Should investors in Medco Health Solutions (NYSE:MHS) worry about its purchase of diabetes-testing supplier PolyMedica (NASDAQ:PLMD)? The risks aren't obvious, but they're present all the same.

On the surface, the deal appears to be a good match. According to the American Diabetes Association, 20.8 million people suffer from diabetes, and treating the disease is a growing, profitable business. Medco's own estimates show that although only 5% of the U.S. population suffers from diabetes, those people account for 15% of all U.S. drug spending. Medco already provides treatment to 2.8 million diabetics, and the PolyMedica acquisition would add 3.8 million patients to its rolls.

In addition, Medco and PolyMedica already have a history together. Last year, they signed a seven-year agreement to let the pharmacy-benefits manager handle PolyMedica's pharmacy shipments. Prior to the buyout agreement, they had also been negotiating to allow PolyMedica to sell its Medicare-covered diabetes supplies to Medco's customers.

Uniting the firms will also provide both companies with huge marketing opportunities to help them compete against rivals Express Scripts (NASDAQ:ESRX) and CVS Caremark (NYSE:CVS). They have complementary lines of business that seem like natural extensions of one another. Medco's mail distribution system will benefit from adding PolyMedica's diabetes distribution business, particularly in marketing to the millions of senior citizens it currently serves.

But PolyMedica may still cause trouble for Medco because the company is not as cash-rich as it wants you to believe. As fellow Foolish commentator Jim Gillies has pointed out here and here, PolyMedica has benefitted from an aggressive form of accounting that gives its pretax profits an inordinate boost. Direct-response advertising, one of PolyMedica's largest expenses, is capitalized and spread out over long periods of time. It's a well-documented facet of the company's business, and it's all quite legal, but it also continuously muddies the quality of PolyMedica's earnings.

Jim has also questioned the company's free cash flow generation because its investor presentations seem to overlook the company's need to pay taxes and increase its working capital requirements to finance the growth of its business. When those have been factored in, PolyMedica appears far less able to produce free cash flow.

The $1.5 billion deal -- which, at $53 a share, is a 17% premium to PolyMedica's closing price before the deal's announcement -- might end up being an expensive purchase, and it could even drain Medco's own performance. Although Medco has a sizeable cash position to fund the purchase, ratings agencies have placed it on a negative credit watch until more aspects of the deal become clear.

Spun off from Merck (NYSE:MRK) in 2003, Medco manages more than $6.5 billion in diabetic drug spending. Adding in PolyMedica would give it the world's largest focus of diabetic patients under care, according to the company, and may create a combined company that's actually more cash-rich and profitable. While there may indeed be hiccups as the two companies unite, I don't think Medco shareholders should worry that their investment will become infected.

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Fool contributor Rich Duprey owns shares of Merck but does not have a financial position in any other stock mentioned in this article. You can see his holdings here. The Motley Fool has a healthy disclosure policy.