Nov. 3 (Bloomberg) -- Medco Health Solutions Inc., the largest U.S. pharmacy benefits manager, said third-quarter earnings rose 13 percent with the help of new clients and increased prescriptions for generic drugs.

Net income climbed to $335.6 million, or 69 cents a share, from $295.7 million, or 58 cents, a year earlier, the Franklin Lakes, New Jersey, company said today in a statement. Earnings excluding some items beat by 3 cents the 72 cent estimate of 21 analysts surveyed by Bloomberg.

Medco operates drug plans for employers, governments, managed-care companies and unions, using its buying power to hold down expenses. The company added contracts with Coventry Health Care Inc.’s Medicare business and state employee plans of New Jersey and Indiana as the recession reduced employment.

“With the economy continuing to struggle, more and more prospective customers are looking to a Medco for its strategies to drive down health-care costs,” Arthur Henderson, an analyst at Jefferies & Co. in Nashville, Tennessee, said in a telephone interview today. “This is indicative in their 2009 results and 2010 outlook and the 99 percent retention rate with clients they announced, which is the highest in memory.”

2010 Forecast

Medco rose $1.48, or 2.6 percent, to a 52-week high of $59.06 at 4:15 p.m. in New York Stock Exchange composite trading. Medco has gained 41 percent this year.

Revenue climbed 18 percent to $14.8 billion. The number of prescriptions filled rose 14 percent to 220.2 million, with 68 percent of those for generic drugs, which are more profitable than brand-name drugs for Medco.

Medco forecast adjusted earnings of $2.80 to $2.82 for this year, compared with a July forecast of $2.76 to $2.81. The company forecast adjusted earnings of $3.28 to $3.38 for 2010.

The company had a cash balance of $2.02 billion. While the company has been mentioned as a potential buyer of health- insurer Aetna Inc.’s pharmacy benefit management unit, Medco’s chief financial officer, Rich Rubino, said during the company conference call that there was “nothing imminent on the front of significant acquisitions.”

Medco is looking at “smaller acquisitions that could add value in 2015 and beyond,” Rubino said in a telephone interview after the conference call.

“The Aetna acquisition would be about short-term growth,” he said. “We’re growing organically. We don’t need an acquisition to support 2010 growth.”

Annualized new business for 2010 rose to $4.1 billion from the $2.8 billion Medco reported at the end of the second quarter. Net new business, which shows the effect of lost accounts, was $4 billion.

To contact the reporters on this story: Pat Wechsler in New York at pwechsler@bloomberg.net.

Last Updated: November 3, 2009 16:52 EST