Medco Probe Exposes Wall Street Split

He went on to say that shorted customers often wind up paying for additional doctor visits and medications that health insurers feel they have already covered.

"Medco didn't do it once; it was a pattern and practice," Burns said. "This is not the kind of fraud you want to take before a jury."

Simek conceded that pill counting can be prone to errors. He also said that mistakes are "as likely to produce an overcount as an undercount." But he ultimately portrayed Medco's pill-counting technology as far more accurate than most.

The Summer Wind

Still, industry sources doubt that Medco will want to face a jury on emotionally powerful charges that are so simple to understand. As a result, they expect Medco to settle for "double damages" exceeding $1 billion. Otherwise, they say, the company faces a summer trial that could bring triple damages instead.

Meanwhile, Medco's two largest competitors -- Caremark (CMX Quote) and Express Scripts (ESRX Quote) -- continue to fight legal battles as well. Caremark faces its own whistleblower lawsuit for allegedly defrauding, and even endangering, customers in Florida. And Express Scripts has been sued by New York Attorney General Eliot Spitzer for allegedly defrauding customers in that state. Investigators accuse the companies of saving their customers less than they should.

The PBMs deny any wrongdoing. But some PBM critics foresee major industry changes as a result of the current probes. For now, however, even Burns admits that the companies will probably continue to perform well on Wall Street.

"Their core business will continue to grow until people figure out whether they actually need PBMs or not," he said. "The real question is whether PBMs actually save money. ... I think the jury is still out on that."