Medco Health Solutions faces a host of headaches, including the rocky future of health care, regulatory scrutiny and fierce competition. CEO David Snow Jr. says he's up for the challenge.
DAVID SNOW JR., PRESIDENT, chairman and chief executive officer of Medco Health Solutions Inc., a leading pharmacy benefit manager, has every reason to be acutely stressed out. He's got government regulators on his back, aggressive competitors nipping at his heels, a staggering $1.5 billion corporate debt hanging over his head and clients who don't have the foggiest idea what his company does. Anyone who's familiar with the health-care system or with the controversial pharmacy benefit industry recognizes the problem: crisis overload. But to Snow, whose father and grandfather were both physicians, handling tough cases under close scrutiny goes with the territory.
From his commanding, no-frills office in Franklin Lakes, New Jersey, the 49-year-old health-care executive discusses what it's like to deal with the increasingly unmanageable network of employer clients, drug manufacturers, physicians, government regulators and workers struggling to hang on to their health-benefits safety net. "It's an all-consuming job," he says. "It's always challenging."
Pharmacy benefit managers save money by negotiating for lower costs than an employer could by itself. They handle administrative chores, operate money-saving mail order pharmacies, set up relationships with pharmacies for walk-in plan members, establish formularies for preferred drugs and offer cost-saving alternatives such as substituting generic drugs for more expensive brand names.
What employers want to know about pharmacy benefit managers is this: Are their companies getting a good deal? In defense of the industry, the Pharmaceutical Care Management Association has issued a series of press releases on various PBM studies. One, commissioned by PricewaterhouseCoopers, estimates that PBMs will save employers $1.3 trillion over the next decade on the cost of prescription drugs. But enough questions have been raised about the industry's pricing policies that a group of chief human resources officers of major companies, operating through the HR Policy Association, are considering forming a drug-purchasing coalition that they believe might significantly reduce their costs.
Snow has been on quite a ride since taking over Medco last year to manage its separation from its former corporate parent, Merck & Co. Inc. Medco landed in the 41st spot on the Fortune 500 list of public companies right out of the chute, and Snow has been guiding it from one emergency to another ever since. A vigorous, confident New Englander who was reared in Manchester, New Hampshire, he earned a master's degree in health-care administration from Duke University in 1978 and has spent his entire professional life in health-care management, holding senior-level jobs with a number of health plans and insurers.
Veterans of the health-care wars take migraine-inducing problems as part of the job. They sigh, raise their hands as if to surrender, and complain about dumb moves like raising copayments on drugs, knowing that some patients may stop using them and wind up with a far more costly hospital stay as a result. Snow is no different. He's a big-picture guy, but readily acknowledges that he doesn't have the ultimate solution to the health-care system's many problems. "I don't have an answer," he says flatly. "There is no magic bullet."
Wortforce executives know Medco-if they know it at all-as the intermediary between drug manufacturers and the workers who are the end users of prescription-drug plans. With $34 billion in annual revenues and 13,000 employees, Medco is the dollar-volume leader among pharmacy benefit managers. Medco's two leading rivals are Caremark Rx Inc., whose merger with AdvancePCS is expected to generate revenues of $20 billion this year, and Express Scripts Inc. …