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?