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"With record-setting performance across our core growth drivers, includingparticular strength from mail-order volumes, generics and specialty, as wellas continuing strong new business growth and renewals, Medco remains on trackto achieve its 27 to 29 percent earnings per share growth expectations for2008. Our 2008 annualized new-named sales grew to $5.1 billion from thepreviously reported $4.9 billion and retention rates remained at ahistorically high 98 percent. Additionally, 2008 net-new sales climbed to $4.6billion, up significantly from the previous $4.0 billion," said David B. SnowJr., Medco chairman and CEO.
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"The recently announced new and aligned agreement with UnitedHealth Groupthrough the end of 2012 provides opportunities for both Medco and UnitedHealthGroup, advancing our relationship with this important client. Also, ourrecently announced international initiatives in Sweden and Germany providelong-term opportunities that extend our technological and operationalexpertise beyond the United States. These initiatives are part of a broader,multifaceted growth strategy that holds great promise for the future," Snowsaid.
Richard J. Rubino, chief financial officer, added: "Our strongfirst-quarter 2008 EPS growth is particularly satisfying in light of thefirst-quarter 2007 benefit from the short-term availability of genericPlavix(R), which made first-quarter 2007 the strongest quarter in 2007. In thefirst quarter of 2008 we successfully installed significant new accounts suchas FEP, State of New York, and HIP of Greater New York, and incurred relatedstart-up costs amounting to approximately $8 million or $0.01 per share. Also,our first-quarter demonstrated a strong growth rate despite a non-recurringinterest rate swap write-off associated with our March 2008 senior notesissuance, amounting to $9.8 million, or $0.01 per share."
First-Quarter Financial and Operational Results
Medco reported record net revenues of nearly $13.0 billion, a 16.2 percentincrease from first-quarter 2007. Net revenues increased primarily as aresult of price inflation on brand-name drugs, and higher volumes associatedwith significant new client wins, partially offset by higher genericdispensing rates. Diabetic supplies associated with our PolyMedicaacquisition also contributed to the net revenues growth.
The record generic dispensing rates, which benefit clients and members andcontribute to higher gross margins, reduced net revenues by approximately $750million compared to the first quarter of 2007.
Total prescription volume, adjusting for the difference in days supplybetween mail-order and retail, increased 9.1 percent from the first quarter of2007 to 206.7 million prescriptions. Mail-order prescription volume increased13.7 percent to 26.6 million. Retail prescription volume increased 6.4 percentto 127.2 million. Adjusted mail-order prescriptions as a percentage of totaladjusted prescriptions increased 1.5 percentage points, reaching 38.4 percent.(Please see Table 6 for the calculation of adjusted prescription volume).
Total gross margin of 6.9 percent remained consistent with the firstquarter of 2007, which benefited from the short-term supply of generic Plavix.For the first quarter of 2008, record-level mail-order prescription volume andgeneric dispensing rates, partially offset by the
