PBM Medco Invests In Comparative-Effectiveness, Safety Research Firm

The Wall Street Journal reports that pharmacy benefit manager Medco Health Solutions will buy United BioSource, a business that conducts safety and comparative effectiveness research, for $730 million. One ripple is that United BioSource’s main clients are drug and biotech companies whose interests may conflict with Medco’s own clients – the insurance companies, employers and others who buy drugs. That conflict may be narrowing, however. “Larry Marsh, an analyst at Barclays Capital, said drug companies, under pressure from governments and other pharmaceutical purchasers, are becoming more interested in funding head-to-head comparative research on their products” (Anna Wilde Mathews, 8/17).

The (Newark, N.J.) Star-Ledger: On that note, Medco executives think the acquisition will align the firm with the recent health overhaul. Chief executive David Snow said, “To meet the three main objectives of national health care reform — improving quality and reducing costs in order to extend access — it is more critical than ever to ensure that our use of medicines is driven by scientific evidence and proven economic value.” That’s the job of United BioSource, “a closely held company in Bethesda, Md., [that] is considered a leading provider of post-approval drug and medical device research” (Todd, 8/17).

The Washington Post: ”Analysts expect the recently signed health-care overhaul law to spur an increase in research comparing drugs and devices. Researchers will compare health systems around the world in areas where both Medco and United BioSource have reach.” One analyst noted that “Medco has been aggressive about doing research in areas such as drug interaction and cost-benefit analyses. ‘This acquisition is a solid fit with what they’ve already done,’ he said” (Ryst, 8/17).

Bloomberg: Not everyone thinks the buy is a great idea. Analyst Arthur Henderson at Jefferies & Co. in Nashville, Tenn., said, “I wonder if investors are going to worry that they paid too much for this given how little accretion they expect in 2011. My first reaction was, ‘what is this? You just spent a big chunk of money on something and I’m not sure how it fits.’” Also on those lines, Sanford C. Bernstein analyst Helene Wolk said, “This appears to represent research on behalf of the pharmaceutical manufacturers versus Medco’s objective, which is typically on behalf of payers” (Wechsler, 8/16).