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VOL. 126 | NO. 36 | Tuesday, February 22, 2011

Accredo Revenue Reaches Record High, Parent Co. Medco Reports 11 Pct. Profit Increase

MARLEY SEAMAN | AP Health Writer

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NEW YORK (AP)Medco Health Solutions Inc., the country's largest pharmacy benefits manager, said Tuesday its fourth-quarter profit rose 11 percent, reflecting an increase in mail-order prescriptions and its expanded service business.

The Franklin Lakes, N.J., company also reaffirmed its 2011 guidance.

Revenue from Medco's Accredo specialty pharmacy business, based in Memphis, rose 21.3 percent to a record of nearly $3 billion. Accredo distributes drugs that require special handling, including treatments for chronic illnesses. New business also drove up retail volumes by 7.5 percent.

The new year marks the start of a "patent wave" in which some of the world's best-selling drugs will lose patent exclusivity and face generic competition. Medco said those products will boost its annual profit by about 9 cents per share. It expects to gain 3 cents per share from a generic version of the cholesterol fighter Lipitor, which loses U.S. patent protection on Nov. 30.

The company reported net income of $378.5 million, or 88 cents per share, in the quarter ended Dec. 25. That's up from $341.5 million, or 70 cents per share, a year earlier. Excluding costs related to its spinoff from Merck & Co., Medco earned 94 cents per share.

Revenue rose 11 percent to $16.93 billion from $15.25 billion a year ago.

Analysts surveyed by FactSet expected adjusted earnings of 94 cents per share and lower revenue of $16.62 billion.

Medco said it filled 27.9 million prescriptions through the mail, which was an increase of 7.3 percent from a year ago. The company said 33.9 percent of its adjusted prescriptions — which count 90-day mail order prescriptions as three 30-day prescriptions — were filled using low-cost generic drugs. Generic drugs are more profitable for Medco even though they reduce its revenue.

The company said it earned $3.22 per adjusted prescription in the fourth quarter, excluding interest, taxes, depreciation, and amortization. It reported a profit of $3.06 per adjusted prescription a year ago.

Medco also said its service revenue grew 59 percent to $349.7 million. In September, the company bought United BioSource Corp., which helps companies design studies of drugs and medical devices, collect information and perform research on drugs and medical devices.

For the full year, the company earned $1.43 billion, or $3.16 per share, up from $1.28 billion, or $2.61 a share, a year ago. Annual revenue rose to $65.97 billion from $59.8 billion in 2009.

Medco said it expects to earn $3.99 to $4.12 per share in 2011, excluding amortization costs. Analysts are forecasting $4.06 per share on average. Medco expects new generics to add 6 cents per share to its profit in the fourth quarter. Half that total is expected to come from Lipitor, which is the world's best-selling brand name drug.

The company said it has signed $1.5 billion in new business for 2011, and has completed more than 80 percent of its contract renewals for the year.

Medco said its first-quarter profit should be between 88 cents and 89 cents per share. That includes a benefit of 4 cents per share from a change in its employee benefit plans. Analysts expect 89 cents per share on average and usually exclude one-time items.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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