8 of 10
BACKNEXT
Medco Health Solutions
Medco Health Solutions
Get quote: MHS

For decades, Americans' health coverage has been fraying, and every new President vows to tackle the problem. The incoming Obama administration has made similar promises. As the largest pharmacy benefits manager (PBM), Medco Health Solutions is poised to benefit from potential reforms. But this well-managed enterprise should thrive even if the government fails to overhaul health care, because the company already addresses the overarching problems of high costs and low quality.

Increased use of generic drugs should also give Medco a lift. "Generics benefit prescription benefit managers because the margins on generics tend to be better," says Les Funtleyder, author of Healthcare Investing and an analyst at Miller Tabak. In just a few years we will see some of the biggest blockbusters come off patent, including Pfizer's Lipitor, the cholesterol treatment that is the top-selling name-brand drug on the market. Bristol-Myers's heart-attack-prevention drug Plavix and Eli Lilly's bipolar-disorder treatment Zyprexa also lose their patent protection in the next three years. "Even if health-care reform doesn't generate increased use of generics, these expirations will," says Funtleyder.

Medco has been doing well even without those external factors. The company keeps its corporate customers happy; it has a retention rate of 98% for 2008. Earnings per share jumped in the third quarter by 49%, and the company gave a full-year 2009 earnings estimate of $2.45 to $2.55 per share, up 15% to 21% over its 2008 guidance. Moreover, the company trades at a P/E ratio of 15, the same as rival Express Scripts, despite Medco's dominance in the category.

NEXT: Pfizer
Last updated December 17 2008: 10:12 AM ET
Should you jump in now? Ignore, for a minute, the turmoil in the business world. If you have the time (say, six years) and patience, you may want to carefully consider the markets. More
401(k) repair kitWhether you're three months - or three decades - away from retirement, our targeted 401(k) checkup will help you make all the right moves. More
8 really, really scary predictions Dow 4,000. Food shortages. A bubble in Treasury notes. Fortune spoke to eight of the market's sharpest thinkers and what they had to say about the future is frightening. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.