It's not rocket science. With health-care costs on the rise during an economic slowdown, the companies that are will benefit most are those that can help their customers save money.
Pharmacy benefit manager Medco Health Solutions
Let's face it: Medco's real clients are the companies and health insurers that enlist the company to manage their pharmacy benefits. They're really interested in lowering the costs incurred by their employees/members, and what better way to do that than through the use of cheaper generic drugs? Medco has that taken care of, with generic drug utilization up 410 basis points year over year to 64.4%.
The end user, the employees and health insurance members, also benefit through lower copays. They're tightening their wallets and switching to mail-order drugs, which increased 11% year over year in the third quarter. Mail order now makes up more than 40% of Medco's business.
The end result? Medco's earnings, excluding charges associated with its spinoff from Merck
As expected, the company looks good going into next year -- signing up new clients and keeping other major clients, like fellow Motley Fool Stock Advisor pick UnitedHealth Group
While Medco is chugging along grabbing new business, I think there's plenty more to go around for competitors Express Scripts
I wonder whether Merck is regretting its decision to spin off Medco right about now.
Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. UnitedHealth is a Motley Fool Inside Value pick, and The Fool owns shares of it. Our disclosure policy obliges us to tell you so.