Excerpted from Dow jones Newswire, “Medco: Kept Pricing Discipline While Winning Business”, by Dina Wisenberg Brin, January 9, 2009
Ken’s Take: (1) “Discipline” is an interesting name for price cuts (2) Pricing is somewhat of a throttle on the hardship tough economy. If folks have any $$$ in their wallets, they can find plenty of good deals
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While a disappointing 2009 forecast from CVS Caremark Corp. has some worried about a pricing war among pharmacy-benefits managers (PBM’s), competitor Medco Health Solutions has been able to keep “disciplined” in pricing its contracts.
Medco said in a statement: “Based on our ability to deliver considerable value to our clients and the power of our advanced clinical model, we have been able to both maintain our pricing discipline and win $7.2 billion in new business in 2008.”
CVS issued disappointing earnings guidance for the year, with repricing of pharmacy-benefit management contracts a major factor.
The company said more than half of its PBM business received “improved pricing” in 2009, part of an effort to lock in three-year contracts that become more profitable after the first year.
Wall Street analysts voiced concern about the price concessions.
Wachovia said it “stokes fears that the PBM business has become more price competitive or that CVS is in a weaker position vis a vis its peers. Pricing has become broadly more competitive. CVS sells a differentiated product and seems willing to accept lower margins in the PBM to boost returns in the retail business and gain traction for new offerings, arguing that returns in the consolidated business will improve.”
Edit by DAF
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Full article:
http://money.cnn.com/news/newsfeeds/articles/djf500/200901091705DOWJONESDJONLINE000836_FORTUNE5.htm
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