Medco Layoff Hits Quietly

Some Medco (MHS) employees have a bitter pill to swallow.

Nine hundred workers -- nearly 7% of the company's staff -- learned on Friday that they will soon lose their jobs or be transferred to another location. Medco has decided to shut down a big facility in Parsippany, N.J., that currently houses a mail-order pharmacy and a customer call center. The giant pharmacy benefit manager reached its decision after losing some major contracts amid a federal probe of its business practices.

Medco quietly informed affected employees of the layoffs Friday morning but, by Monday, had yet to issue a public announcement. The company did, however, confirm the news when contacted by TheStreet.com.

Medco spokeswoman Soraya Rodriguez-Balzac described the action as a "difficult decision" that will nevertheless enhance the efficiency of the company's overall operations. She blamed outdated technology and rising rent -- not employee performance -- for the pending closure. But she stressed that "several hundred" of the workers will be transferred to another facility.

Still, one Medco employee said the company seemed to be treating the layoffs like a "non-event."

"There is nothing written down and handed out by the company," another employee said in an email to TheStreet.com. "The company has still refused to post the announcement to their investor Web site."

Medco is making the cuts after losing business -- most notably its contract with the federal government -- to competitor Caremark (CMX). Medco is the target of a federal whistleblower lawsuit that accuses the company of, among other things, destroying prescriptions and favoring expensive drugs manufactured by former parent Merck (MRK). The company has already agreed to pay $29 million to settle similar allegations levied by 20 different states.

Rodriguez-Balzac dismissed any connection between the layoffs and lost business. But at least one Parsippany employee viewed the situation differently.