Medco 4Q Profits Increase 10 Percent

TRENTON, N.J. - Medco Health Solutions Inc., the country's biggest manager of prescription drug benefits, posted a 10 percent increase in fourth-quarter profit, as gross margins rose slightly due to increased use of generic medicines and operating efficiency.

The company said late Wednesday that net income was $118.3 million, or 43 cents per share. That compares with $107.2 million, or 40 cents per share, a year earlier.

Excluding a 5-cent charge for a write-down on decreased value of assets, Medco earned 48 cents per share. That beat by 2 cents the consensus forecast of analysts surveyed by Thomson First Call, who were expecting 46 cents.

Revenue increased 5.4 percent to $9 billion, from $8.54 billion in 2003's fourth quarter.

The Franklin Lakes, N.J.-based company said its gross margin, - always razor thin in the highly competitive industry - increased to 4.6 percent from 4.2 percent.

Medco processed about 138 million prescriptions in the fourth quarter, including about 20 million mail order scripts, about the same as the year-ago quarter.

Arthur Wong, health care credit analyst at Standard & Poor's, said the report was solid.

"We believe that the results are indicating some positive trends for the company," including increased profitability per prescription handled, he said.

Wong noted that the percentage of generic drugs the company dispenses is increasing, and generic drugs bring prescription benefit managers, retail pharmacy and wholesalers about three to four times the profit as brand-name drugs.

"It is a positive for everyone except the major drugmakers," he said.