10% of Europe's GDP is HealthCare Spending
Medco Forms European JV Zacks Equity Research, On Monday June 21, 2010, 11:29 am EDT
Medco Health Solutions (NYSE: MHS - News) and German Based pharmaceutical distribution company Celesio AG have formed a joint venture, to be headquartered in Amsterdam, to combine their operations in Europe with the aim to improve patient health and lowering of healthcare-related costs.
This is significant since an aging population and rising healthcare costs have raised healthcare spend in many European countries to 10% of national GDP.
The joint venture, which is expected to be operational in Germany in 2010, will target patients suffering from chronic diseases such as diabetes, asthma, high-cholesterol and heart disease. Subsequently, operations will spread to major European markets of UK, France, Spain and Italy. Gradually, the joint venture plans to include all 27 EU member states along with Switzerland and Norway.
Regular monitoring of patients is necessary since proper care at early stages of the disease saves on hospitalization expenses. It has been observed that in the US, more than half of all patients do not follow their prescribed therapy within the first year of treatment. The situation is similar in Europe where costs of poor patient compliance are quite high at €200-300 billion per year. The joint venture is obviously a welcome move since rising healthcare costs is a problem in almost every country.
The joint venture is an important step forward for Medco, which is one of the leading pharmacy benefit managers (PBM) in the US. An aging population coupled with the associated higher incidence of chronic diseases continues to drive demand and add to the escalating cost of new drug therapies. As a result, we expect the outlook for the PBM industry to remain positive. Medco, being the nation’s largest mail-order pharmacy operation is therefore well positioned to benefit from both favorable demographic trends and increasing acceptance of more efficient mail order and internet-related distribution channels.
We have a Neutral recommendation on the stock.
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