U.S. health service companies seek growth abroad

By Lewis Krauskopf

NEW YORK (Reuters) - A crop of recent deals is sowing the seeds for U.S. health-care service companies to grow abroad as they try to translate their methods for controlling spending and managing chronic disease.

Makers of prescription drugs and medical devices have long benefited from overseas sales of their products -- especially lately with the dollar weak against foreign currencies.

Now U.S. health service firms such as pharmacy benefit managers, disease management companies and health insurers are moving into Europe, Asia and South America.

Although these investments are not seen as significantly boosting profits any time soon, Jefferies & Co analyst Arthur Henderson said the international markets are an emerging growth opportunity.

"I think you're going to see more deals and more contribution to earnings," Henderson said. "I do think there will be a lot more investment abroad as these companies see opportunities there."

The companies make their money domestically by convincing customers they can bring down healthcare budgets or make people healthier. An aging population in the United States has driven the need for such programs -- and executives see those demographics replicating in other modern nations.

"With aging populations with chronic health needs, it's natural for socialized systems to look for more market-based solutions to be able to continue to provide a high level of care to the entire population," John Driscoll, president of new markets for pharmacy benefit manager Medco Health Solutions, said recently.

Medco, which administers prescription drug benefits for employers and health insurers, last month agreed to pay about $120 million for a majority stake in a company that provides mail-order pharmacy services in Germany and the Netherlands.