M&a Medco

6619 WordsMay 20, 201127 Pages
Case Analysis - "Merck-Medco" Maureen Hergert MGT 362 - SPRING 2004 Professor Steven Francis Case Analysis - "MerckMedco" March 7, 2004 Introduction. Merck & Company (Merck) was a pharmaceutical researcher and manufacturer while Medco Cost Containment Services, Inc. (Medco) was a pharmacy benefit manager (PBM). On November 18, 1993, Merck purchased Medco for $6.6 billion. Immediately after the merger, Medco operated as a subsidiary of Merck. In 1994, MerckMedco was formed. 2 Grant states that corporate strategy involves decisions that define the scope of the firm. In addition, he states the importance of vertical integration as it has caused companies to redesign their value chains within their organizational boundaries. 1 The acquisition…show more content…
2 In August 2003, Merck-Medco announced the spinout of Medco, which is now named Medco Health Solutions. Medco Health Solutions is considered one the top pharmacy benefit management companies in the US. It currently serves about 65 million members. The company assists health plans in managing drug costs by negotiating rebates with pharmaceutical companies and processing claims. Patients may fill their prescriptions through a network of 60,000 pharmacies, a mailorder program, or the company's Internet pharmacy. Medco Health Solutions processes nearly 550 million prescriptions per year for clients that include unions, corporations, HMOs, insurance companies, and federal employees. 5 In retrospect, the Medco acquisition was beneficial for both companies. Its website reports the following: Together, Merck and Medco Health have enjoyed 10 years of growth and success. As a subsidiary of Merck, Medco Health grew to become the nation's leading pharmacy benefits management (PBM) company, providing integrated prescription health care to 62 million Americans. Medco Health increased revenues from $2.2 billion in 1992 to $33 billion in 2002, and last year, filled or processed approximately 548 million prescriptions. By all measures, the acquisition of Medco Health by Merck has been highly successful," said Merck Chairman, President and Chief Executive Officer Raymond V. Gilmartin. "With the spin-off, the market now has the ability to value each
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