Express Scripts Inc. and Medco Health Solutions Inc. have provided the Federal Trade Commission with additional data about their planned merger, even as opposition to the deal grows.

Express Scripts, Medco, PBM, Federal Trade Commission, merger, second request, FTC, pharmacy benefit management, Food Marketing Institute, FMI, Jon Leibowitz, Erik Lieberman, ESI-Medco merger, Herb Kohl, antitrust, PBM mergers, chain drug stores, Scot Meyer, National Association of Chain Drug Stores, NACDS, Steve Anderson, National Community Pharmacists Association, NCPA, B. Douglas Hoey, community pharmacies

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Inside This Issue - News

As opposition mounts, FTC weighs big PBM deal

February 27th, 2012

ST. LOUIS – Express Scripts Inc. and Medco Health Solutions Inc. have provided the Federal Trade Commission with additional data about their planned merger, even as opposition to the deal grows.

The companies have complied with a “second request” for information from the FTC regarding their proposed $29 billion merger, which would create the nation’s largest pharmacy benefit management company.

The companies say they still expect the deal to be completed in the first half of the year, and Express Scripts recently completed a $3.5 billion bond offering to raise additional funds for the merger.

On the same day Express Scripts finalized its bond offering, the Food Marketing Institute (FMI) stepped forward to oppose the deal. In a letter to FTC chairman Jon Leibowitz, FMI regulatory counsel Erik Lieberman urged the regulatory agency to block the merger.

“The ESI-Medco merger will destroy competition by creating a behemoth with the power to unilaterally slash reimbursement rates to uncompetitive levels,” he wrote. “A merger of these two giants would lead to the demise of the reduced price and free generic drug programs that millions of Americans depend on, and reduce access to other key pharmacy services. The FTC should bring an enforcement action to enjoin the merger.”

FMI, a trade association that represents food retailers, said that the supermarket industry ranks among the nation’s most competitive.

“Consumers and pharmacy patients have benefitted from this robust competition in the form of low prices and high levels of service,” the letter to the FTC stated. “Our members dispense over 30% of our nation’s drugs and play a vital role by offering the lowest-cost drug options to millions of consumers.”

FMI’s action came on the heels of another letter to the FTC chairman, this one from Sen. Herb Kohl (D., Wis.). Kohl, who chairs the Judiciary’s subcommittee on antitrust, competition policy and consumer rights, issued the letter as a follow-up to a subcommittee hearing he chaired last December about the proposed merger.

In the letter Kohl argued that the merger would reduce competition in the marketplace.
“Express Scripts’ proposed merger with Medco will unquestionably create a giant PBM that is substantially larger than any competitor, and will result in the combined entity having a dominant market share in mail order and specialty pharmacies,” Kohl wrote. “It will reduce choices for PBM services to health plan sponsors, especially large employers. And it has the potential to have profound effects on the ability of both community and chain drug stores to compete.”

Kohl was also skeptical about Express Scripts and Medco’s claim that the merger would result in cost savings for patients, employers and health plans.

“There is considerable doubt that PBM mergers in the past have resulted in any savings being passed on to plan sponsors,” Kohl said. “While the promise that reduced reimbursement payments will in fact be passed on to plan sponsors is very speculative, the evidence we received at our hearing is that the threat to pharmacies is very real.”

The National Association of Chain Drug Stores applauded Kohl’s letter, as did the National Community Pharmacists Association (NCPA).

“Sen. Kohl outlined well-documented and serious concerns about this proposed mega-merger, many of which have been echoed by consumer groups, antitrust watchdogs and others,” said NACDS president and chief executive officer Steve Anderson. “NACDS appreciates the serious approach that Sen. Kohl has brought to congressional examination of this proposed merger, which NACDS has said from the outset would create a mega-PBM that is too big to play fair.”

NCPA chief executive officer B. Douglas Hoey stated: “We sincerely appreciate Chairman Kohl’s leadership in standing up for pharmacy competition and patient access to local pharmacists. On behalf of small business community pharmacists and their patients, NCPA has opposed this merger from day one and will continue to fight against its approval. This merger is the wrong prescription for the country because it will reduce patient access to pharmacy services, undermine competition and lead to higher drug costs for patients, the government and employers.”

According to the NCPA, 11 senators and 48 representatives have written letters expressing concern about the merger. Among the most recent was a letter to the FTC chairman from Sens. Mike Crapo and James Risch, both Republicans who represent Idaho.

“We urge your office to conduct a thorough investigation of this merger, including examining any potential impact on consumers, patients, third-party and federal payers, and independent community pharmacies,” the senators wrote. “It is our understanding that the proposed combined entity has the potential to control 60% of mail order and 50% of the specialty prescription drug market.”