* Prescription service shows record gains, expects approval of Express Scripts deal.

FRANKLIN LAKES — Medco Health Solutions, the giant pharmacy-benefits manager, reported record fourth-quarter earnings and revenues on Tuesday. The company also said it expected its proposed $29 billion acquisition by Express Scripts of St. Louis to close in the first half of this year.

Medco reported net income of $424.4 million, or $1.08 a share, on revenue of $19 billion for the fourth quarter. That includes costs of about $43.6 million related to the Express Scripts deal. Analysts had expected net income of $1.17 a share; if not for the merger-related costs, Medco would have beaten that estimate, with earnings per share of $1.25. In the fourth quarter of 2010, the company reported net income of $378.5 million, or 88 cents a share, on revenue of $16.9 billion.

Generics, which generally carry higher profit margins, made up a record 74.7 percent of prescriptions in the fourth quarter, Medco said.

Express Scripts' acquisition of Medco is being reviewed by the Federal Trade Commission on anti-trust grounds. The combined company would cover about one-third of the market.

"We continue to strongly believe that the combined company will be best positioned to drive down prescription costs for America," David Snow, Medco's chief executive, said in a statement. During a conference call, he said the merger would result in $1 billion in savings to consumers.

Medco is the nation's largest pharmacy benefits manager, with more than 20,000 employees — including more than 2,000 in Bergen County — and annual revenues last year of $70.1 billion. Express Scripts is third largest, after CVS Caremark.

The acquisition has been opposed by independent pharmacies, drugstore chains and supermarket chains with pharmacy operations, which say it would lower reimbursement rates and force customers to switch to mail-order prescriptions.

Medco's stock declined 82 cents Tuesday, to close at $63.19.

Email: lynn@northjersey.com