Report: FTC may approve Express-Medco deal
Saturday, March 10, 2012
NEW YORK (AP) — Antitrust regulators will probably not oppose the merger of two of the country’s largest pharmacy benefits management companies, The Wall Street Journal reported Friday.
The FTC is reviewing Express Scripts Inc.’s plan to buy competitor Medco Health Solutions Inc. for $29.1 billion in cash and stock. The Journal reported Friday that the FTC is not preparing to file a lawsuit to block the deal or taking other steps to prevent the merger, although it said the FTC does have some concerns about the $29.1 billion deal. The Journal cited people familiar with the matter.
The FTC declined to comment on the story. Express Scripts and Medco also declined to comment on the report, and said they still expect the deal close in the first half of this year.
Express Scripts and Medco are two of the three biggest independent pharmacy benefits managers in the country, and combined, they would handle prescriptions for about 135 million people. The companies run prescription drug plans for employers, government agencies and other clients, using their large purchasing power to negotiate lower drug prices and make money by reducing costs for health plan sponsors and members.
They also hold down costs by extracting discounts and rebates from drugmakers, using tiered co-payments that nudge patients to buy generics or the lowest-cost brand names, and reminding patients to take medicines as scheduled to limit costly complications. Express Scripts also has said the PBM business would remain competitive, with that competition coming from retail pharmacy PBMs, independent PBMs and those run by health insurers.
But the deal has stirred some concern about competition in Congress, and it has drawn opposition from independent pharmacists.
Sen. Herb Kohl, D-Wis., told the FTC that the combined company would have a dominant market share, and it could have a profound effect on the ability of both community and chain drugstores to operate. Kohl also said in a letter sent last month to the FTC that given the “massive buying power” the two companies already have, it seems unlikely the deal will lead to a big increase in buying power to attain cost savings.
The National Community Pharmacists Association said when the combination was announced it “would quite simply make a bad situation much worse for American employers, government agencies, consumers and pharmacists” as the large drug benefit managers “already wield an unchecked, one-sided advantage in setting contract and reimbursement terms for community pharmacists, undermining their viability.”
Drug benefits managers channel as much business as possible to mail-order pharmacies, which reduce costs because they’re mostly filling 90-day prescriptions. Medco and Express Scripts both have automated pharmacies, where robots and computerized conveyor-belt systems fill mail-order prescriptions more cheaply than people could.
Shares of Medco, based in Franklin Lakes, N.J., rose 91 cents to $68.56 while St. Louis-based Express Scripts saw its stock pick up 90 cents to $54.18.