HealthExtras Inc. has won a $1.1 billion contract to manage pharmacy benefits for more than 225,000 Maryland state employees in its latest expansion against tough competition.
The Rockville company helps clients keep health care affordable by taking over prescription functions that otherwise would be more expensive for self-insured employers.
Its customers include seven state employee health plans, unions and third-party administrators and other health plans.
Negotiations on the Maryland contract, which took effect July 1, lasted more than one year, company officials said.
Earnings for HealthExtras grew 67 percent in the first three months of this year compared with a year earlier.
"I think we picked up something like $800 million in new business coming into 2007," said David Blair, HealthExtras' chief executive officer.
The company competes with the Big Three of its industry — Medco Health Solutions, Express Scripts and CVS/Caremark — using a strategy that focuses on giving customers personalized service in an industry quickly consolidating into large corporations.
"We make a commitment to support each of our clients at the local level," Mr. Blair said.
The company also collaborates with clients to design their health care plans in what Mr. Blair calls "a customized approach, not a one-size-fits-all approach."
Its pharmacy benefit management operations, which operate under the name Catalyst Rx, provided 97 percent of its revenue in 2006. HealthExtras' roughly 450 employees processed more than 29 million prescription claims last year.
It also offers its own supplemental benefit programs, such as lump sum accidental disability, death and dismemberment and emergency accident or sickness benefits. The supplementals earned the other 3 percent of the company's revenue last year.
More than 58,000 pharmacies participate in HealthExtras national network of prescription providers.
When an employee of a client presents an identification card to a participating pharmacist, the Catalyst Rx system provides the pharmacist with online information about eligibility for benefits, patient history, reimbursement rates and other health plan information.
The company went public in 1999 and raised $60 million for its early operations.
"We should do close to $2 billion in revenue this year," Mr. Blair said.
The company reported net income of $9.7 million, or 23 cents per share, in the first quarter of this year compared with $5.8 million, or 14 cents per share, one year earlier.
Revenue grew to $406.4 million from $238.7 million in the first quarter of 2006.
Shares of HealthExtras, HLEX on the Nasdaq, fell 17 cents, or less than 1 percent, yesterday to close at $29.36.
Analysts say HealthExtras is making steady progress in a $200 billion market for pharmacy benefit management programs.
"Over the next three years, we look for them to grow at 28 percent earnings," said Michael J. Baker, vice president of health care research for the financial firm Raymond James and Associates.
"A lot of employers, given the fact you've had such a meaningful rise in benefits costs, are looking for alternative providers. That creates the potential for a company such as theirs to pick up some market share."
Acquiring Wellmark Blue Cross/Blue Shield as a major client last year, as well as growing awareness among health care plan consultants about the cost advantages of pharmacy benefit management programs, add to HealthExtras potential revenue growth, he said.
Mr. Baker rates HealthExtras' stock outlook as "outperform." Raymond James plans to have an investment banking relationship with HealthExtras.