Mail service and higher generic use helps keep spending in check, countering brand drug price inflation and specialty medication

 Mail service and higher generic use helps keep spending in check, countering brand drug price inflation and specialty medication growth

--Medco reports overall 3.3 percent Drug Trend for 2008
-- Drug Trend managed to a low 1.3 percent excluding specialty medications
-- Clients with more than 40 percent mail order experienced a negative drug trend

FRANKLIN LAKES, N.J., May 13, 2009 - Brand-name drug price inflation hit its highest level in five years, but increased use of generic drugs limited prescription drug spending growth to 3.3 percent, a new report released by Medco Health Solutions, Inc. (NYSE:MHS) revealed today. Specialty drugs, which include brand-name, high-cost biologics, accounted for 60 percent of that growth.

Medco's drug trend - a measure of spending growth that tracks the year-over-year increases in prescription spending among its client base - faced pressure from brand-name drug price inflation that topped 8 percent in 2008. Generic drugs, however, accounted for more than 64 percent of all prescriptions dispensed last year, dampening the impact of rising brand-name prices and specialty drugs as clients and members seek lower-cost options.

In 2008 Medco's overall prescription volume increased to 586 million up from 560 million the prior year. Of that total, Medco's mail-order prescription volume rose 11.6 percent to 106 million. Prescription drug utilization, which is the days of therapy per member, fell a slight 1.1 percent in 2008. This drop was primarily driven by over-the-counter availability of widely used allergy and gastrointestinal medications and safety concerns for certain medication classes.

For the second consecutive year, diabetes medications were the leading driver of drug trend [1] as the disease afflicts more patients and doctors increasingly prescribe newer and costlier drug therapies, the company said in the 2009 Medco Drug Trend Report [2], a comprehensive analysis of prescription drug spending and utilization. Other key drivers of prescription growth were rheumatological, seizure, antiviral and cancer drugs.

Specialty drugs propelled growth. [3] This group of drugs showed a 15.8 percent rise in drug spend. If specialty drugs were excluded, overall drug trend would have been 1.3 percent. New products and the absence of a regulatory approval process for lower cost generic versions of specialty drugs have fueled spending growth in this category. Bills have been recently introduced in Congress to create a regulatory pathway for biosimilars -versions of biologic pharmaceuticals that could eventually reduce these costs.

Recessionary pressures propel generic and mail order use
According to the report, which is statistically representative of the company's more than 60 million covered members, the weakened economy moderated prescription drug spending as consumers were increasingly motivated to use lower-cost alternatives, as clinically appropriate. In addition to a higher generic dispensing rate, clients whose members used mail-order pharmacy more than 40 percent of the time experienced negative drug trend - their drug costs, on average, actually declined year-over-year. Overall unit costs for medications increased 4.4 percent, since generic drug prices offset some of the brand-name drug price inflation.

Over the next five years, brand-name drugs with more than $66 billion in annualized sales are scheduled to lose patent protection [4] and face competition from generic introductions. The 2009 Medco Drug Trend Report projects spending growth of 4 percent to 7 percent annually through 2011, or an aggregate of 14.7 percent to 18.0 percent over the three-year period. Generic drugs should help to mitigate spending through this period, but growth is expected to resume as specialty drugs and new treatments paired with genetic screening make more of a presence in the marketplace.

"Under even greater pressure due to the unstable economy, plans are more aggressively pursuing tighter prescription drug management techniques, such as generics and mail order, to both reduce costs and preserve a comprehensive, high-quality benefit for their members," Chairman and CEO David B. Snow Jr. said. "Medco's clinical focus drives this concept even further - as specialist pharmacists engage members who have chronic conditions and their physicians to close clinical gaps in care - fundamentally bending the cost curve and reducing overall health care costs through improved compliance and wellness."

Per Member Utilization Dips
Prescription demand fell 1.1 percent in 2008, largely related to safety concerns for certain medication classes, over-the-counter availability of blockbuster medications and a relatively low number of new drug introductions, the report said.

"Safety issues and a transition to over-the-counter medicines had more to do with lowering utilization than either an unhealthy economy or a healthy population," said Dr. Robert S. Epstein, Medco's chief medical officer. "An aging America, combined with an obesity epidemic [5], has led to a surge in chronic conditions such as diabetes, high cholesterol, hypertension and heart disease. Until we successfully tackle this public health crisis, patients and payors will continue to see rising prescription and medical costs."

According to the report, safety issues led to declines in the use of osteoporosis drugs, hormone replacement therapy and medications used to treat chemotherapy-induced anemia. In addition, product withdrawals mandated by the U.S. Food and Drug Administration (FDA) resulted in a drop in migraine and cough & cold medication use.

Several medications became available without a prescription in 2008, reducing prescription drug utilization even as patients likely continued their therapy with the non-prescription formulations. Over-the-counter (OTC) availability of Zyrtec suppressed allergy drug demand by 30 percent; the OTC version of the laxative Miralax lowered prescription gastrointestinal drug use in that category by more than 9 percent. Without OTC availability of these medications, overall prescription drug utilization would have been flat compared with 2007.

Drug Trend Drivers
The 2009 Medco Drug Trend Report noted the following significant factors that affected drug trend:

• Rheumatological drugs jumped 17.2 percent due to a near 10 percent rise in utilization and higher unit costs from specialty drugs Click here to view spending outlook for 2009-2011 [6]
• Spending on seizure drugs [7] surged 13.9 percent from broadened indications to treat bipolar depression, neuropathic pain and fibromyalgia
• Higher-cost cancer drugs helped push spending growth 11.8 percent higher, despite only a marginal increase in utilization Click here to view spending outlook for 2009-2011 [8]
• Among drug categories seeing lower drug trend, the report listed lipid lowering drugs, allergy treatments and specialty drugs used to treat anemia

About Medco
Medco Health Solutions, Inc (NYSE: MHS) is a leading health care company, serving the needs of more than 60 million people. Medco, the world's most advanced pharmacy®, provides clinically driven pharmacy services designed to improve the quality of care and lower total health care costs for private and public employers, health plans, labor unions and government agencies of all sizes, and for individuals served by Medicare Part D Prescription Drug Plans. Through its unique Medco Therapeutic Resource Centers® and the Accredo Health Group, Medco's Specialty Pharmacy, the company is creating innovative models for the care of patients with chronic and complex conditions. Medco is a leader in the emerging field of personalized medicine and in applying evidence-based protocols to elevate the practice of pharmacy -a key element in reforming America's health care system. Medco is ranked number 51 on the Fortune 500 list, with 2008 revenues of more than $51 billion. For more information about Medco, go to http://www.medcohealth.com [9].

This press release 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. Forward-looking statements in this press release 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 and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission.