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Growth expected in PBM Sector

Ahead of the Bell: Growth expected in PBM Sector

From Associated Press (September 23, 2010)

Stocks in the pharmacy benefit management industry have trailed the Standard & Poor’s 500 index for the past year, but the sector is well positioned going forward, according to a FBR Capital Markets analyst.

The industry is down 7 percent in the 12 months that ended Sept. 20 compared to a 6-percent gain for the Standard & Poor’s 500 index, according to analyst Newton Juhng. But the analyst said Thursday in a research note that he expects a 10-percent to 13-percent recovery over time, as the sector closes the gap with the index.

"We remain bullish on the overall PBM space, as we view the industry as well positioned for future pharmaceutical trends of increased utilization, greater availability of generics, and the potential release of biosimilars to the open market," Juhng said in a note.

FBR Capital Markets started coverage of four companies in the PBM services industry: Catalyst Health Solutions Inc., Express Scripts Inc., Medco Health Solutions Inc. and Healthways Inc.

Juhng noted that most PBM companies are trading below median historical values, and health care reform has muted enthusiasm for industry prospects, a concern he says is overblown.

The analyst noted that the reform debate has increased the focus on rising health care costs, and nearly all areas of health care services have received some blame, but PBMs can make a positive impression.

"The PBM industry ... with its push for increased use of generics and mail order, can make a compelling argument that its interests are aligned with those of the general populace," Juhng wrote.


Posted: September 2010