Boone County and Health Care & Life Sciences and Health Care & Insurance and Pharmaceutical and Distribution & Logistics

Medco deal loses its luster

June 13, 2011

State leaders hailed the 2007 decision by Medco Health Solutions Inc. to add 1,300 pharmacy jobs in Whitestown by 2012. But the deal isn’t panning out as promised.

New Jersey-based Medco has hired just 430 workers in Whitestown so far, and its business trends suggest the company is shrinking, not growing. The pharmacy benefits manager has lost $3.5 billion in contracts since March and could lose another $11 billion contract with UnitedHealth Group, its largest client, next year.

Minnesota-based UnitedHealth is reviewing its contract with Medco and leaning toward moving the work in-house, Bloomberg News reported, citing Ana Gupte, an analyst at Sanford C. Bernstein & Co. Combined, the contracts lost or in limbo account for 29 percent of Medco’s current business.

That could force Medco to make an acquisition or diversify out of pharmacy-benefit management to replace the revenue. Last year the company pulled in nearly $66 billion, generating a profit of $1.4 billion.

Medco operates a $140 million automated pharmacy and distribution center in Whitestown in Boone County. In 2009, it raised its employment projections to more than 1,400, paying salaries that range from $40,000 to $100,000. The company studies drug data, genetic testing and medical-claims data at the facility.

"This is a huge jewel in the crown of our state," Gov. Mitch Daniels said when announcing Medco’s expansion in Indiana in 2007. To lure Medco, the state offered tax credits of $18.3 million and training grants of $450,000. It later promised another $3.6 million in incentives when the company raised its employment projections.

Work-force availability was a top issue for Medco as it chose the Indianapolis area over Louisville, Ky., and 20 other cities.

The presence of Butler University and Purdue University pharmacy graduates was a big deal, as nearly a third of the jobs will require pharmacy backgrounds. Purdue and Indiana University also can offer a stream of graduates for the information-technology and other positions the facility will create, executives said.

Medco also liked the Indianapolis area because of its central location and because being near FedEx's hub at Indianapolis International Airport will save time and money in shipping.

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