non-votes.

(d) The Stockholders re-approved the
performance criteria under the Companys 2004 Stock and Incentive Plan. A total
of 103,377,548 votes were cast in favor of the proposal; 5,012,454 votes were
cast against it; 409,380 votes abstained; and there were no broker non-votes.

(e) The Stockholders ratified the
appointment by the Audit Committee of the Board of Directors of
PricewaterhouseCoopers LLP as independent registered public accountants for the
Company and its consolidated subsidiaries for the 2009 year. A total of
105,750,128 votes were cast in favor of the proposal; 2,887,720 votes were cast
against it; 121,534 votes abstained; and there were no broker non-votes.

ITEM 6 - EXHIBITS

See Index of
Exhibits.

89

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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: July
 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
|                                                                                       |                                                                                                                                              |                                                                                                                      |                            
|(10.1)                                                                                 | Letter,
 dated July 27, 2009, to Joel F. Gemunder Regarding Temporary Salary Reduction
 Program                                              |                                                                                                                      | Filed
 Herewith            
|                                                                                       |                                                                                                                                              |                                                                                                                      |                            
|(10.2)                                                                                 | Letter,
 dated July 27, 2009, to Patrick E. Keefe Regarding Temporary Salary Reduction
 Program                                              |                                                                                                                      | Filed
 Herewith            
|                                                                                       |                                                                                                                                              |                                                                                                                      |                            
|(10.3)                                                                                 | Letter,
 dated July 27, 2009, to David W. Froesel, Jr. Regarding Temporary Salary
 Reduction Program                                         |                                                                                                                      | Filed
 Herewith            
|                                                                                       |                                                                                                                                              |                                                                                                                      |                            
|(10.4)                                                                                 | Letter, dated
 July 27, 2009, to Cheryl D. Hodges Regarding Temporary Salary Reduction
 Program                                              |                                                                                                                      | Filed
 Herewith            
|                                                                                       |                                                                                                                                              |                                                                                                                      |                            
|(10.5)                                                                                 | Letter,
 dated July 27, 2009, to Jeffrey M. Stamps Regarding Temporary Salary
 Reduction Program                                             |                                                                                                                      | Filed
 Herewith            
|                                                                                       |                                                                                                                                              |                                                                                                                      |                            
|(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        

E-1

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|                                                                                        |                                                                                                                                              |                                                                                                                      |                    
|--------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------- | -------------------
|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
|                                                                                        |                                                                                                                                              |                                                                                                                     
|                                                                                        |                                                                                                                                              |                                                                                                                      |                    
|(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-2

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