Medco says had competitive offer for FEP contract

NEW YORK (Reuters) – Medco Health Solutions Inc said Wednesday that the loss of a major pharmacy benefit contract to rival CVS Caremark Corp starting next year did not represent a trend.

Medco shares tumbled last Friday after the company disclosed the surprise decision for the Federal Employee Program account, for which Medco had been providing mail-order and specialty pharmacy benefits.

“Every once in a while you’re going to lose one,” Medco Chief Financial Officer Rich Rubino told an investor conference. “That’s not a trend; it’s one.”

Rubino’s comments came after a formal presentation by Medco, in which the large U.S. pharmacy benefit manager touted its strong organic growth and client retention in recent years.

“We have shown in the past that we can recover from these sorts of things,” Rubino told the conference, held by Sanford Bernstein. “Let’s not give it too much import.”

Some on Wall Street have been worried about Medco’s ability to retain business, after the company also lost a contract with Calpers, the biggest U.S. public pension fund, earlier this year.

The FEP contract generates nearly $3 billion in annual revenue, including about 9.8 million mail order prescriptions, according to Medco.

Rubino said the company “put a very competitive offer on the table” and was told the decision was based on the ”financials.” Some analysts have speculated that CVS took a much lower profit margin than Medco to win the account.