By: Mahdieh Danesh Yazdi, with Special Thanks to: Dr. Tomasz Jodlowski
In previous issues, we discussed an upcoming $29.1 billion merger between Express Scripts Inc. and Medco Health Solutions. The merger had been previously delayed by the Federal Trade Commission (FTC). The FTC wanted to verify that this upcoming merger would not violate any antitrust laws and would not substantively damage the competitive marketplace for other pharmacy benefit managers (PBMs). On Monday, April 2, 2012, the FTC approved the merger in a 3—1 vote. The FTC found no legal reason to block the merger citing the fact that are currently about ten major PBMs and that this merger would not significantly interfere with market dynamics. The sole dissenter was Commissioner Julie Brill who argued that the merger would create a duopoly that would severely stifle competition. She urged the Commission to review the impact of its decision by assessing the market in three years time.
The merger went through to the great dismay of many pharmacy organizations which had sought to block it. In addition to publicly opposing the merger and lobbying against it, The National Association of Chain Drug Stores (NACDS) and the National Community Pharmacists Association (NCPA) and several other organizations sued to put a preliminary and permanent injunction on the merger. As they are still hearing arguments, the courts have not stepped in to take any action in favor of or in opposition to the merger. Express Scripts and Medco asked that the suit be dismissed, arguing that the community pharmacy organizations had waited too long to file. Express Scripts also claimed that stopping the merger would cause its company severe financial harm, as it has already spent almost $230 million for this merger. Both Express Scripts and Medco maintain that this merger would allow them to cut down costs, and pass on these savings to consumers resulting in lower costs for their medications.
Community pharmacies are concerned that with less competition in the PBM industry, they will have less leverage in negotiating contracts with these institutions for reimbursements. With many community pharmacies already suffering due to reduced reimbursement rates, especially in Medicare and Medicaid, a further cut in reimbursements would be detrimental to these pharmacies. The community pharmacy organizations involved in this suit view claims of consumer savings as a result of the merger with skepticism, noting that there is no guarantee that the companies will actually comply with their promise to pass on their savings to their customers. Furthermore, they contend that reduced competition in the PBM market may in fact increase costs to consumers while reducing their choices.
After getting FTC approval, Express Scripts and Medco have essentially completed their merger. The judge presiding over the lawsuit filed by community pharmacy organizations has said that she would issue a ruling on this matter at a later date. It remains to be seen what impact this merger has on consumers and the broader pharmacy world.
- Abelson, Reed and Natasha Singer. “F.T.C. Approves Merger of 2 of the Biggest Pharmacy Benefit Managers.” 2 April 2012. The New York Times.< http://www.nytimes.com/2012/04/03/business/ftc-approves-merger-of-express-scripts-and-medco.html. 14 April 2012>.
- Dearment, Alaric. “Report: Federal judge hears arguments in ESI-Medco merger case.” 11 April 2012. Drug Store News. http://www.drugstorenews.com/article/report-federal-judge-hears-arguments-esi-medco-merger-case?ad=latest-news. 14 April 2012. <http://www.drugstorenews.com/article/report-federal-judge-hears-arguments-esi-medco-merger-case?ad=latest-news>.
- National Association of Chain Drug Stores. “NACDS, NCPA Comment on FTC Conclusion of Express Scripts-Medco Merger Review.” 2 April 2012. Too Big to Play Fair. http://www.toobigtoplayfair.com/Home/tabid/55/EntryId/80/NACDS-NCPA-Comment-on-FTC-Conclusion-of-Express-Scripts-Medco-Merger-Review.aspx. 14 April 2012.
- Posey, L Michael. “ESI–Medco merger gets FTC nod.” 2 April 2012. American Pharmacists Association. http://www.pharmacist.com/AM/Template.cfm?Section=Pharmacy_News&template=/CM/HTMLDisplay.cfm&ContentID=28213. 14 April 2012.
- —. “NACDS, NCPA sue to block Express Scripts–Medco merger.” 29 March 2012. American Pharmacists Association. http://www.pharmacist.com/AM/Template.cfm?Section=Pharmacy_News&Template=/CM/ContentDisplay.cfm&ContentID=28187. 14 April 2012. <http://www.pharmacist.com/AM/Template.cfm?Section=Pharmacy_News&Template=/CM/ContentDisplay.cfm&ContentID=28187>.