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Express Scripts(ESRX - Get Report), the largest pharmacy benefit manager in the U.S. ESRX essentially acts as a middle man between drug companies and pharmacies, administering more than a billion (Medco merger-adjusted) prescriptions each year. Express Scripts benefits from economies of scale -- it focuses on controlling costs by administering drug benefits, and taking a small margin for its trouble.
While middleman roles are typically fraught with risk, Express Scripts showed investors just how strong its business was this summer when its feud with
Walgreen (WAG) ended in the two companies' relationship. The split didn't last long. Ultimately, Walgreen suffered from the move when it lost patient volume, and it's likely that it yielded to Express Scripts' bigger reimbursement demands. That public scuffle is likely to be a warning to the other firms that pharmacy benefit managers deal with.
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Because Express Scripts operates within the U.S. healthcare system, it earns all of its revenues here at home. The recently upheld healthcare reform mandate is likely to provide a tailwind to ESRX when its pool of potential customers grows.
As of the most recently reported quarter, Express Scripts was one of
SAC Capital's holdings and also shows up in
George Soros' portfolio.
To see these names in action, check out the
Buy American 2012 Portfolio on Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.