Express Scripts CEO confident in home delivery, specialty growth

Express Scripts’ second quarter net income more than tripled (compared to the second quarter of 2012) to $543 million, thanks in part to the growth of home delivery and the exploding specialty drug market.

“We are poised to benefit from the growth of home delivery and specialty drugs. Specialty drugs are expected to grow to nearly 50% of total drug spend by 2015 as a result of inflation, new drugs coming to market, and increased utilization,” said George Paz, chairman and CEO of Express Scripts, on the company’s earnings conference call July 30.

Home delivery represents nearly 30% of Express Scripts’ total adjusted claims, while around 75% of prescriptions are for maintenance medications. While Express Scripts projects 40% short-term penetration in home delivery, penetration could be as high as 60% over the long term, according to Paz.

“The reason we are confident in the future growth of home delivery is because it improves adherence, lowers costs, increases safety, and is consistent with consumer trends,” Paz said.

While Express Scripts’ executives previously projected earnings per diluted share to grow 13% to 16% in 2013, they now anticipate achieving growth of 14% to 16% by the end of the year. In addition, Paz said the company – the largest processor of prescription drug claims - will achieve annual earnings increases of between 10% and 20% over the next several years.

“We are bullish about our future. We will be making strategic acquisitions and returning cash to our shareholders,” Paz said.

At the same time, Paz acknowledged that the healthcare industry will lag because of U.S. economic conditions. “The economy, in my opinion, is still teetering. There are a lot of people still on the sidelines….who are laid off and have critical disease states. They will have healthcare available to them but…without the employer penalty, what is going to be available to them?” Paz said.

Addressing healthcare reform, Paz said one of the biggest questions is whether employers with more than 50 employees will cease providing coverage. “Based on conversations we are having with our clients and through analysis of industry information, we think most employers will take a wait-and-see approach for at least the first few years,” Paz said.

Express Scripts is “well-positioned” for healthcare reform, based on its relationship with managed care clients and its ability to help them control costs, Paz added.