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Medco profit rises as mail-order generics business grows

February 23, 2010

Medco Health Solutions Inc., the largest U.S. pharmacy benefits manager by revenue, said fourth quarter profit rose 24 percent as the company’s more-profitable business supplying mail-order generic drugs expanded.

Franklin Lakes, N.J.-based Medco operates an automated pharmacy and distribution center in Whitestown in Boone County, and it plans to employ more than 1,400 people there by 2012. The company studies drug data, genetic testing and medical-claims data at the facility.

Medco's profit climbed to $341.5 million, or 70 cents a share, from $274.4 million, or 54 cents a share in the same quarter a year ago, the company said. Earnings excluding one-time items were 76 cents a share, beating the 75 cent average estimate of 26 analysts surveyed by Bloomberg.

Medco’s push into personalized medical care and its ability to cut health-plan costs with mail-order generic medicines helped the company retain about 99 percent of its client base, CEO David Snow has said. The benefits manager in the last year also won contracts with state employee plans of New Jersey and Indiana, and Coventry Health Care Inc.’s Medicare business.

“Medco is a well-oiled machine,” said Tony Perkins, an analyst at First Analysis Corp. in Chicago. “Even with newcomers moving into personalized medicine, Medco is pretty far ahead of the curve. It will take others a while to catch up.”

Fourth quarter revenue rose 18 percent, to $15.2 billion. Medco said it has already won $4.2 billion in net new sales for 2010.

Medco reaffirmed its 2010 earnings forecast of $3.05 to $3.15 a share.

The company expects to retain 99 percent of its client base this year as well, Snow said in today’s statement.

Perkins said he expects many health plans to consider switching benefits manager in 2010, and Medco is likely to be a beneficiary.

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