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.You can read the full report here: CalPERS Releases Special Review Report on Placement Agent Activity.
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."
Here are some other background stories:
- CalPERS Notifies Medco of Renewal Decision (Medco press release, 3/16/11)
- Medco CEO To Share CalPERS Info, Defends Co 'Integrity' (Dow Jones Newswires, 3/17/11)
- Medco Receives SEC Subpoena Related To Calpers Matter (Dow Jones Newswires, 3/18/11)
