Proportion of Overall Spending on Expensive Treatments Highest Among Children -

ORLANDO, Fla., /PRNewswire-FirstCall via COMTEX/ -- Fueled by a biotech surge, spending on high-cost "specialty" medications for people with complex, chronic conditions -- ranging from rheumatoid arthritis to infertility -- grew 26.6 percent in 2003. This represents a growth rate that is approximately double the national average increase in drug spend (13.4 percent), according to new data released today by Medco Health Solutions, Inc. (NYSE: MHS).

Medco's 2004 Drug Trend Report, which reviewed the company's top 150 clients, revealed data that points toward two therapeutic categories - rheumatoid arthritis and multiple sclerosis - which combined contributed to nearly 50 percent of pharmaceutical spending in the specialty drug category in 2003. Rheumatoid arthritis drugs alone made up 50 percent of drug trend (the year-over-year growth in spending) under the pharmacy benefit. Current spending on specialty drugs is approximately $25 billion and is expected to reach $40 billion by the end of 2006. The annual cost of specialty drug therapy can range from $6,000 to more than $350,000 per patient.

"The pipeline for biotechnology drugs has become the fastest growing segment of drug trend in America," said Dr. Alan Lotvin, president, Specialty Pharmacy Services, Medco. "To aggressively manage costs associated with specialty pharmaceuticals, Medco focuses on addressing the spend that is often buried within major medical claims. Through a proprietary integrated data management system, we can help health plans and employers manage the rising costs of these expensive medications, while also delivering a high standard of personalized patient care."

The specialty drug trend analysis, highlighted in the Drug Trend Report, uncovers growth in spending and use of particular high-cost medications, including:

• Rapid rise in rheumatologics: Spending on treatments for rheumatoid arthritis increased 80.6 percent, and utilization increased 71.2 percent. Drug trend for rheumatologic conditions overall rose 64.5 percent last year, driven by a 28.8 percent increase in unit costs and new drug introductions.
• Growth among children: In 2003, specialty medications comprised the largest proportion of the total prescription drug spend among children under 19 years of age -- 8 percent. The 35-49 age group had the second largest proportion of specialty spend at 5 percent. Specialty drugs in seniors 65+ made up only 1 percent of their drug spend.
• Specialty Drivers: Besides the dramatic increase in trend for rheumatologics, cancer and hemophilia drugs drove trend in 2003 with jumps of more than 33 percent and 28 percent respectively.
• Overflowing Pipeline: More than 195 biotech drugs are in Phase II or Phase III clinical development. Currently, 178 biotech drugs are in development for cancer therapies; 47 for infectious diseases; 26 for autoimmune diseases; and 21 for AIDS/HIV.

"As specialty medication use grows, health plans would be well advised to consider developing specific strategies to deal with the potentially destabilizing cost implications," said Lotvin. "By considering options, such as the integration of major medical and pharmacy claims for specialty medications, tiered co-pays geared specifically for specialty medications, and coordinated clinical support services, plans can better equip themselves to address the challenges brought by this continually emerging category of treatment."

The specialty drug category is one of a number of pharmacy benefit issues reviewed in Medco's 2004 Drug Trend Report, one of the nation's most comprehensive examinations into the trends affecting prescription healthcare costs and strategies for managing them. Other emerging trends reviewed in the report include:

Drug Trend & Spend

• Drug Trend Falls for Third Straight Year: While drug trend sits at a national average of 13.4 percent, Medco reported that its clients saw a drug trend rate significantly lower (10.2 percent); more than 50 percent of Medco's clients recorded trend rates below 10 percent.
• CNS Drugs Take the Top Spot: In 2003, central nervous system medications, including treatments for attention deficit/hyperactivity disorder (ADHD), overtook cardiovascular drugs as the largest single category of spending, accounting for 24.8 percent of overall plan spending.
• Pediatric Spending Continues to Rise: Spending on prescription drugs for children under age 19 grew at a higher rate last year (9.5 percent) than for any other age group; this is the third straight year the pediatric category has been the No. 1 age group driving drug trend.
• Overall Pipeline Slows but Blockbusters Expected: During 2003, the Food and Drug Administration (FDA) approved only 21 new molecular entities, just four more than 2002, and only 72 new drug applications, well below the high of 131 in 1996. Despite this decline, several blockbuster drugs are expected to come to market in 2005, including Exanta(R) (ximelagatran) for the prevention of blood clots and stroke; Alvesco(TM) (ciclesonide) for asthma; Arcoxia(TM) (etoricoxib) for the treatment of chronic pain often associated with osteo- and rheumatoid arthritis; Cymbalta(R) (duloxetine) for depression; Genasense(TM) (oblimersen) for cancer treatment; a Zocor(R)/Zetia(R) (simvastatin/exetimibe) combination for treating high cholesterol; and pregabalin, a CNS pain medication. Each new drug has the potential to exceed $1 billion in annual sales.

Cost Containment Strategies

• Mail Order for Maintenance Meds: The average mail order pharmacy service prices for maintenance medications are significantly lower than those provided through retail, and can provide up to 10 percent savings for health plans. Drug trend for the 50 largest Medco clients enrolled in a mail order program averaged 6.9 percent, significantly lower than the national average of 13.4 percent.
• Generics: Drugs with total U.S. sales of almost $30 billion per year could lose patent protection over the next three years. Generic drugs could comprise as much as 57 percent of the prescription drug market by the end of 2005, up from 47 percent in 2002. Generic medications contain the same active ingredients, strength and dose as their brand- name medications and may lower the overall cost of providing a prescription drug plan by 4 percent.
• Health Plan Changes: Prudent changes to co-payment incentives, capitalizing on over-the-counter (OTC) drugs, and implementing coverage rules that require prior authorization can lead to a dramatic reduction in drug trend.
• Integrated Data: Using integrated patient medical and health plan information can identify potential drug interactions -- averting potential hospitalizations and resulting in significant health plan savings.

About Medco

Medco Health Solutions, Inc., a leading pharmacy benefit manager with the nation's largest mail order pharmacy operations, assists its customers to moderate the cost and enhance the quality of prescription drug benefits provided to members nationwide. Its customers include private- and public- sector employers and healthcare organizations. Medco is traded on the New York Stock Exchange under the symbol MHS. On the Net: http://www.medco.com.

This press release contains "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that may cause results to differ materially from those set forth in the statements. No forward-looking statement can be guaranteed, and actual results may differ materially from those projected. We undertake no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise. Forward-looking statements in this presentation should be evaluated together with the risks and uncertainties that affect our business, particularly those mentioned in the Risk Factors section of the Company's Annual Report on Form 10-K filed with the Securities and Exchange Commission.

SOURCE Medco Health Solutions, Inc.

Ann Smith of Medco Health Solutions, Inc., +1-201-452-0487, or ann_smith@medco.com ; or Kevin Lamb or Janet Schiller, both of Coyne Public Relations, +1-973-316-1665, for Medco Health Solutions, Inc.

http://www.medco.com