Medco 2014 Annual Report Download - page 44

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Express Scripts 2014 Annual Report
42
Selling,generalandadministrativeexpense(“SG&A”)decreased$276.9million,or6.2%,in2014from2013.This
decreaserelatesprimarilytooperationalefficienciesasaresultoftheMerger,partiallyoffsetby$614.4millionoftransaction
andintegrationcostsfor2014comparedto$490.4millionfor2013.
PBMoperatingincomeincreased$47.5million,or1.4%,in2014from2013,basedonthevariousfactors
describedabove.
PBM RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2013 vs. 2012
Networkrevenuesincreased$5,478.9million,or9.5%,in2013from2012.DuetothetimingoftheMerger,2012
revenuesandassociatedclaimsdonotincludeMedcoresultsofoperations(includingtransactionsfromUnitedHealthGroup
members)fortheperiodJanuary1,2012throughApril1,2012,comparedtoafullyearofoperationsfor2013.Duetothis
timing,approximately$9,131.7millionoftheincreaseinnetworkrevenuesrelatestotheacquisitionofMedcoandinclusionof
itsrevenuesandassociatedclaimsforthethreemonthsendedMarch31,2013.Thisincreaseispartiallyoffsetbylower
revenueofapproximately$3,565.8millionduetothetransitionofUnitedHealthGroupduring2013,aswellasanincreasein
thegenericfillrate.Ournetworkgenericfillrateincreasedto81.6%oftotalnetworkclaimsin2013ascomparedto79.4%in
2012.
Homedeliveryandspecialtyrevenuesincreased$4,763.5million,or14.5%,in2013from2012.Duetothetiming
oftheMerger,2012revenuesandassociatedclaimsdonotincludeMedcoresultsofoperations(includingtransactionsfrom
UnitedHealthGroupmembers)fortheperiodJanuary1,2012throughApril1,2012,comparedtoafullyearofoperationsfor
2013.Duetothistiming,approximately$5,216.8millionoftheincreaseinhomedeliveryandspecialtyrevenuesrelatestothe
acquisitionofMedcoandinclusionofitsrevenuesandassociatedclaimsforthethreemonthsendedMarch31,2013.In
addition,thisincreaseisduetoinflationonbrandeddrugs.Theseincreasesarepartiallyoffsetbylowerrevenueof
approximately$627.2millionduetothetransitionofUnitedHealthGroupduring2013,aswellasanincreaseinthehome
deliverygenericfillrate.Ourhomedeliverygenericfillrateincreasedto74.6%ofhomedeliveryclaimsin2013ascompared
to71.5%in2012.
CostofPBMrevenuesincreased$9,543.6million,or11.3%,in2013whencomparedtothesameperiodof2012.
DuetothetimingoftheMerger,2012costofrevenuesandassociatedclaimsdonotincludeMedcoresultsofoperations
(includingtransactionsfromUnitedHealthGroupmembers)fortheperiodJanuary1,2012throughApril1,2012,comparedto
afullyearofoperationsfor2013.Duetothistiming,approximately$13,416.8millionoftheincreaseincostofPBMrevenues
relatestotheacquisitionofMedcoandinclusionofitscostofrevenuesandassociatedclaimsforthethreemonthsended
March31,2013.Inaddition,thisincreaseisduetoingredientcostinflationonbrandeddrugsaswellas$238.3millionof
transactionandintegrationcostsfor2013comparedto$49.7millionfor2012.Theseincreasesarepartiallyoffsetbylowercost
ofrevenuesofapproximately$4,069.4millionduetothetransitionofUnitedHealthGroupduring2013,aswellasanincrease
inthegenericfillrate.
PBMgrossprofitincreased$915.9million,or13.0%,in2013from2012.Thisincreaserelatestotheacquisitionof
Medco(includingtransactionsfromUnitedHealthGroupmembers)andinclusionofitsgrossprofitandassociatedclaimsfor
thethreemonthsendedMarch31,2013,asdescribedabove.Inaddition,thisincreaseisaresultofbettermanagementof
ingredientcostsandcostsavingsfromtheincreaseinthegenericfillrate,partiallyoffsetbylowerrevenuesandassociatedcost
ofrevenuesduetothetransitionofUnitedHealthGroup.
SG&Aincreased$218.6million,or5.1%,in2013from2012.Approximately$832.9millionofthisincrease
relatestotheacquisitionofMedco,dueprimarilytotheinclusionofitsSG&Aandtheamortizationofintangibleassets
acquiredforthethreemonthsendedMarch31,2013,asdescribedabove.Thisincreaseispartiallyoffsetbysynergiesrealized
asaresultoftheMerger,$490.4millionoftransactionandintegrationcostsfor2013comparedto$697.2millionfor2012,and
decreasedmanagementincentivecompensation.
PBMoperatingincomeincreased$697.3million,or24.9%,in2013from2012,basedonthevariousfactors
describedabove.
38