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Quest Crushed on UnitedHealth Cut

It loses its national lab service contract to LabCorp.

Quest Diagnostics (DGX) - Get Quest Diagnostics Incorporated Report dropped 9% after it said it lost its national lab service contract with UnitedHealth (UNH) - Get UnitedHealth Group Incorporated Report to rival LabCorp (LH) - Get Laboratory Corporation of America Holdings Report.

Lyndhurst, N.J.-based Quest said UnitedHealthcare accounts for 7% of annual revenue. LabCorp expects to realize revenue in excess of $3 billion from UnitedHealthcare over the 10-year term of its deal. Its shares rose 9%.

"In our response to UnitedHealthcare's request for proposals, we offered to substantially reduce its laboratory costs, while at the same time increasing access and convenience for its members and physicians," said Quest CEO Surya N. Mohapatra. "Unfortunately, the terms and conditions that were offered by UnitedHealthcare would have been irresponsible for us to accept.

"We believe patients, physicians and employers will continue to insist they have access to quality and convenient laboratory services from Quest Diagnostics, because of our enhanced patient experience, medical quality and the broadest distribution network," continued Dr. Mohapatra. "We want them to know they have a choice when it comes to selecting a laboratory. Choosing a diagnostic lab with a focus on patients and quality makes a difference for your health."

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Early Tuesday, LabCorp rose $6 to $71.21 and Quest dropped $5.80 to $55.10.