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Express Scripts continues to see fallout from Medco purchase; income falls


By Virgil Dickson
Posted: July 30, 2014 - 2:00 pm ET
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The continued ripple effects of a major client exit following a major merger contributed to a second-quarter drop in net income for Express Scripts Holding Co.

The nation's largest pharmacy benefit manager posted second-quarter net income of $515 million, compared to $543 million for the same period last year. It filled 324 million prescriptions, down from 368 the same period last year. Overall, quarterly revenue decreased 4.8% to $25.11 billion from $26.4 billion.

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The decline can in part be traced to the company's 2012 purchase of Medco Health Solutions for $29.1 billion, and the expectations that the company's clients would have once the merger concluded.

“When we made the Medco acquisition, there was an expectation that everything would be the same as they had before and that wasn't going to be the case,” George Paz, Express Scripts CEO, said in an earnings call Wednesday. The purchase meant changes to people, processes and systems.

“Account management teams experienced turnover,” the company said in SEC filings. “Often these relationships are key to retaining clients.”

Last year, Express Scripts lost Medco's largest client, UnitedHealth Group. That loss continued to impact claims volume in the second quarter of 2014, the company said.

Further, there also have been “isolated challenges” for other clients as a result of the merger, Paz said. The company is increasing customer service to address such challenges, Paz said.

Six-month net income stood at $843.5 million compared with $916 million in the first six months of the prior year. Six-month revenue stood at $48.8 billion compared with $52.4 billion in the first six months of last year.

Follow Virgil Dickson on Twitter: @MHvdickson


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