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Lilly's New Bloom Costs A Bundle


In Business This Week

LILLY'S NEW BLOOM COSTS A BUNDLE

Merck's acquisition last year of Medco Containment is starting to look like a prescient bargain. On July 11, Eli Lilly agreed to pay $4 billion for one of Medco's rivals, McKesson's PCS Health Services unit. Wall Street sent Lilly's stock down 15%, with good reason: It will pay 130 times net earnings for a pharmacy benefit manager (PBM) with just $170 million in sales. But Lilly had little choice. PBMs, which process prescription claims and negotiate bulk discounts with drug manufacturers, have gained control of one-third of the prescriptions written in the U.S. Lilly admits it felt pressure to move fast or be left behind.EDITED BY KEITH H. HAMMONDS


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