Express Scripts-Medco Merger – So. That happened.

by pharmacy on June 6, 2012

Much to the dismay of independent pharmacists, consumer and patient advocates all over the country, the acquisition of Express Scripts (ESRX) of Medco Health Solutions (MHS), was approved by the U.S. Federal Trade Commission this month. The approval went through without even the regulations proposed by FTC Chairman Jon Leibowitz designed to prevent the pharmaceutical juggernaut from engaging in conduct that hinders competition. One of the four FTC commissioners, Julie Brill, objected to the merger and abstained from the vote.

Opponents of the merger fear that the combined companies would control such a huge percentage of the drug market that competition would be overwhelmed. But there are other concerns as well. Express Scripts now has unregulated carte blanche to use discounted rates to force patients into ordering by mail, bypassing independent brick-and-mortar stores until they can no longer survive. Much like Walmart did to independent stores, Express Scripts has the purchasing power to drive the competition out of business. The bread and butter is in recurring prescriptions for chronic conditions like HIV and rheumatoid arthritis…not in filling prescriptions for temporary illnesses. No pharmacy can survive without recurring prescription business.

Opposition to this merger was so fierce and widespread that it came as a surprise, but the fight is not over. A lawsuit challenging the legality of the merger was filed immediately in the U.S. District Court in Pittsburgh by a group comprised of the National Association of Chain Drug Stores, The National Community Pharmacists Association, and nine retail pharmacies. The group requested an injunction preventing the merger until the court case can be settled and legality determined.

Express Scripts chairman and CEO George Paz claims that the merger “represents the next chapter of our mission to lower costs, drive out waste in health care, and improve patient health.” The FTC seems to have been moved by the argument that the merger will lower costs through an ability to negotiate lower prices with volume purchases…which is the way Walmart operates, often using purchasing power to bully manufacturers into break-even deals…or worse.

Julie Brill, the lone FTC dissenter, said, “I have reason to believe that this merger is, in fact, a merger to duopoly with few efficiencies in a market with high entry barriers — something no court has ever approved.”

United Health Group recently struck back by refusing to deal with Medco, a move that cost Medco 25% of its business.

What’s your take? Will small independent pharmacies go the way of the neighborhood hardware store in the wake of Walmart? Will the merger result in lower drug prices…or higher, with a single company holding a 40% market share from day one?

{ 4 comments… read them below or add one }

David Whitrap June 6, 2012 at 2:56 pm

The rising cost of healthcare is clearly one of nation’s biggest challenges. Express Scripts’ mission is to make prescription drugs more affordable and safer. We negotiate price discounts with drug manufacturers, we implement solutions that improve medication adherence, and we provide cross-pharmacy oversight to close gaps in care and identify potentially dangerous drug-drug interactions.

Our merger with Medco furthers our ability to lower the cost of medications while improving the health outcomes for the tens of millions of patients we serve. The FTC thoroughly reviewed the merger and ultimately determined that it was pro-competitive and pro-consumer.

According to the National Association of Chain Drug Stores (http://nacds.org/wmspage.cfm?parm1=6264), the number of independent pharmacies in the country is growing, and revenues at these small pharmacies went up $1.1 billion in 2010 alone. According to the National Community Pharmacists Association (http://www.ncpanet.org/pdf/digest/2010/2010digestexecsum.pdf), profits for independent pharmacies have doubled since 1999.

We look forward to working with pharmacies – independents and chains – to ensure access to prescription medications. In fact, the vast majority of prescriptions our members fill are done at retail pharmacies.

In addition to employing more than 4,000 pharmacists directly, we are proud of the relationship we’ve built over the past 25 years with pharmacies of every type. Pharmacies, big and small, are our partners, and we look forward to fostering those relationships as we continue efforts to improve the country’s healthcare delivery system.

David Whitrap
Public Affairs, Express Scripts

George Kloda June 8, 2012 at 4:17 pm

Independent pharmacy died shortly after PCS and PAID Prescriptions entered the neighborhood; just the body still twitches. The brain, in typical zombie fashion, still accepts take it or leave it contracts and still believes that non-dispensing functions will be the profession’s salvation.
This merger may be the stake in the heart…

Barry A. Posner June 9, 2012 at 8:53 am

The tools for the government to watch over the merged entity exist. They are any willing provider laws and patient freedom of choice laws if for first time since enactment thw at ate goverwmts put teeth into these regulations there would be at least a few sharp arrows in the independent pharmacy quiver.

I do not believe independent pharmacy is dead and twitching. I agree it is not as vibrant as it once was for sure.

I
State independent pharmacy associations have to pick themselves up and lobby not for change in law, but in enforcement of existing law- a much easier proposition.

Using any willing provider and freedom of choice to prohibit mandatory mail and lockout should be the focus of the fight

Stephen Logsdon, Pharm.D. June 13, 2012 at 11:34 pm

As a pharmacist who is also a patient, the thought of independent pharmacies being forced out and/or the imposition of “mandatory mail” frighten me more than the average R.Ph; I’d assume understandably so. If I can’t get my independent pharmacy-owning colleagues to order certain medications in advance for me- which WAG and CVS just cannot do (for this specific class of medicine) as they order only once to twice a week- I’m “screwed!” With regard to mandatory mail, here in Florida it gets HOT…and as we all know, prescription meds (of all kinds) are simply NOT meant to ‘stored’ in a 110+ degree mailboxes for up to 6-8 hours at a time, and I refuse to accept/return to sender any medication that has been subjected to such “excursions.”

I’ve had many successes succinctly explaining to patients whose insurance is trying to enforce a “no-refill at retail” policy that the lack of climate control during the shipping progress may very well effect the efficacy their medication has against the illness they’re taking them for…just something to think about…

-Steve Logsdon, Pharm.D.
pharmDsteve@gmail.com

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