These appear to be halcyon days for the big PBMs. Their various mergers and IPOs are completed, there are more and more drugs coming off patents enabling them to save more money by using generics and the Medicare Part D drug coverage gives them a whole new market among seniors. By yesterday, the share prices of the big three--Medco, Caremark and Express Scripts--were up more than 50 percent for the year so far, with Express Scripts stock up more than 150 percent.
But today Medco announced that, while profits for the third quarter were up 33 percent and 2 cents better than expected, its 2006 earnings per share would be between $2.52 and $2.64, below analyst forecasts of $2.79. Whether this is a minor blip as the big PBMs consolidate their market positions or the end of a period of irrational exuberance in the sector remains to be seen.
- see this article from TheStreet.com