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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 25, 2010
MEDCO HEALTH SOLUTIONS, INC.
(Exact name of registrant as specified in its charter)
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Delaware
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1-31312
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22-3461740
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| (State or other Jurisdiction of Incorporation) |
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(Commission File Number) |
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(IRS Employer Identification No.) |
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100 Parsons Pond Drive, Franklin Lakes, NJ
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07417
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(Zip Code) |
Registrant’s telephone number, including area code:
201-269-3400
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| (Former name or former address if changed since last report.) |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant
under any of the following provisions:
o
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Item 7.01 Regulation FD Disclosure.
Senior members of Medco Health Solutions, Inc.’s (the “Company”) management team will be making a presentation at
the Jefferies 2010 Global Healthcare Services Conference on Monday, January 25, 2010 at 9:30 a.m. Eastern Time at the
Mandarin Oriental Hotel in New York, New York. A live audio webcast of the Company’s presentation at the conference
will be available on the Company’s Investor Relations website at
www.medcohealth.com/investor
. A replay of the
Company’s presentation will also be available on the Company’s website for one month following the presentation. The
slides accompanying the presentation are attached to this Current Report on Form 8-K (“Current Report”) as Exhibit 99.1
and are incorporated herein solely for purposes of this Item 7.01 disclosure. These materials will also be available on
the Company’s Investor Relations website at
www.medcohealth.com/investor
.
The information in Item 7.01 of this Current Report, including Exhibit 99.1 attached hereto, is being furnished
and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or
otherwise subject to the liabilities of such section. The information in Item 7.01 of this Current Report, including
Exhibit 99.1 attached hereto, shall not be incorporated by reference into any registration statement or other document
pursuant to the Securities Act of 1933, as amended.
Item 9.01 Financial Statements and Exhibits.
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Exhibit No.
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99.1
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Slide Presentation for Jefferies 2010 Global Healthcare Services
Conference on Monday, January 25, 2010
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly authorized.
MEDCO HEALTH SOLUTIONS, INC.
Date: January 25, 2010
By:
/s/ Thomas M. Moriarty
Thomas M. Moriarty
General Counsel, Secretary and
Senior Vice President,
Pharmaceutical Strategies and
Solutions
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EXHIBIT INDEX
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Exhibit No.
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Description |
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99.1
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Slide Presentation for Jefferies 2010 Global Healthcare Services
Conference on Monday, January 25, 2010
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Strategy
Jefferies 2010 Global Healthcare Services Conference
Brian T. Griffin
Group President, Health Plans
Execution
Results
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Forward-Looking Statements
This presentation contains "forward-looking statements" as that term is defined in
the Private Securities Litigation Reform Act of 1995. These statements involve
risks and uncertainties that may cause results to differ materially from those set
forth in the statements. No forward-looking statement can be guaranteed, and
actual results may differ materially from those projected. We undertake no
obligation to publicly update any forward-looking statement, whether as a result of
new information, future events or otherwise. The forward-looking statements are
not historical facts, but rather are based on current expectations, estimates,
assumptions and projections about the business and future financial results of the
pharmacy benefit management ("PBM") and specialty pharmacy industries, and
other legal, regulatory and economic developments. We use words such as
"anticipates," "believes," "plans," "expects," "projects," "future," "intends,"
"may," "will," "should," "could," "estimates," "predicts," "potential," "continue,"
"guidance" and similar expressions to identify these forward-looking statements.
Medco's actual results could differ materially from the results contemplated by
these forward-looking statements due to a number of factors.
Forward-looking statements in this presentation should be evaluated together with
the risks and uncertainties that affect our business, particularly those mentioned
in the Risk Factors section of the Company's Annual Report on Form 10-K,
Quarterly Reports on Form 10-Q and other documents filed from time to time with
the Securities and Exchange Commission.
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Today's Presentation Topics
About Medco
Smarter Medicine:
Medco's Clinically Differentiated Service Model
Core Growth Drivers
Expansion into New Markets
Fourth-quarter 2009 earnings results will be reported on February 23, 2010, and Medco
is currently in its quiet period.
As a result, all earnings-related guidance for 2009 and 2010 has been excluded from
this presentation and our comments will be limited to historical results and strategic
initiatives.
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Who is Medco
Largest PBM Measured by Drug Spend
2008 revenues of $51.3 billion, YTD 3Q 2009 revenues
of $44.6 billion
Serving 60+ million members
Leader in Clinical Innovation
Medco Therapeutic Resource Centers(r)
Pharmacogenomics in practice today
Leading Specialty Pharmacy
Largest Mail-Order Pharmacies in the World
GAAP EPS CAGR from Spin-Off through 2008 of 21.9%
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2003 2004 2005 2006* 2007 2008 YTD 3Q09 2010E
GAAP EPS 0.79 0.88 1.03 1.21 1.63 2.13 1.91 3.1
Medco is Driving Value to Shareholders
Through Continued GAAP EPS Growth
* Excludes first-quarter 2006 legal settlements charge; see reconciliations to
GAAP financial measures in appendix.
2003-2008 GAAP EPS CAGR 21.9%
MHS stock price has appreciated 436%
from spin-off through year-end 2009
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The Case for Smarter Medicine:
Getting Granular
Poor Management of Chronic and Complex Diseases Can Lead to
$350 Billion of Excess Total Healthcare Costs
1. Medco Research
2. Center for Disease Control
50% of US Population1
96% of drug costs in the US1
75% of medical expenses
in the US2
For 88% of chronic and complex
diseases, drugs are a first choice
for medical intervention1
Chronic & Complex
Diseases Represent:
Non-compliance: up to 50%
non-compliance rates after one
year of therapy are not
uncommon in many of the key
disease categories
Omissions in care: 33% of
patients experienced an omission
in therapy gap1
Instability of a Chronic or
Complex Patient is Most Often
Tied to Gaps-in-Care
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The Challenge to Physicians:
Facts per Decision Exceed Human Cognitive Capacity
Source: William Stead, IOM Meeting, 8 October 2007. Growth in facts affecting provider decisions versus
human cognitive capacity.
1. Single Nucleotide Polymorphisms
Facts per Decision
Structural Genetics:
e.g., SNPs1, Haplotypes
Functional Genetics:
Gene Expression Profiles
Proteomics and Other
Effector Molecules
Defines the Need for
the Use of Evidence-
Based Protocols
5
Human
Cognitive
Capacity
Decisions by Clinical
Phenotype
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Total Drug
Spend
Smarter Medicine Provides
a Greater ROI for Clients
Value Prop
Traditional PBM
Utilization Management
Mail Service
Pharmacies
Formulary Management
Step
Therapy
Retail
Networks
Specialty
Pharmacy
Value Prop
Smarter Medicine Service Model
Medco Therapeutic
Resource Centers(r)
1 Kaiser Family Foundation, "Trends in Health Care Costs and Spending", March 2009; and Medco estimates
Total
Healthcare
Costs
Total Drug
Spend
Total Drug
Spend
Pharmacogenomics
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Smarter Medicine Provides
a Greater ROI for Clients
Value Prop
Traditional PBM
Value Prop
Smarter Medicine Service Model
Medco Therapeutic
Resource Centers(r)
1 Kaiser Family Foundation, "Trends in Health Care Costs and Spending", March 2009; and Medco estimates
Total
Healthcare
Costs
Prescription Drugs Only
10%-15% of Total
Healthcare Expenditures1
Total
Drug
Spend
Pharmacogenomics
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Medco Drives Patient Adherence with
Evidence-Based Protocols
** Medical measures are limited to diabetics under 65 years of age due to data limitations typically observed in Medicare eligible populations
M = Measured using Medical Claims Data; P = using Pharmacy Claims Data; MP = using either Medical or Pharmacy Claims Data as shown
on Analyst Day 2008.
Key Diabetes Metrics Key Diabetes Metrics Medco
Diabetes TRC
Average Blood Sugar, lower to prevent amputation, blindness, kidney failure, nerve damage, heart attack, stroke Average Blood Sugar, lower to prevent amputation, blindness, kidney failure, nerve damage, heart attack, stroke Average Blood Sugar, lower to prevent amputation, blindness, kidney failure, nerve damage, heart attack, stroke
Assess average blood sugar
(A1C test in past year) M** 69.2%
Insulin users monitoring blood sugar
with test strips MP 60.7%
Adherence - diabetes medication P 78.1%
Prevent ER visits for insulin users M** 80.2%
Blood Pressure, lower to prevent heart attack, stroke and kidney failure Blood Pressure, lower to prevent heart attack, stroke and kidney failure Blood Pressure, lower to prevent heart attack, stroke and kidney failure
Use ACE-inhibitor/ARB (>55) P 77.0%
Use ACE-inhibitor/ARB
(% BP med users) P 86.8%
Adherence - any BP medication P 83.3%
Cholesterol, lower to prevent heart attack and stroke Cholesterol, lower to prevent heart attack and stroke Cholesterol, lower to prevent heart attack and stroke
Assess LDL-Cholesterol
(obtain LDL-C test) M** 63.8%
Use cholesterol medication P 76.6%
Adherence - cholesterol medication P 80.5%
15 TRCs
Over 70 Unique
Metrics and
Underlying
Protocols
Chronic Medications
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Precision Medicine in Practice: Medco is Using
Scientific Discoveries to Create New Protocols
% Plavix Users on PPI Drugs
Medco study
published
11/14/08
FDA early warning
and Medco system
alert enabled
FDA label
change
One year
after Medco
study
Mail
Retail
11/14/08 11/28/08 12/14/08 12/28/08 1/14/09 1/28/09 2/14/09 2/28/09 3/14/09 3/28/09 4/14/09 4/28/09 5/14/09 5/28/09 6/14/09 6/28/09 7/14/09 7/28/09 8/14/09 8/28/09 9/14/09 9/28/09 10/14/09
East 0.1417 0.1357 0.1461 0.1395 0.1569 0.1657 0.1698 0.1621 0.1728 0.1602 0.1657 0.1585 0.164 0.1621 0.1569 0.1657 0.1561 0.166 0.1539 0.1635 0.1497 0.1621 0.1489 0.158
West 0.1197 0.1181 0.1263 0.1206 0.12 0.12 0.1137 0.1137 0.1109 0.1131 0.1021 0.0919 0.0878 0.0908 0.101 0.1007 0.1007 0.1002 0.0878 0.0859 0.087 0.0859 0.0848 0.0848
11/14/08
12/14/08
1/14/09
2/14/09
3/14/09
4/14/09
5/14/09
6/14/09
7/14/09
8/14/09
9/14/09
10/14/09
Medco TRCs: Risk
decreased 33%
Retail: Risk
increased 14%
Retail: Increase from 14% (11/08) to 16% (10/09) = 14% growth in users taking both Plavix and a PPI
Mail: Decrease from 12% (11/08) to 8% (10/09) = 33% decline in users taking both Plavix and a PPI
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Financial Strategy
New Business
Mail Order
Generics
Specialty Pharmacy
Medicare
Clinical Innovations
TRCs & Pharmacogenomics
Medco Health Store(tm)/OTC
International
e-Prescribing
Biosimilars
Medco: A Portfolio of Drivers
Shareholder Value
Smarter Medicine
Comparative
Effectiveness
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2009 2010 2011 2012 2013 2014 2015
Acute
Chronic/Complex 13.7 9.1 14.1 26.9 9.3 13.1 8.2
Drivers of Growth:
Generics - A Strong Pipeline of Opportunity
Prevacid(r)
Topamax(r)
Valtrex(r)
Adderall XR (r)
Effexor XR(r)
Flomax(r)
Aricept(r)
Cozaar(r)
Hyzaar(r)
Lipitor(r)
Actos(r)
Zyprexa(r)
Plavix(r)
Seroquel(r)
Singulair(r)
Lexapro(r)
Levaquin(r)
Diovan(r)
Tricor(r)
Lovenox(r)
Lidoderm(r)
$13.7
$9.1
$14.1
$26.9
$9.3
$13.1
$8.2
Oxycontin(r)
Cymbalta(r)
Aciphex(r)
Nexium(r)
Celebrex(r)
Abilify(r)
2009 2010 2011 2012 2013 2014 2015
5.9 13.7 13.7 13.7 13.7 13.7 13.7
5 9.1 9.1 9.1 9.1 9.1
3.6 14.1 14.1 14.1 14.1
15.3 26.9 26.9 26.9
3.7 9.3 9.3
7 13.1
3.4
$5.9
$18.7
$26.5
$52.3
$67.5
$80.1
$89.7
Source: U.S. Drug spend estimates are based on IMS Health data for 2008. Compounded
amounts are prorated for mid-term expirations. Brand drug expirations based on expected patent
expiration dates current as of December 2009. Changes may occur due to litigation, patent challenges, etc.
$94.4 Billion in Brand Drugs
Off-Patent from 2009-2015
Off-Patent Compounding Effect -
Prorated
($ in Billions)
($ in Billions)
You are here
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2005 2006 2007 2008 2010E
Mail-Order Generic 36.4 39.9 47.4 58.2 44.5 65
Mail-Order Brand 50.9 49.1 47.4 47.6 32.6 43
Drivers of Growth:
Mail-Order Generic Volumes Increasing
2005 2006 2007 2008 2010E
New Business 4 4.7 2.9
Mail-Order Volume 87 89 95 106 77.1 108
Mail-Order Generic Volume
Mail-Order Brand Volume
Mail Order Prescription Volume
Mail-Order Brand vs. Mail-Order
Generic Prescription Volume
(In Millions)
(In Millions)
YTD
3Q09
YTD
3Q09
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2005 2006 2007 2008 YTD 3Q09 2010E
Mail-Order Generic 36.4 39.9 47.4 58.2 44.5 65
Mail-Order Brand 50.9 49.1 47.4 47.6 32.6 43
Drivers of Growth:
Mail-Order Generic Volumes Increasing
Mail-Order Generic Volume
(In Millions)
Mail-Order Generic Prescription Volume
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2006 2007 2008
Acute
Chronic/Complex 5437 6043 7974.2 7071.1
Drivers of Growth:
Specialty Pharmacy - An Important Growth Engine
$5.4
$7.1
$8.0
$6.0
2006 2007 2008
189 210 281.2 273
$189
$281
$273
$210
Accredo Net Revenues
Accredo Operating Income
2006-2008 CAGR 21.9%
2006-2008 CAGR 21.1%
($ in Billions)
($ in Millions)
YTD 3Q09
YTD 3Q09
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Drivers of Growth:
Medicare - Growth and Diversification
Retiree Distribution by Medicare Solution (Lives %)
RDS PDP Part D Federal Other
2.12 0.33 0.86 0.23 3.23
2007
RDS PDP Part D Federal Other
1.89 0.59 5.27 1.49 3.1
2009
Retiree Drug Subsidy
Federal Clients
Part D - PBM Inside - "ASO"
Medco PDP - "At risk"
Other
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Drivers of Growth:
New-Named Sales
Annualized
New-Named Sales
2009*
Net-New Sales
2010*
* As of third-quarter 2009 earnings call
>$10.0B
$4.1B
>$8.0B
>$4.0B
Sept '09 YTD Results
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OTC
Vitamins
Supplements
Rx
Rx
Medco Health Store(tm) Provides a Safety Net for
Vitamins/OTC Drug and Rx Drug Interactions
68% of adults are regularly taking an Rx drug and also
using an OTC drug or dietary supplement1
Proton Pump Inhibitors
increase the risk of major
cardiovascular event by more
than 50 percent for patients
taking Plavix(r)
Omeprazole obtained OTC
outside the pharmacy benefit
can not be reviewed for safety
WARNING!
Codeine - OTC Cough Syrups
Patients who are extensive
metabolizers of codeine can be
poisoned by excess conversion
of codeine to morphine
(Genotype AD6)
WARNING!
Warfarin plus aspirin increases
the risk of severe bleeding
Nearly 50% of potential drug-
drug interactions involved the
use of anticoagulants along
with antiplatelet drugs1
WARNING!
1. Source: Journal AMA Jan09
2. Source: Medco data
3. www.fda.gov
4. US GAO Report to Congressional Requestors: DIETARY SUPPLEMENTS - FDA Should Take Further Actions to Improve Oversight and
Consumer Understanding (Jan 2009). "Dietary supplements" includes vitamins.
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OTC
Vitamins
Supplements
Rx
Rx
Rx
Rx
Medco Health Store(tm) Provides a Safety Net for
Vitamins/OTC Drug and Rx Drug Interactions
68% of adults are regularly taking an Rx drug and also
using an OTC drug or dietary supplement1
Proton Pump Inhibitors
increase the risk of major
cardiovascular event by more
than 50 percent for patients
taking Plavix(r)
Omeprazole obtained OTC
outside the pharmacy benefit
can not be reviewed for safety
WARNING!
Codeine - OTC Cough Syrups
Patients who are extensive
metabolizers of codeine can be
poisoned by excess conversion
of codeine to morphine
(Genotype AD6)
WARNING!
Warfarin plus aspirin increases
the risk of severe bleeding
Nearly 50% of potential drug-
drug interactions involved the
use of anticoagulants along
with antiplatelet drugs1
WARNING!
80,000
Rx Doses2
300,000
OTC Drug Products3
75,000
Dietary Supplements4
1. Source: Journal AMA Jan09
2. Source: Medco data
3. www.fda.gov
4. US GAO Report to Congressional Requestors: DIETARY SUPPLEMENTS - FDA Should Take Further Actions to Improve Oversight and
Consumer Understanding (Jan 2009). "Dietary supplements" includes vitamins.
Over 30 Billion
Combinations
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Medco is Exporting Smarter Medicine
Germany
Sweden
UK
August 2009 - Joint
venture with United
Drug focusing on
specialty pharmacy
services
United Kingdom
Drug Spend: $22.3B
Population: 61M
March 2008 -
Collaboration with
Apoteket, government-
owned pharmacy, to
develop CDUR system
Sweden
Drug Spend: $4.3B
Population: 9M
April 2008 - Majority
stake acquisition of
Europa Apotheek
Venlo B.V.
Germany
Drug Spend: $41.3B
Population: 82M
Source: IMS
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Smarter Medicine through e-Prescribing
Strong industry momentum in 2009
26% of U.S. prescribers are now active e-prescribers
Number of e-prescribers more than doubled from 2008
MIPPA and ARRA incentives should fuel sustained momentum
Very promising signs for a long-term Medco advantage
Medco has the largest share of e-prescribed mail prescriptions
Medco is raising the bar, being the first to roll out real-time co-pay
information in 2010 - additional smart advances to come
Medco saves $2 in administrative costs for every new e-prescribed mail
prescription, and earns even more from higher generics and formulary
compliance
Medco's 2009 e-prescribed mail prescriptions more than tripled over 2008,
but still relatively small - at 1.5% of mail prescriptions in 2009
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Smarter Medicine: The World is Taking Notice
Innovation
5. Medco Health Solutions, Inc.
Most Admired in Health Care:
Pharmacy and Other Services
1. Medco Health Solutions, Inc.
100 Most Trustworthy Companies
#9. Medco Health Solutions (large cap companies)
GLOBAL
GLOBAL
People Management
10. Medco Health Solutions, Inc.
10
GLOBAL
TOP
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Drug Mix Trend (%)
Brand Drugs Account for 85%
of Client Drug Spend
Brand Name
Generic
Total Prescriptions Dispensed (%)
2004 0.52 0.48
2005 0.48 0.52
2006 0.44 0.56
2007 0.4 0.6
2008 0.36 0.64
MAT 2008/2009 0.34 0.66
2004 0.88 0.12
2005 0.87 0.13
2006 0.86 0.14
2007 0.86 0.14
2008 0.86 0.14
MAT 2008/2009 0.85 0.15
Total Expenditures on Prescription Drugs (%)
*
*
*MAT denotes moving annual total; MAT 08/09 represents the 12 months ending in July 2009.
Source: IMS Health, National Prescription Audit Plans, National Sales Perspective, September 2009.
Includes re-stated historical data effective with January 2009 update to IMS databases. Data includes specialty drugs.
Drug Spend Mix Trend (%)
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2006 2007 2008 2009
Acute
e-Rx's 10949896 29447150 67749689 190068527
e-Prescription Industry Statistics
2006 2007 2008 2009
Active e-Prescribers 15.868 35.597 74.487 155.917
Active e-Prescribers as % of Total 0.03 0.06 0.12 0.26
Total e-Prescriptions
Total Active e-Prescribers
(in millions)
Source: SureScripts
10.9
67.7
29.4
190.1
Total Active e-Prescribers
Active e-Prescribers as
% of Total Prescribers
(in thousands)
15.9
35.6
74.5
155.9
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Reconciliation Tables
Full Years Ended Full Years Ended
Earnings Per Share Reconciliation December 29,
2007 December 30, 2006
GAAP diluted earnings per share $1.63 $1.04
Adjustment for the 2006 legal settlements charge1 - $0.17
Diluted earnings per share, excluding the legal charge $1.63 $1.21
Diluted earnings per share growth over prior year 35% 17%
1) This represents the pre-tax legal settlements charge of $162.6 million recorded in the first quarter of 2006.
Medco Health Solutions, Inc.
Selected Information (Unaudited)
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