AmerisourceBergen wins $18.5 billion Express Scripts contract

Valley Forge-based drug-wholesaler AmerisourceBergen Inc. announced Tuesday that it has won a three-year contract, worth about $18.5 billion a year, to supply products to pharmacy benefits manager Express Scripts.

"We are honored that Express Scripts has chosen AmerisourceBergen to supply the brand pharmaceuticals it needs for its recently combined mail-order and specialty-pharmacy business," Steven H. Collis, AmerisourceBergen's president and chief executive officer, said in a statement.

The contract is a critical development for Collis and AmerisourceBergen's 13,000 employees - including 1,100 in three local facilities - because the revenue essentially replaces proceeds from a contract with Medco Health Solutions, which Express Scripts acquired in April to create the nation's largest mail-order drug company and largest pharmacy-benefits manager.

PBMs are paid to manage the drug portion of employer-sponsored health-insurance programs; wholesale-drug companies distribute pharmaceutical manufacturers' products.

With the purchase of Medco completed, St. Louis-based Express Scripts requested proposals from the three largest wholesalers: McKesson Corp. of San Francisco; Cardinal Health of Dublin, Ohio; and AmerisourceBergen, which also handles other supply-chain activities for clients.

Though it is 29th among the Fortune 500, with $80 billion in revenue in 2011, AmerisourceBergen is the smallest of the three wholesalers; $19 billion of that revenue came from its Medco contract.

In filings with the Securities and Exchange Commission and in a May interview with The Inquirer, Collis said the biggest corporate uncertainty for AmerisourceBergen was the outcome of negotiations with Express Scripts.

Collis was not specific, but he was mildly optimistic about the status of negotiations as he spoke July 26 with stock-market analysts, when the company reported quarterly earnings. Revenue for the fiscal 2012 third quarter was $19.8 billion, a drop of 1.9 percent from the same period in 2011.

The contract with Express Scripts will start Oct. 1. In the statement Tuesday, AmerisourceBergen said it expected revenue from the new agreement to contribute about 23 percent of company revenue and about 3 percent of its earnings per share.

AmerisourceBergen's stock closed Tuesday at $39.70, up $1.17, or 3.04 percent, on the New York Stock Exchange.

The Express Scripts decision was bad news for Cardinal Health, which has offices in the Philadelphia area.

In a filing with the SEC, Cardinal Health said its previous contract with Express Scripts provided $9 billion in revenue.