Medco's 10-year agreement with Accredo Health will increase its specialty pharmacy offering by 15 to 20 products.

"Under our recently announced agreement with Accredo Health we've expanded the number of drugs administered through our specialty pharmacy by an additional 15 to 20 products," CEO David Snow said Feb. 12 during the firm's fourth quarter earnings call.

Under the deal, "Accredo becomes the preferred retail and home delivery pharmacy provider to Medco Health members for the specialty product lines that Accredo currently dispenses to treat patients with long-term, chronic diseases," Medco said.

The Accredo add-ons "include medications to treat hemophilia, pulmonary arterial hypertension, multiple sclerosis, growth hormone deficiency, and Gaucher's disease."

In those categories, Accredo distributes Biogen's Avonex (interferon beta-1a), Genzyme's Cerezyme (imiglucerase), GlaxoSmithKline's Flolan (epoprostenol), United Therapeutics' Remodulin (treprostinil), and Actelion's Tracleer (bosentan).

Medco currently offers more than 100 specialty drugs through its recently opened distribution center in Columbus, Ohio.

The company will continue service for a number of specialty products. "The key ones that we are going to maintain would be again, parts of growth hormone therapy, parts of multiple sclerosis, all of hepatitis C, [and] the rheumatoid arthritis products," Medco President-Specialty Pharmacy Services Alan Lotvin, MD, said.

Lotvin was named president of the division in January after serving as a senior VP in Medco's pharmaceutical contracting group.

He joined the PBM from a cardiology practice in 1997 as senior director of medical policy and programs. He subsequently served as the chief medical officer for the division Medco dedicated to managing UnitedHealth Group's pharmacy benefit.

"This strategic alliance accelerates our move into specialty distribution," Snow said.

"Our partnership with Accredo gives Medco access to the competitive pricing and best possible care for our clients members through Accredo's premiere distribution capabilities and negotiated manufacturing agreements."

Snow had discussed the PBM's intention to expand its presence in specialty pharmacy during a presentation at the UBS Global Healthcare Services Conference Feb. 2 (¹ Also see "Medco, Caremark To Sponsor Medicare Cards Despite Concern With Rx Plans" - Pink Sheet, 9 February, 2004., p. 30).

Medco characterized the deal as a way to expand its specialty business cost-effectively.

"We don't intend in the foreseeable future to be building all these additional proprietary capabilities that are big investments....So Accredo's a great complement, makes a tremendous amount of sense," Snow said.

"If you look at the categories that...the drugs covered by this relationship represent, it's 14% of the overall specialty market," Lotvin said.

The 14% figure works out to about $1.4 bil., according to Medco estimates. In 2003, Medco managed $2.3 bil. in specialty drugs.

Medco's own specialty Rx business has grown quickly. "In less than a year...we have enrolled 235 clients into our specialty program and increased the number of lives covered by the program from 200,000 to 6.5 mil. members," Snow said.

Snow said that Medco will seek acquisition opportunities in the specialty business but is wary of getting into a "buying frenzy." The agreement with Accredo does not include the right of first refusal but it does have a change of control provision.

With the Accredo deal addressing growth in the specialty area, Medco can keep its $638.5 mil. in cash free for other uses (see ² Also see "Medco Balance Sheet Gives PBM Flexibility Ahead Of Medicare Rx" - Pink Sheet, 16 February, 2004. ).

The alliance represents some good news for Medco following the loss of two large clients: Independence Blue Cross and Blue Shield and the Teacher Retirement System of Texas.

Medco Adds 15-20 Specialty Pharmacy Products Under Accredo Deal

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