Medco Pharmacy, part of Medco Health Solutions, Inc., started in 1983, according to Bloomberg Business. The Express Scripts Holding Company acquired Medco in 2012 after Federal Trade Commission approval, notes the New York Times. The merger created the United States' largest pharmacy benefits manager.
Martin Wygod, an investment banker, created Medco in 1983 as a holding company for the purchase of National Pharmacies, a mail-order vitamin and prescription drug business, according to Company-Histories.com. Wygod expanded Medco by arranging prescription drug benefits contracts with large companies and labor unions. Medco's mail-order business focused on repeat prescription refills necessary for chronic conditions.
In 1990, Medco introduced the Prescriber's Choice formulary, where drug companies would contract with Medco to provide cost savings. Medco would, in turn, charge patients lower prices for drugs on the formulary. From 1993 to 2003, the drug company Merck owned Medco, notes USA Today, leading to accusations during that time that the formulary served to favorably position Merck's drugs against competing products.
The goal of pharmacy benefits plans is to reduce cost to consumers by negotiating large purchasing agreements with drug companies and pharmacies, explains USA Today. The benefits program splits the consumer cost of a prescription between a pharmacy and the benefit plan, known as "spread pricing," enabling the benefit plan to earn money. Benefit plans also earn income through membership fees from company and individual health plans.