The Specialty Pharmacy division of Medco Health Solutions (MHS) recently announced the launch of a new medical benefit management program to efficiently handle specialty medications covered under major medical plans.
With the growing importance of pricey specialty drugs used to treat rare or complex diseases, this new benefit plan is expected to be beneficial in effectively bringing down the cost of medication amid an inflationary situation as well increasing greater efficiencies around the coverage of these drugs.
Medco with its subsidiary Accredo Health Group is entering into a partnership with specialty medications manager NovoLogix in order to obtain technological support for Medco’s medical benefit management program. This program should help reduce the estimated cost of $8 billion that is generated annually due to lack of compliance, over-utilization, non-formulary drug use and other inefficiencies.
The Specialty Pharmacy segment of Medco is focused on the sale of higher margin specialty pharmacy products for the treatment of chronic and potentially life-threatening diseases. Specialty Pharmacy products typically include expensive drugs developed by biotechnology companies, often injectable and usually requiring significant amounts of ancillary administration equipment, special packaging, and a higher degree of patient-oriented customer service.
Specialty pharmacy products and services are also covered through medical benefit programs with the primary payors being insurance companies and government programs, and patients (amounts due for co-payments and deductibles). Presently, Express Scripts‘ (ESRX) CuraScript and Medco’s Accredo are the two largest specialty pharmacy businesses in the US, with a combined market share of more than 50%.
For a decade, this expensive type of medication has been one of the fastest growing categories in health care. With high demand, the cost of specialty drugs has always been on the rise. In 2010, it consisted of 20% of all medications covered by pharmacy benefits where as by 2013 it is expected to rise to 27.5%. By 2016, 8 of the top 10 prescription drugs are expected to be considered specialty drugs.
The proposed merger between Medco and Express Scripts will likely to create a sole dominant power in the specialty pharmacy business eradicating the small specialty pharmacists who are raising their voices and appealing to the US Federal Trade Commission (FTC) against the mega-merger. However, economists in support of this deal believe that the combined company will likely achieve greater cost savings mainly with the evolution of “biosimilars” when innovator patents expire.
Currently, we are Neutral on Medco and Express Scripts, which correspond to the Zacks #3 Rank (short-term Hold rating).
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