Medco seeks to export U.S. healthcare business model

There are still a few things we can teach the world about medical cost containment, despite what appears to be our own unsustainable cost spiral.

You would think, given that Americans pay twice as much as Europeans for health care that on average is less effective, we would be importing European business models, not exporting them.

But we do have a few ways to save a few dollars, and innovative entrepreneurs anxious to do business. So let the exporting begin.

The exporter in this case is Medco Health, a pharmacy benefits manager. They use computers and counseling to move patients toward generics, and fulfill the orders by mail.

(The company's ads feature a character called Dr. Obvious, above, who has his own Facebook page.)

I have watched Medco for over 30 years, since its construction as Medco Containment under horse-lover Martin Wygod. Wygod sold Medco to Merck in 1993, which spun it out in 2002. Its current market cap is almost $27 billion.

Medco has been interested in Europe since 2008, when it bought Europa Apotheek of Germany. It signed a deal to get into England last year, and this week launched a joint-venture with another German company, Celesio, which will let it expand across the continent.

The idea is that the two companies will share costs and equity 50-50, taking Medco's business model to the Continent where Celesio will handle procurement and fulfillment.

"We can significantly reduce overall medical spending in Europe," Medco CEO David Snow told a webcast audience yesterday.

And he probably can. European patients tend to be more passive on costs than their American counterparts, and companies more passive concerning their health care costs. But that is changing, as everyone faces an aging population.

The separation of drug plans from doctors has long been a feature of the American market, where Medco faces a much larger competitor, Caremark, which also owns the largest chain of drug stores, CVS . Geographic expansion thus makes good strategic sense for Medco.

Still, the news should give all Americans a bit of hope. There are still a few things we can teach the world about medical cost containment, despite what appears to be our own unsustainable cost spiral.

This post was originally published on Smartplanet.com

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