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Senate PBM hearing: Retail Rx execs blast merger
December 6th, 2011
WASHINGTON – Retail pharmacy executives told a Senate panel that the merger of Express Scripts Inc. and Medco Health Solutions Inc., if approved, could lead to higher prescription drug costs and limit patient access to pharmacy services, in turn negatively impacting health outcomes.
In a hearing Tuesday afternoon before the U.S. Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, Shopko Stores Operating Co. chief operating officer Mike Bettiga and Marshland Pharmacies co-owner Susan Sutter said the proposed union of the two pharmacy benefit managers (PBMs) would be anti-competitive and anti-consumer because it would give one entity too much influence over the prescription drug market.
The subcommittee hearing was titled "The Express Scripts/Medco Merger: Cost Savings for Consumers or More Profits for the Middlemen?" Announced in late July, the merger deal is expected to close in the first half of next year, pending the FTC's review.
A 35-year pharmacy veteran, Bettiga told lawmakers that a combined Express Scripts-Medco would curtail patient choice in how they receive pharmacy services and restrict their access to services offered by community pharmacists, who provide education on medications and recommend lower-cost options. Patients also could encounter disjointed prescription records and stoppages to normal timely prescription service, resulting in decreased medication adherence, he added.
"More consumers would be forced into using the PBMs' own mail-order facilities. They will see decreased or limited access to essential pharmacy services," Bettiga said in testimony provided by the National Association of Chain Drug Stores. "Reducing patient choice and access will lead to higher prescription drug costs, potential adverse patient outcomes and higher downstream health care costs."
If the Federal Trade Commission clears the way for the merger, roughly 135 million Americans would have to rely on the mega-PBM for their prescription drug benefits, with a single company controlling more than 40% of overall prescription volume and an even higher share of the market for large employers and health plans, according to Bettiga.
Sutter, who owns three community pharmacies in Wisconsin, told the Senate panel that it should urge the FTC to block the Express Scripts-Medco deal, which would create "unparalleled market concentration in the PBM industry, with the merged entity controlling anywhere from one-third to two-thirds of all prescriptions filled in community pharmacies.
"This market dominance and significant reduction in competition will result in reduced choices for federal and state programs and third-party payers, decreased patient access to pharmacy services and ultimately lead to higher prescription drug costs paid by plan sponsors and consumers," she said in her testimony, provided by the National Community Pharmacists Association.
Bettiga and Sutter also stressed to lawmakers that the merger would not end up reducing health care costs because there's scant evidence supporting the claim that PBM savings are conveyed to consumers, employers and health plans.
"There is little proof that PBMs pass along their purported savings to health plans, employers or consumers. In fact, the PBM industry has been fraught with allegations of extensive deceptive and fraudulent practices," Bettiga testified. "Patients appear to be an afterthought. A mega-PBM would have an increased ability to engage in similar egregious conduct to the detriment of consumers, payers, and pharmacy providers."
According to Sutter, rising health care costs and declining pharmacy reimbursements undercut the purported benefits of the proposed merger's economies of scale.
"Express Scripts and Medco have claimed that the combination of these two companies would create an entity with the negotiating leverage that will enable it to create greater efficiencies in the pharmaceutical supply chain that it could in turn pass along to plans and consumers," she explained. "They have claimed they can do this by squeezing manufacturers and pharmacies. I can tell you there is nothing left to squeeze. If their claims are true, why do co-pays continue to increase, health plan costs continue to increase, pharmacy reimbursement goes down, while PBMs enjoy record profits? Where is the money going?"
Sutter's written testimony was accompanied by an economic estimate of the merger's impact on Connecticut, Iowa, Minnesota, New York, Texas, Utah and Wisconsin — states represented by Senators on the subcommittee.
"We have estimated that the merger, if approved, will cost the state of Wisconsin $68 million in sales and tax revenues annually and approximately 1,350 jobs and will send these precious resources to an out-of-state mail-order pharmacy," Sutter stated. "The loss of pharmacies in rural communities could mean the end of primary health care for millions of individuals."
George Paz, chairman and chief executive officer of Express Scripts, and David Snow, chairman and CEO of Medco, testified at the subcommittee hearing that the combination of their companies would make prescription drugs services more affordable and more effective for Americans.
"We will lower drug costs that are far too high and improve health outcomes for consumers," Paz stated. "As the big drug companies merge, as large chain drug stores buy up their competition and demand higher prices, we must become more effective representing the interests of plan sponsors and consumers. Patients — not profits — must come first."
Snow explained that the merger reflects the "transformation of America's health care system" to deliver more for less.
"As the health care industry necessarily focuses on reducing costs, as Congress seeks to find health care savings without compromising patient care, and as all participants in the system are faced with the prospect of doing more with less, we must make our health care dollars work more effectively. We believe that the services that Medco and Express Scripts, working together, will provide are critical to achieving this goal," Snow said in his testimony.
"With the combined expertise and capabilities of Medco and Express Scripts, we will be able to speed the pace of delivering value-added solutions that address the pressing need to reduce overall costs and raise the standard for quality care."