Medco Health Solutions’ 3rd-quarter profit jumps 13.5 percent on new clients, pricing

Medco Health 3Q profit jumps 13.5 percent

NEW YORK — 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.

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 72 cents per share in profit from $14.68 billion in revenue.

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 due to lower demand for brand-name drugs.

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, it set 2010 profit guidance between $3.28 and $3.38 per share, including 25 cents per share in profit from newly introduced generic drugs. Analysts expect $3.28 per share.

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.

“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.

Chairman and CEO David 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.

In morning trading, Medco shares rose $1.06 to $58.64. Earlier the stock reached an all-time high of $59.69.

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Associated Press Writer Damian Troise in New York contributed to this story.