More generics, more frugal clients for Medco

If you want to know what's happening in the U.S. drugs market, look at Medco Health Solutions. The largest pharmacy benefits manager in the country offers a window into sales growth, product breakdown, and market share. And this quarter, the news was good for Medco itself, but not so hot for branded pharma.

The PBM's Q3 earnings grew by 13 percent to $335.6 million. So far, so good. Revenues grew by 18 percent to $14.8 billion; even better. What's more, the number of prescriptions rose by 14 percent to 220.2 million. What's not to like?

Well, a big chunk of Medco's revenue growth came from new clients added to the sales numbers. "With the economy continuing to struggle, more and more prospective customers are looking to a Medco for its strategies to drive down health-care costs," Arthur Henderson, an analyst at Jefferies & Co., told Bloomberg. And when more PBM customers "drive down healthcare costs," they're also driving down pharma revenues by paying lower prices.

Not to mention the fact that 68 percent of Medco's Q3 scrips were for generic drugs. We don't have to tell you that new generic scrips often equal lost branded scrips. So while Medco makes more money on generics, feeding that 13 percent growth in profits, branded drugmakers certainly don't.

- check out Medco's earnings report [1]
- read the story [2] from Bloomberg

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