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MEDCO CONTAINMENT SERVICES' 60% INCREASE IN MAIL ORDER SALES

Executive Summary

MEDCO CONTAINMENT SERVICES' 60% INCREASE IN MAIL ORDER SALES is predicted for the fiscal year ending June 30, Medco Containment Exec VP-Marketing William McIntosh indicated at pharmaceutical policy conference sponsored by the Ohio State University. In an April 11 presentation, McIntosh said that sales were on track to reach $ 450 mil. in fiscal 1988, representing a 60% increase from 1987 sales of $ 283 mil. The projected sales increase mirrors a projected 60% jump in prescriptions dispensed. McIntosh estimated that the firm would dispense 12.8 mil. prescriptions in fiscal 1988, compared to the 8 mil. dispensed by the mail order house in 1987. McIntosh predicted a similar growth pattern for the coming year. "We expect that by a year or so down the road we will be approaching 18 to 20 mil. prescriptions dispensed," McIntosh said. Tracking the rise in dispensing, McIntosh said Medco expects to approach "$ 1 bil. in sales in the not to distant future." According to McIntosh, Medco is now the second largest volume provider of prescriptions, following the Veterans Administration, which dispensed 26 mil. prescriptions in 1987. Medco's figures put the American Association of Retired Persons third with 8 mil. prescriptions dispensed in 1987. To accomodate the anticipated growth, Medco is planning to open three new pharmacy centers "within the next year," including one already under construction in Texas. The firm currently operates eight pharmacies: two small regional pharmacies in California, and six "large size pharmacies that operate at between 30,000-60,00 prescriptions per week," McIntosh said. The six larger pharmacies include one in New York, two in Ohio, one in New Jersey, one in Florida and one in Nevada. The firm estimates that together the eight pharmacies dispense 250,000 prescriptions a week. McIntosh pointed out that while the mail-order prescription business is growing it still comprises a relatively small portion of pharmaceutical business, representing less than 5% of total retail drug sales in the U.S. The Medco exec cited a recent study by the Boston consulting group Arthur D. Little that estimated mail order prescription sales of approximately $ 1.2 bil. out of total industry sales of $ 26 bil. in 1987. The study predicted that mail order sales would almost quadruple to $ 4.5 bil. by 1992, while total drug sales during the same period would grow roughly 30% to $ 34 bil. "What this means is . . . that the industry in comparison to all prescription drugs that are being dispensed is relatively small -- virtually insignificant today," McIntosh commented. "It will remain, if you believe these projections, relatively small even in the early 1990s, but clearly if these projections are right it will be a significant force, capturing in excess of 10% of the total market by the early 1990s," he added.

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