Pharmacy benefit manager Medco Health Solutions, Inc. (MHS) on Tuesday reported over 13% increase in third-quarter profit, helped by new client wins and price inflation on brand-name drugs that led to an 18% increase in revenues. Adjusted earnings topped Wall Street view. Looking ahead, the company raised its earnings forecast for 2009 and issued guidance for 2010 within analysts' expectations.
The Franklin Lakes, New Jersey-based company said its third-quarter net income improved to $335.6 million or $0.69 per share from $295.7 million or $0.58 per share in the same quarter last year. For the second quarter, Medco reported net income of $312.1 million or $0.64 per share.
Adjusting for the amortization of intangible assets that existed when Medco became a publicly traded company in 2003, third-quarter 2009 earnings per share was $0.75. Twenty-three analysts polled by Thomson Reuters expected the company to report earnings of $0.72 per share. Analysts' estimates typically exclude special items.
Total net revenues for the quarter increased to $14.795 billion from $12.559 billion in the prior year, reflecting contributions from new client wins and price inflation on brand-name drugs, partially offset by higher volumes of lower-priced generic drugs. Analysts estimated revenues of $14.68 billion for the quarter. Total net revenues for the second quarter were $14.93 billion.
Third-quarter revenues for Accredo Health Group grew 19.2% to $2.401 billion, reflecting the contribution from new client wins and continued growth across the specialty business. Service revenues advanced to $204.0 million from $168.8 million in the previous year.
Medco's generic dispensing rate increased 3.3 percentage points from third-quarter 2008 to a record 67.7%. The mail-order generic dispensing rate increased 2.3 percentage points to 58.1% and the retail generic dispensing rate increased 3.0 percentage points to 69.4%. Higher volumes of lower-priced generic drugs reduced net revenues for third-quarter 2009 by about $560 million.
Total prescription volume, adjusting for the difference in days supply between mail-order and retail, increased 14.1% to 220.2 million. Mail-order prescription volume was 25.5 million, down 2.3% from the third-quarter 2008. The company noted that Mail volume reflects a decline in brand-name drugs of 7%, partially offset by a 1.4% increase in generic drugs. Retail volumes reached 144.3 million, a 25.4% increase from last year, on new business wins. The adjusted mail-order penetration rate decreased 5.9 percentage points to 34.5%
Gross margin for the latest quarter increased 12.5% to $1.04 billion. Total gross margin percentage decreased 40 basis points to 7% from 7.4% due to significant incremental retail volumes from new clients.
Total costs and expenses in the third quarter of 2009 increased to $14.242 billion from $12.111 billion reported last year.
For the first nine months of the fiscal, net income rose to $938.7 million or $1.91 per share from $828.6 million or $1.58 per share in the previous year. Total net revenues increased to $44.56 billion from $38.3 billion in the previous year.
Looking ahead, Medco revised its 2009 GAAP earnings per share guidance to a range of $2.58 to $2.60 from the previous forecast of $2.54 to $2.59. Excluding amortization of intangible assets, earnings per share guidance was raised to $2.80-$2.82 from the prior range of $2.76 to $2.81. Wall Street looks for 2009 earnings of $2.75-$2.86 per share with a consensus of $2.80 per share.
For the full-year 2010, Medco expects to achieve GAAP earnings per share in the range of $3.05-$3.15. Excluding amortization of intangible assets, earnings are estimated between $3.28 and $3.38 per share. Analysts expect 2010 earnings of $3.28 per share with estimates ranging between $3.12 and $3.41 per share.
According to David Snow Jr., Medco chairman and chief executive officer, "We continue to leverage the power of our clinical innovations and highly efficient infrastructure to deliver improved care to patients, and reduced costs for the healthcare system - the essence of real healthcare reform. With a specialized patient-centric clinical model - a proven brandable difference - we expect our momentum to continue. This confidence is evident in our raised 2009 earnings guidance and strong 17 to 22 percent GAAP diluted EPS growth expected for 2010."
Medco is currently the nation's biggest pharmacy-benefits manager. However, that position is likely to change when Express Scripts Inc.(ESRX) completes its acquisition of WellPoint Inc.'s (WLP) NextRx pharmacy-benefit business later in the year. Reports had appeared recently stating that Medco was interested in buying the pharmacy-benefit management business of insurance giant Aetna Inc. (AET).
MHS closed Monday's regular trade at $57.58, up from the previous close of $56.12, on 3.80 million shares.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.