Jim:       David how are you?

David:  I am doing well, Jim, how about you?

Jim:       Okay, David set the scene here… we know that the government is strapped… we know that there isn’t enough money for healthcare… it seems like there is a simple solution to lowering the cost right now, and it involves Medco, tell us about it.

David:  Sure, well first of all you save 10% across the board when you buy your drugs through mail vs. a retail setting, and that is important. But that is not going to save healthcare. What is really powerful is that if you manage chronic and complex disease with specialist pharmacists tied to protocol, you can get a $350B of waste in this country tied to inappropriate management of chronic and complex disease. Most important, is the clients, but there are other issues as well. So having a clinical setting that manages at the disease level in a superior way, can save our country an awful lot of money.

Jim:       Alright, David, I would tell you that my local pharmacist, who could be more accurate than my local pharmacist?

David:  Here is the challenge, Jim, at a local pharmacy level that pharmacist doesn’t necessarily know that that patient has been do five other pharmacies, from 6 other doctors, it really has to come through a PBM - pharmacy benefit manager - that information, and then the pharmacist has to have the time to actually work with that patient, and work with that physician, it is not easy to do that at the counter at a drug store. It is very hard.

Jim:       Is the issue here… cause this seems like…. I mean look… there is no such thing as lay ups… it would seem to me that there is a political clout on the behalf of the pharmacist… is that what is keeping this from happening?

David:  Not really, I mean I think in any reformed effort you have to be cognizant that there are lots of businesses out there that want to survive. And people work very hard to protect their businesses. And quite frankly, Medco needs retail pharmacies, they are part of our system. Our whole point is that we can make it much more efficient, and improve patient care for better outcomes by wiring healthcare, producing and showing physician and retail pharmacists the information that helps drive better outcomes. In a PBM environment, where we control the end to end solution, we are doing that today.

Jim:       Okay, one of the things that I think people don’t realize… they think big warehouse… lots of robots… doesn’t really have any data… just a big mail order house. Talk about the sophisticated data that you have, and how drug companies are smart to tap into it.

David:  Well, we manage the drug benefits for about 65 million Americans, and here is a fact that is important to know. 96% of all drug costs, 75% of all medical costs in this country is tied to chronic and complex disease. Drugs are the first line of defense 88% of the time when it comes to chronic and complex disease. So we have the information on the drugs. We know the proper protocols around the diseases that where you spend this money. And the name of the game in healthcare, is to keep people that are chronic or complex stable so that they don’t end up with the awful consequences that result in ER visits, in-patient hospital visits, and really terrible consequences personally.

Jim:       David, one last question… I have always felt that the best way to look at your earnings power is to see how many drugs are going generic… we all know that one of the main reasons why big pharma has been a terrible place to invest for multiple years… is people are looking out 2010, 11, 12 and seeing big generics… can you explain to our viewers why a big generic switch is good for Medco?

David:  Sure, there are about $90B worth of branded drugs that are expected to go off patent between now and 2015, the way we manage our business, we are aligned with our customers best interest. Meaning we make our money with generics, we don’t make our money on branded drugs. So we are very aligned when we save our clients significant money. That is where we make money.

Jim:       David Snow, chairman and CEO of Medco Health. Thank you for coming on the show.