Medco Express Scripts

July 21, 2011 by Post Team 

Medco Express ScriptsMedco Express Scripts, The two major U.S. companies managing prescription drug benefits are united in agreement and 29.1 billion they say will help you achieve the key objectives of health reform: reining in costs and improve the health of patients. Express Scripts Inc. on Thursday announced an agreement to buy its larger rival Medco Health Solutions Inc. As a whole, would address the requirements of about 135 million people, more than one in three Americans.

That will give them more influence in the demand for discounts from drug manufacturers, who are dealing with falling or stagnant revenues and a record number of blockbuster drugs taken daily by millions of people are getting cheaper competition from generics.

Pharmacy benefit managers to process mail order prescriptions and manage accounts recipes in retail pharmacies, which act as intermediaries between employers who offer prescription drug benefits and drug manufacturers. Also keep costs down by removing discounts and rebates from drug manufacturers, the use of tiered copayments to push patients to buy generic drugs or lower-cost brands, and reminding patients to take medications as programmed to limit the costly complications.

Overall, Express Scripts and Medco handled more than 1.7 billion prescriptions in 2010 and reported nearly $ 110 million and revenue, despite Medco recently lost several contracts covering millions. They have very narrow profit margin.

“The strategic partnership makes sense because in this business, issues of scale,” said Les Funtleyder, healthcare portfolio manager at Miller Tabak.

The combined company may be able to squeeze lower prices, drug manufacturers. Their trade group, Pharmaceutical Research and Manufacturers of America, said he had no position on the agreement.

It is unclear whether patients or, simply, employers and health plans are future savings. However, patients may be more stringent rules requiring greater use of generic drugs and mail order services for chronic drug, and programs to ensure that they are the best medicine for them.

Medco has six medical teams in areas such as heart disease, diabetes and cancer drugs to review patients to avoid drug interactions and ensure that patients are the most effective treatment sometimes even on the basis of genetic. He also has experience in one of the fatest growing areas, specialty drugs – expensive drugs, usually injected for cancer and other complex diseases.

Express Scripts has complementary programs that encourage patients to take cheaper medicines, such as requiring generics unless you opt out. Both companies make bigger profits for the processing of generic brand drugs, and keeping its millions of customers.

The changes will not happen soon, however, as the drug benefit plans are covered by multi-year contracts.

The express agreement of double-action scripts in the market to 30 percent, beating ahead of his rival CVS Caremark Corp., which has a market share of 15 percent, said Atlantic Information Services, a care Publisher health information.

That reduce choices for customers of the pharmacy, pharmacist, said Hamid Abbaspour, founder of the independent pharmacy, Dr. Aziz, in Indianapolis.

Abbaspour, which does business with both Medco and Express Scripts, said the combination of both drugs independent shops could be tough negotiations because the benefit managers have more influence.

“We actually have to push to be part of your group of suppliers,” he said, because the funnel business to their own mail-order pharmacies. “Sometimes they come to us and say, ‘Take it or leave it’, and at some point they could put a huge financial burden on us if we say,” We do not accept these unfair terms in consumer contracts. ”

Drug benefit managers do business channel as much as possible to e-pharmacies to reduce costs, because most are prescriptions to the pharmacy for 90 days. Express Scripts and Medco, and both have large automated pharmacies, where robots and computerized conveyor filling mail order prescriptions cheaper than people could.

The National Community Pharmacists Association said the agreement “would simply make a bad situation worse for U.S. employers, government agencies, consumers and pharmacists,” and administrators to benefit the big drug “that already have a marked one side of the advantages of tender and repayment terms of community pharmacists, which undermines the viability of continuing to serve patients. ”

The surprise agreement in the works for several months was announced as Medco reported a 4 percent drop in quarterly profit and said its contract with UnitedHealthcare, which covers 12 million people, which ends in December 2012. Medco CEO Dave Snow said the U.S. was offering in terms of negotiations last week was bad for shareholders.

Medco has had some other recent contract losses, and has been secretive about and 800 million in new business for 2012, much less the business has been lost. Last year had revenues of approximately 66 billion and, compared with approximately 48 million CVS and Caremark and and $ 45 million for Express Scripts. However, Express Scripts has the largest value, with a market capitalization of around 29.5 billion and, compared to almost 26 billion and Medco, as of Thursday afternoon.

Express Scripts and Medco, said he expected only and 1 billion in savings from the combination, slightly less than 1 percent of their income, but someanlysts expect more.

“We believe that if the transaction is complete, build synergies and could be twice (that) due to the purchase of influence, the savings of the supply chain, and reducing corporate overhead,” wroteanlyst Research Jeffries Arthur Henderson, adding that Express Scripts “long-term growth prospects have improved dramatically.”

Express Scripts president and CEO George Paz and Snow declined to give details on the savings in a conference call withanlysts and said it was too early to talk about changes, such as cutting jobs and closing facilities.

Both executives repeatedly stated that its aims the expulsion of waste, reducing spending and improving patient outcomes are perfectly aligned with those of the Obama administration. The health care reform of 2009, which would bring insurance and prescription drug coverage to millions of Americans point to contain increases in health spending by reducing waste and fraud, better care coordination and investigate which treatments work best.

“Everyone agrees we have to get under control healthcare costs,” Paz saidanlysts. “This is what America needs is what patients need, is what customers need.”

Investors pushed the share price of the three senior prescription benefits. In afternoon trading, the price of Medco shares rose and 8.30, or 15 percent, to 64.08 y. Express Scripts and gained 2.73, or 5.2 percent, to 55.27 and Caremark and CVS, which operates the store chain CVS drug business with his prescription drug benefit, rose 93 cents, or 2.5 percent to 37.88 y.

In a domino effect, the pharmacy chain Walgreen Co. fell 5 percent to 39.71 and drug wholesaler AmerisourceBergen Corp., whose biggest customer is Medco, fell 6.3 percent to 39.12 y.

Given that Medco handled most of the recipes U.S. Express Scripts and was second last year, and rank first and third, respectively, in revenue,anlysts questioned whether the Federal Trade Commission might object to the transaction or require some divestitures. Paz said he expected no problems due to the benefits of the combination to customers and the country.

“Do not do this if we do not think we could get it done,” he said.

Henderson, however, draws attention to issues of competition “may arise.”

Under the agreement, Express Scripts, St. Louis, will buy Medco and 71.36 per share. Medco shareholders will receive and 28.80 per share in cash and 0.81 shares of Express Scripts for each share they own. That’s a 27.9 percent premium based on the closing price of Medco and 55.78 on Wednesday. Shares of Franklin Lakes, New Jersey, the company has traded between 43.45 and 65.39 and once in the past year.

The deal is expected to close in the first half of 2012, pending approval by regulators and shareholders of both companies. Peace will lead the new company, which will be headquartered in St. Louis and the board will be expanded to include two independent directors Medco.

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