Express Scripts completes Medco acquisition
Pharmacy benefit managers are usually unseen companies that handle drug plans for employers and fill millions of prescriptions by mail. The three biggest were reduced to two Monday when Express Scripts Inc., completed its $29.1 billion acquisition of Medco Health Solutions Inc. The deal went through once the Federal Trade Commission said Monday it would not block the move, but that decision was controversial and will not end a legal fight, if independent pharmacists have any say.
Pharmacy benefit managers are usually unseen companies that handle drug plans for employers and fill millions of prescriptions by mail. The three biggest were reduced to two Monday when Express Scripts Inc., completed its $29.1 billion acquisition of Medco Health Solutions Inc.
The deal went through once the Federal Trade Commission said Monday it would not block the move, but that decision was controversial and will not end a legal fight, if independent pharmacists have any say.
Based in St. Louis, No. 1 Express Scripts bought third-ranked Medco, which was based in Franklin Lakes, N.J. Most of Medco's top executives departed and other layoffs are likely, though none were announced. Express Scripts chief executive officer George Paz addressed Medco workers on Monday. CVS Caremark is second in sales among pharmacy benefit managers (or PBMs).
"There is stability for patients and employers," Express Scripts chief medical officer Steve Miller said when asked what it means for someone previously getting prescriptions via Medco. "You are able to get your prescriptions and service the same today as you did yesterday."
Independent drug store owners were not happy and said patients and employers will also suffer as Express Scripts exerts market dominance.
"The impact is that soon there won't be anybody around to answer questions from patients," said Chuck Kohlerman, who runs the family-owned Kohlerman Pharmacy in Malvern.
Some studies suggest there has been little change in the number of independent pharmacies.
PBMs negotiate prices with drug makers and retail pharmacies on behalf of employers, with whom they have contracts. But since PBMs also profit from mail-order service, they're leverage is unfair, said John Giampolo, CEO of the Independent Pharmacy Alliance of America, which is based in Cranberry, N.J., and serves 2,800 members in mid-Atlantic states.
"There were three big gorillas, but now there is one gargantuan gorilla and one big gorilla," Giampolo said.
Pending since July, 20, the deal was approved 3-1 by the FTC with no conditions. The three-member majority said in a statement, "The acquisition of Medco by Express Scripts will likely not change these dynamics: the merging parties are not particularly close competitors, the market today is not conducive to coordinated interaction, and there is little risk of the merged company exercising monopsony power."
Commissioner Julie Brill dissented, calling the decision a "game changer," that will result in a "duopoly" with Express Scripts and CVS Caremark dominating the landscape, "with few efficiencies in a market with high entry barriers - something no court has ever approved."
With more than 7,000 stores, CVS Caremark may be better known to most consumers, or at least the retail portion of its business.
"The PBM industry is highly competitive and we expect it will remain so in the future," spokeswoman Carolyn Castel said via e-mail. "CVS Caremark is well-positioned to compete in the marketplace given our unique and differentiated offerings and innovative solutions."
Legislation is pending in Washington and Harrisburg, among other places, to restrict the reach of PBMs. Groups representing chain drug stores, community pharmacists and nine community pharmacy companies near Pittsburgh sued in federal court last week to stop the ExpressScripts-Medco deal. The organizations said in a statement Monday the suit will continue.
Philadelphia pharmaceutical consultant Adam J. Fein wrote last year that he thought the FTC would eventually approve the deal. Subsequently, he said Monday, he was asked by Express Scripts to send his thoughts to Congressmen concerned about the topic.
"The FTC's role," Fein said, "is not to protect one particular business over another."
Contact David Sell at 215-854-4506 or dsell@phillynews.com, or follow on Twitter @PhillyPharma. Read his PhillyPharma blog on philly.com.
At a Glance
Express Scripts
Headquarters in St. Louis
Facilities in Bensalem and Swatara, Pa.; Parsippany, N.J.
CVS Caremark
Headquarters in Woonsocket, R.I.
Adding health clinics to some of its more than 7,000 retail stores.
Medco
Headquarters in Franklin Lakes, N.J.
Employees: 23,200.