Medco Health celebrates its independence day

Communication World, May-June, 2005 by Jeffrey Simek

In March 2003, Medco Health Solutions, a leading pharmacy benefit manager (PBM) in the United States, announced a planned separation from parent company Merck & Co. and the appointment of a new CEO. This momentous event, which would be the largest domestic corporate spin-off in more than three years, called for a carefully orchestrated communication program that would effectively reach Medco Health's clients, members and the investment community.

A communication team comprising staff from both Coyne Public Relations and Medco Health faced a number of challenges in communicating the spin-off news. Most significant, Medco Health was recovering from the blow of a failed initial public offering (IPO): In 2002, the company's scheduled IPO was cancelled due to poor market conditions. Medco Health was also coping with scrutiny of its business practices, as media and regulators questioned the generally accepted accounting principles that PBMs used to calculate revenue. As the last remaining PBM owned by a major drug company, Medco Health faced allegations of conflicts of interest between its parent company (focused on generating revenue through drug sales) and its own mission (to purchase drugs at the best price for its clients and their health plans).

Additionally, several lawsuits against Medco Health and other PBMs had been filed in the months leading up to the spin-off. Yet Medco Health had been prevented from addressing the resulting negative media attention because of the U.S. Securities and Exchange Commission's mandatory quiet period for companies planning to go public.

However, the communication team looked to capture the spotlight by turning liabilities into opportunities. Medco Health's spin-off from Merck gave the newly independent company a chance to reinforce its image among its core clients and a new investor audience. It also allowed new CEO David Snow to establish himself as the face and voice of Medco Health with clients, investors and the media. On a broad scale, PBMs presented an intriguing topic for the media in the context of various issues in the marketplace, including proposals for a Medicare prescription drug plan and the importation of prescription drugs from Canada to the United States. Medco Health had a 24-hour window during which it was legally allowed to speak with the media to take advantage of these opportunities.

Objectives

The overarching goals for the program were to position Medco Health as a viable, independent company worthy of investment, and to validate the company's leadership and strength in the pharmacy benefits industry.

To achieve those goals,

Coyne PR and Medco Health developed the following communication objectives:

* Generate significant positive media coverage for Medco Health's spin-off from Merck.

* Establish new CEO David Snow as the face and voice of Medco Health.

* Proactively address negative perceptions held by the media and/or the investment community.

Solution and implementation

To prepare Snow for media inquiry during interviews on spin-off day, the team developed a comprehensive media training program, including an analysis of each interviewer's recent coverage of Medco Health and/or the industry.

The communication effort was rolled out in three phases: pre-spin, spin-off day and post-spin. In the weeks leading up to the spin-off, the communication team focused on crafting Medco Health's message. The investor relations team conducted an investor road show, engaging directly with top investment houses across the country through meetings and presentations. The team also conducted an analyst day in New York City, during which Snow outlined the company's growth strategy and his vision for the future directly to the investors in attendance and via a webcast.

Once the investment community was abuzz with the Medco Health news, the team turned its attention to the spin-off, with an eye on making it the biggest business news story of the day. The team scored a major victory when, on short notice, it arranged for Snow to ring the opening bell of the New York Stock Exchange on 19 August 2003, the day before the company went public. The media relations team then arranged 17 interviews for Snow with influential print and broadcast media that same day. Coyne PR kicked off the day's coverage with a live, 11-minute interview on CNBC with Snow at 7:30 a.m., followed by three wire service interviews. Representatives in lab coats distributed 3,000 Medco Health-branded pill bottles at the three main entrances to the NYSE. The bottles, which were filled with M&Ms in Medco Health's corporate colors and labeled with company statistics, were even used as props during the CNBC interview.

Finally, to close the loop on the program after spin-off day, the PR team circled back with analysts on 18 September with tours of the company's automated dispensing pharmacy in New Jersey, showcasing the company's technological leadership.

Measurement and evaluation

In the campaign, which Medco Health called "absolutely world-class," negative allegations were successfully addressed, resulting in overwhelmingly positive news coverage. The program yielded more than 58 million overall media impressions. This included more than 235 media stories over a four-day period, driven by 17 feature interviews in The Wall Street Journal, The New York Times, Investor's Business Daily and USA Today, as well as with the Associated Press, Reuters, Dow Jones and Bloomberg, and more than 90 broadcast segments, ranging from the CNBC segment to live interviews on CNN/fn and Bloomberg Television.