The company said it has been exploring alternatives to restore its repackaging capacity quickly and efficiently, after a fifth quality control failure in 11 years at its drug repackaging plant - Heartland Repack Services - forced the firm to recall products and close down the facility located in Toledo.
"We believe this is a much better solution than opening a new plant because we can be back in business sooner," Joel Gemunder, Omnicare CEO said during a recent conference call.
"We won't have the headaches or cost of new construction, nor the associated timing issues."
Under the terms of the deal which will run until October 2010, Omnicare is outsourcing its repackaging operation to the repackaging division of Cardinal, while it will continue to operate its Vanguard repackaging plant in Glasgow, Kentucky, and will repackage, when needed, at its local pharmacies, the firm said.
Omnicare said that, with this new deal, it believed "the overall economics for the company would be at least as favourable as operating a new facility."
Gemunder explained that the current plan is to start the process immediately and he expects that Omnicare's repackaging operations will be up and running at Cardinal by midyear.
"Together with the capacity at our Vanguard Repackaging facility, we believe this new capacity with Cardinal will allow us to meet our current and future needs, and it will allow us to move out the incremental cost associated with the less efficient repackaging activity taking place on-site in our pharmacies," said Gemunder.
Kentucky-based Omnicare had to suspend its Heartland repackaging operation during the third quarter of 2006 after the The US Food and Drug Administration (FDA) issued the health care company with a blunt warning letter outlining the firm's quality and safety lapses at its Toledo packaging plant.
"The deficiencies in your quality control systems were serious," the FDA correspondence informed the company.
"We remain concerned about the quality control systems and procedural problems that have allowed these significant deficiencies to remain unresolved for so long."
Omnicare informed the FDA of measures it was taking to address the issues raised by the agency, which include hiring outside consultants to re-evaluate current good manufacturing practices (cGMP) controls and retrain employees on cGMP, hiring new experienced quality control/ quality assurance (QC/QA) staff and plant managers and permanently relocating the drug repackaging operations to a new facility.
As a result of the suspension, Omnicare was forced to ramp-up production in its other repackaging facility and on-site in its pharmacies in order to meet customer needs.
It subsequently decided to close the Heartland facility and was hit with a with a $9m (€6.8m) blow during the fourth quarter, largely for labour, professional fees, and materials costs.