Monday, March 21, 2011

Medco Responds to the CalPERS Situation

On Friday, Medco Health Solutions (NYSE:MHS) formally responded to allegations about the company's actions related to the California Public Employees' Retirement System (CalPERS) PBM business. Click here to read the 8-K filing with the response.

Below are links to a few news stories about this situation in case you haven't heard about it yet. Briefly, Medco was mentioned in a report on alleged corruption at CalPERS, which then terminated negotiations for renewing a contract with Medco. Chairman and CEO David Snow has unambiguously defended Medco's "integrity."

Medco's latest response suggests that the relationship with an outside consultant was appropriate. More significantly, the independent directors of Medco's Board have determined not to conduct an internal investigation at this time.

At this point, I do not expect a broader impact for the PBM industry as a whole, but reserve the right to change my mind as the story unfolds.

Calpers Probe Touches Medco (The Wall Street Journal, 3/18/11)
"On Monday, Calpers released a report it commissioned to examine middlemen paid by outside money managers to help win fund business. Calpers said the review found apparent misconduct and that some top fund officials had acted inconsistently with their responsibilities.

The Medco-related activity accounted for a relatively small part of the report. Calpers has said that there may have been improper activity by former Calpers officials in connection with Medco's hiring of a consultant who had been a Calpers board member."
You can read the full report here: CalPERS Releases Special Review Report on Placement Agent Activity.

Here are some other background stories:

6 comments:

  1. You are being way too nice on Medco :)

    ReplyDelete
  2. 1. A Primer on the Economics of Prescription Pharmaceutical Pricing in Health Insurance Markets by Ernst R. Berndt, Thomas G. McGuire, Joseph P. Newhouse #16879 (HE IO)
    http://papers.nber.org/papers/W16879

    Above just posted. Note 6 references to Drug Channels.

    ReplyDelete
  3. Thanks for noticing! I'll comment on the paper when it is published later this year as part of a book compilation.

    ReplyDelete
  4. Holy cow Adam. It doesn't take a genius to realize that Medco has been pushing the envelope for close to 20 years.

    Even in the Paid Prescriptions days (10 yrs antes de Merck-Medco with Marty Wygod), they were known for cutting sweetheart deals not just to different client groups, but also to specific pharmacy networks. Nothing like following the Rotary Int'l Four-Way Test....not.

    Also, wasn't there a USAG from Philly who made certain Medco was in the news on a regular basis? Forgot the guys name.

    ReplyDelete
  5. AnonymousJune 29, 2011

    Holy cow Adam. It doesn't take a genius to realize that Medco has been pushing the envelope for close to 20 years.

    Even in the Paid Prescriptions days (10 yrs antes de Merck-Medco with Marty Wygod), they were known for cutting sweetheart deals not just to different client groups, but also to specific pharmacy networks. Nothing like following the Rotary Int'l Four-Way Test....not.

    Also, wasn't there a USAG from Philly who made certain Medco was in the news on a regular basis? Forgot the guys name.

    ReplyDelete
  6. AnonymousJune 29, 2011

    You are being way too nice on Medco :)

    ReplyDelete

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