(Adds Aetna comment in 6th paragraph.)
By Dinah Wisenberg Brin
Of DOW JONES NEWSWIRES
Medco Health Solutions Inc. (MHS) remains open to acquiring another pharmacy benefits manager, or PBM, although the company doesn't need to, as it is gaining market share from its competitors, Medco Chairman and Chief Executive David B. Snow Jr. said Tuesday.
"We're winning business from almost all of our competitors," including other stand-alone pharmacy benefit managers, health insurers' in-house PBMs and the merged drug store chain-prescription benefits giant CVS Caremark Corp. (CVS), Snow told Dow Jones Newswires. "We're winning across the board."
Nonetheless, Medco would be a "likely looker" for any PBM that's on the block, he said.
Speculation about a potential Medco acquisition of a health insurer's in-house PBM arose after smaller rival Express Scripts Inc. (ESRX) announced plans to buy the PBM operations of health insurer WellPoint Inc. (WLP). That deal, expected to close this quarter, will significantly expand Express Scripts, which trails Medco and CVS Caremark's PBM in size.
Cigna Corp. (CI) had expressed interest in exploring the sale of its in-house PBM, although Snow noted the health insurer more recently backpedaled. In September, a Cigna executive said the company had evaluated the PBM and concluded it was performing well and the company liked having the business as a captive asset. That said, Cigna said it would keep evaluating alternative uses of the PBM.
In addition, the Wall Street Journal reported months ago that Aetna Inc. (AET) was shopping its PBM operation. Aetna continues to say it doesn't comment on business-development activity and that clinical integration of pharmacy benefits remains a core element of its strategy, although the company is willing to explore options that could add value for shareholders and customers.
"Medco continues to be interested. It's not our strategic imperative," Snow said. "Our organic growth is very strong. We don't feel a compelling need to do a bolt-on acquisition. ... We would entertain the concept still if the right opportunity arises."
Snow wouldn't say whether Medco is talking to any potential acquisition targets now.
"To the extent someone is shopping an asset, we're a likely looker," he said.
Medco on Tuesday reported third-quarter earnings rose 13%, exceeding Wall Street's expectations, and posted strong numbers in terms of client wins and retention.
The company said 2009 annualized new-named business stands at more than $10 billion, or $8 billion on a net basis. For 2010, annualized new-named sales have reached $4.1 billion, compared with $2.8 billion last quarter, and also has surpassed $4 billion on a net basis. The company also expects to keep 99% of its clients next year.
PBMs manage prescription-drug benefits and claims for employer and health-insurer clients and their employees or members, operate their own mail-order pharmacies and increasingly offer services aimed at keeping patients healthy and compliant with their medications.
Snow attributed the client wins and retention to Medco's strategy of employing therapeutic resource centers to help patients manage complex and chronic diseases, close gaps in care and keep patients stable.
The offering "is very powerful and clients get it," Snow said.
Medco also has been studying pharmacogenomics, or personalized medicine, which uses genetics to help a patient obtain proper dosage, and also is researching comparative effectiveness of different drug therapies. A recent Medco study found that popular proton-pump inhibitor heartburn pills boosted the risk of heart attack and stroke among heart patients taking the anticlotting drug Plavix, he noted.
"I think that's why clients are staying with us on the retention side, and people are joining us on the new-named (business) side," Snow said.
Medco recently traded at $58.93, up $1.35, or 2.3%.
-By Dinah Wisenberg Brin, Dow Jones Newswires; 215-656-8285; dinah.brin@dowjones.com