Financial Results and Public Companies and Health Care Businesses and Health Care & Life Sciences and Pharmaceutical

Medco Health profits climb as it adds big clients

April 28, 2010

Pharmacy benefits manager Medco Health Solutions Inc. said Wednesday its profit grew 10 percent in the first quarter as it started doing business with several large new clients.

The Franklin Lakes, N.J.-based company 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, the largest U.S. pharmacy benefits manager, said it handled 239.2 million prescriptions in the quarter. Its results got a boost from higher prices on brand-name drugs and from greater sales of cheaper, more profitable generic drugs.

Starting this year, Medco began handling drug benefits for retired Chrysler employees and won Coventry Health Care's commercial insurance and workers' compensation businesses.

The company said it earned $320.5 million, or 67 cents per share, in the three months ended March 27. That's up from $291 million, or 58 cents per share, a year ago. Excluding costs from Medco's spinoff from Merck and Co. in 2003, its profit totaled 73 cents per share.

Revenue rose 10 percent, to $16.31 billion from $14.83 billion.

According to Thomson Reuters, analysts expected a profit of 72 cents per share and $15.95 billion in revenue. Analyst estimates usually leave out one-time costs.

The company said its new clients are filling more prescriptions by mail than it originally expected. Mail-order prescriptions are more profitable for the company and cheaper for its clients. Prescriptions filled by mail increased 5.8 percent, to 27.2 million. Total adjusted prescriptions, which count 90-day prescriptions as three standard 30-day prescriptions, rose 6 percent from the first quarter of 2009.

Revenue from the Accredo Health business, which provides specialty drugs for chronic illnesses like diabetes, grew 17 percent, to $2.7 billion. Specialty drugs require special handling and they are usually more expensive than other pharmaceuticals.

Medco backed its annual profit forecast of $3.05 to $3.15 per share, or $3.28 to $3.38 per share excluding spinoff costs. On average, analysts expect $3.36 per share.

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