NEW YORK (AP) — Medco Health Solutions Inc., the largest U.S. pharmacy benefits manager, said Tuesday its profit rose 13.5 percent as the company gained new clients and benefited from price inflation of brand-name drugs.
Medco makes larger profits on sales of generic drugs, although they bring in less revenue. With a large wave of blockbuster drugs going off-patent in 2011, drugmakers have gotten more aggressive about raising their prices recently, which is also helping Medco.
Medco Chairman and CEO David Snow said the recession motivated health plan sponsors and members to look for ways to save money, which helped the company's business. But the desire for savings will remain as the economy improves, he said.
"It does appear that the economy is starting to slowly heal," Snow said in a telephone interview. "That said, I still believe you're going to see more prudent buyer behavior on the part of the consumer, which is a benefit to us."
The company earned $335.6 million, or 69 cents per share, up from $295.7 million, or 58 cents per share, a year prior. Excluding charges, the company said it earned 75 cents per share. Revenue surged 18 percent to $14.79 billion from $12.56 billion.
Analysts polled by Thomson Reuters expected earnings of 72 cents per share on $14.68 billion in revenue.
Medco shares rose $1.51, or 2.6 percent, to $59.09 in midday trading after rising to an all-time high of $59.69 earlier inn the day.
Medco, headquartered in Franklin Lakes, N.J., said adjusted prescriptions increased 14 percent to 220.2 million. That includes 144.3 million prescriptions filled in drugstores, up 25 percent from a year ago. Mail order volumes decreased because demand for brand-name drugs has fallen during the recession. Mail delivery of generic drugs remained strong, Medco said.
Revenue from Medco's Accredo specialty pharmacy business rose 19 percent to $2.4 billion. The generic dispensing rate, or the portion of prescriptions that were filled using low cost generic drugs, rose to 67.7 percent from 64.4 percent.
The company slightly raised its 2009 profit outlook to between $2.80 and $2.82 per share from a range of $2.76 to $2.81 per share. The new forecast is mainly above Wall Street forecasts of $2.80 per share.
Looking ahead, the company set 2010 profit guidance between $3.28 and $3.38 per share. Analysts expect $3.28 per share. Medco expects to earn 25 cents per share for the year from sales of generic drugs, as top sellers like Effexor XR, Flomax, and Aricept lose patent protection. That's almost double the 13 cents per share it expects in 2009.
"The company's continued momentum is evident in its strong 2010 guidance and continued growth in net-new business wins, a sign that Medco continues to take market share from the majority of its competitors," Deutsche Bank analyst Ross Muken said in a note to clients.
Snow said Medco expects to retain 99 percent of its clients in 2010, and has gained $4 billion in new contract revenue for the year.
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Associated Press Writer Damian Troise in New York contributed to this story.
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