Caremark's expansion of its standalone disease management business "might be a logical extension in a year or two."

The pharmacy benefit manager's current focus is on consolidating its programs with AdvancePCS, Caremark CEO Mac Crawford said during an earnings call May 6.

The merger is moving along faster than the PBM anticipated. Caremark completed its acquisition of Advance PCS in March (¹ Also see "Caremark Completes Acquisition Of AdvancePCS" - Pink Sheet, 24 March, 2004.).

"We are now comfortable to bill…$125 mil. by the end of this year, which is one quarter earlier than we have previously given," Crawford said.

Caremark expects about 70% of its $125 mil. in synergies to come from aggregate purchasing power. The company had previously anticipated 70%.

In terms of contract renegotiations, the transition has been fairly smooth for the PBM.

"No doubt that when you have a transaction like this…you'll have some customers that will try to renegotiate and some will go out to bid and we have that going on right now," Crawford said.

None of Caremark's clients have exercised change of control provisions, he said.

Certain characteristics of the two PBMs, including how rebates are handled, will not be changed in the near term.

"We've got two different models," Crawford said. "We will continue to work under two business models for a long period of time. It's really based on what the customer's looking for."

"How we do things two years from now, who knows, maybe different than we are today, but right now, no change," he added.

Cultural challenges resulting from the merger have also been moderate.

I have seen far fewer cultural differences than I expected, Crawford noted. "People have just been super about working together and getting along and trying to make it, make the transaction work for our customers."

- John Rancourt

Caremark To Focus On Consolidating Programs With AdvancePCS, Contract Renewals

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