Medco Health Solutions Inc. (MHS) is a healthcare company that provides clinically driven pharmacy services for approximately 60 million Americans. MHS’ services are designed to lower total healthcare costs for private and public employers, health plans, labor unions and government agencies of all sizes, and for individuals served by the Medicare Part D Prescription Drug Plans. The Company provides pharmacy benefit management (PBM) services through its national networks of retail pharmacies and its own mail-order pharmacies.

The Company’s Specialty Pharmacy segment, Accredo Health Group, provides specialty pharmacy products and services for the treatment of chronic and complex diseases. Through its subsidiary, Liberty Medical, the Company provides diabetes testing supplies and related products. MHS also offers services such as plan design, clinical management, utilization management, clinical services, pharmacy management, mail-order services, physician services and Web-based services. Its clients primarily include Fortune 500 companies.

The Company was founded in 1983 and is based in Franklin Lakes, New Jersey.

Source: Reuters.com, SEC Filings.

For the first quarter of fiscal 2009, MHS’ net revenues rose 14.4% to $14.83 billion from $12.96 billion in the previous-year quarter, primarily as a result of contributions from significant new client wins and price inflation on brand-name drugs, partially offset by higher volumes of lower-priced generic drugs. The Company reported a net income of $291 million or $0.58 per share, compared to $270.2 million, or $0.50 per share, in the year-ago quarter.

The Company closed the first quarter with nearly $1.8 billion of cash in balance sheet, well over three times the $541 million at the end of the first quarter 2008 and almost double the $938 million at the close of the last quarter. MHS’ total debt remained at $4.6 billion and the Company expects to hold that level of debt through the end of 2009.

The Company said its second-quarter results should be similar to the first quarter, but the introduction of new generic drugs will add about 3 cents per share to its profit. In late April, MHS reiterated its fiscal 2009 full-year guidance and expects GAAP diluted earnings per share in the range of $2.45 to $2.55, representing 15% to 20% growth over fiscal 2008. The fiscal 2009 diluted EPS, excluding amortization of intangible assets, expected in the range of $2.67 to $2.77, representing 15% to 19% growth over fiscal 2008.

Source: Reuters.com

In the past 52 weeks, shares have been trading in a range of $29.80 – $51.15. MHS has ascended 13% in 2009, outperforming the Dow and the S&P 500. Currently, shares are trading near their 52-week high.

Analysts polled by Thomson Reuters expect Medco to “Outperform,” with 12 analyst recommending the stock a “Buy” up from 11 analysts three months ago; eight analysts expecting the stock to “Outperform,” the same number as three months ago; and two analysts rating the stock a “Hold,” down from three analysts three months ago. Thomson Reuters’ polled analysts anticipate revenue of $58,748 million and EPS of $2.73 for the fiscal year 2009.

Contracts worth $8.6 billion have been completed in 2009. Those deals are expected to bring $7 billion in net new revenue. Beginning January 1, 2009, MHS is administering the Medicare Part D prescription drug benefit on behalf of Coventry Health Care – the sixth largest U.S. health insurer by market value – for 1.2 million Medicare beneficiaries with annual drug spending of more than $2 billion. MHS will also manage prescriptions for Coventry Health Care Inc.’s commercial insurance and workers’ compensation businesses starting in 2010. The Company has completed over 97% of planned 2009 client renewals. All accounts with drug spend more than $500 million have been renewed. Overall, the 2009 client retention rate stands at more than 96%.

The Company’s profit had been boosted in recent quarters as more people tried to save money by filling their prescriptions through the mail instead of going to the drugstore. MHS has made mail-order prescriptions a centerpiece of its business, as it typically makes more profit when people fill 90-day prescriptions through the mail instead of at a pharmacy. However, at the end of 2008, the Company lost large two clients that made significant use of mail-order prescriptions. In the first quarter, mail-order prescriptions fell and retail prescriptions were higher than the Company expected. MHS’ newest clients make very little use of mail order, and about 9% of their prescriptions are filled by mail. The Company intends to boost that rate over the next few years.

President Obama’s support for electronic medical records is one of the key efforts of health reform. Only about 8% of the nation’s 5,000 hospitals and 17% of its 800,000 physicians currently use the kind of common computerized record-keeping systems that Obama envisions for the whole nation. MHS and Google Health are working for strives to deliver electronic health records for Americans. The companies’ collaboration enables MHS’ more than 60 million members to construct their own online personal health record (PHR), effectively creating a secure and private place for their health information to be stored. Those members who choose to create a Google Health profile, which can contain both pharmacy and medical record data, and authorize MHS to transfer their prescription information into the profile, can then use it to share their information with physicians or other health care providers to ensure those providers are working with the most current and accurate information.

In its annual survey of drug trends, MHS said that prescription drug use in the U.S. fell last year, although prescription drug spending climbed 3.3% in 2008 over 2007, even though prices for brand-name products rose about 8%. Those higher prices were offset by sales of generic drugs, which accounted for 64% of all prescriptions filled by MHS in 2008, up from 60% the previous year. The strongest growth came from diabetes drugs, and use of specialty treatments for cancer, along rheumatological disease, seizure disorders and antiviral drugs also increased. The report also forecasts prescription drug spending to increase by 4% to 7% annually through 2011. An aging U.S. population also plays into MHS’ hands by increasing the overall demand for medications.

While current market turmoil has investors wondering about the safety of their savings, Forbes listed MHS as one of “The 100 Most Trustworthy Companies.” Forbes published its listing based upon Audit Integrity’s ranking of corporate accounting and management practices. MHS also captured the No. 1 position within the Health Care: Pharmacy and Other Services sector on Fortune’s World’s Most Admired Companies List. In addition, of all companies surveyed globally, MHS was ranked No. 5 in Innovation and No. 10 in People Management. The Company is ranked No. 51 on the Fortune 500 list.

The United States spends more than $2.2 trillion on health care each year—almost $8,000 per person. According to President Obama, if the health insurance system is not reformed, it would lead to higher costs for families and businesses, as well as bankruptcy for Medicare and Medicaid, the federal health programs for elderly and poor Americans. President Obama’s 2010 Budget lays the groundwork for reform of the American health care system, most notably by setting aside a deficit-neutral reserve fund of $635 billion over 10 years to help finance reform of our health care system to bring down costs, expand coverage, and improve quality.