The pharmacy benefits management (PBM) industry has been a great place to invest. With aging baby boomers, rising health-care costs, and longer life expectancies, that trend isn't likely to change. Although larger companies such as Caremark Rx (NYSE:CMX) and Express Scripts (NASDAQ:ESRX) have produced multibaggers for investors, I like their smaller rival, National Medical Health Card Systems (NASDAQ:NMHC).

With NMHC being a 30-bagger since early 2001, it's no wonder Tom Gardner put it on the Motley Fool Hidden Gems watch list. While I encourage investors to formulate their own conclusions, here are a few pills worth swallowing.

The business
NMHC is rapidly expanding by investing in personnel, innovative technologies, and the expansion of its specialty and home delivery pharmacy businesses. I particularly like the budding home delivery pharmacy business, where up to 60% of a plan's allotment can be spent on patients taking so-called "maintenance medications" for high blood pressure, diabetes, and other chronic illnesses. Focusing on this population of patients can effectively lower clients' pharmaceutical costs by up to 20%, thanks to home delivery's lower distribution costs.

NMHC's innovative Total Health Care Solutions is also becoming popular among the company's clients; it collects pharmacy and medical claim data across an entire health plan, which helps administrators manage risk, cut costs, and improve care. In addition, the company's open-book policy provides clients complete transparency of its business. These practices, which bigger PBMs have been reluctant to adopt, can only help NMHC's continue growth.

By the numbers
With NMHC ranking No. 6 in Fortune magazine's 2004 list of "America's 100 Fastest-Growing Companies," it's no wonder the company has cranked out more than 20 consecutive quarters of year-over-year double-digit increases in gross profit. Amazingly, over the past five years, NMHC's revenues have grown by an annual average of 35%, with net income growing at an average 60%. For fiscal 2006 (ending in June), NMHC expects to earn between $1.33 and $1.37 per share, delivering a forward P/E somewhere around 22. Given the company's historical growth rates and expected expansion, some investors might consider that a bargain.

The Foolish bottom line
Yesterday, NMHC reported second-quarter earnings, and at first glance, I saw robust signs of expansion, client satisfaction, and growth. (It will take me a while to fully slog through the numbers and conference call.) Writing a prescription for a few shares of NMHC could be just the pill to heal your aching portfolio.

We've prescribed further Foolishness:

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Fool contributor M.D. Mitchell holds no financial position in any of the above companies. The Motley Fool is investors writing for investors.