Senators Hear Testimony on Proposed Merger of Medco, Express Scripts
On Tuesday, members of the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights expressed skepticism about a proposed merger of pharmacy benefit managers Express Scripts and Medco Health Solutions, Modern Healthcare reports (Daly, Modern Healthcare, 12/6). Â
In July, Express Scripts and Medco -- the two largest PBMs in the U.S. -- announced that they will merge in a deal worth about $29.1 billion. The merger is pending approval from regulators and shareholders and is expected to close in the first six months of 2012.
Consumer and pharmacist groups have warned that the merger could lead to higher costs for consumers (California Healthline, 8/3). In October, a bipartisan group of 17 House lawmakers sent letters to the Federal Trade Commission opposing the proposed merger and urged the agency to conduct a comprehensive investigation.
The CEOs of the two PBMs, during a House Judiciary subcommittee hearing in September, said the merger would help lower drug costs and spur competition in the PBM industry.
FTC will make the final decision on whether to challenge the merger, but lawmakers can influence public opinion through hearings and oversight of regulators (Pecquet, "Healthwatch," The Hill, 12/5).
In the opening statement of Tuesday's hearing, subcommittee Chair Herb Kohl (D-Wis.) said, "Reducing the number of competitive choice ... raises the dangerous possibility that these large companies will have little choice but to pay more for PBM services" (McCarthy, National Journal, 12/6). He continued, "There is no question that this merger will have far-reaching and long-lasting effects on the way prescription drugs are paid for, sold and dispensed."
Two witnesses representing smaller pharmacists said the merger would drive them out of business (Adams, CQ HealthBeat, 12/6). Lawmakers agreed with those concerns, as the combined PBMs would hold an overall 64% market share after the merger, while the next largest competitor would hold 24% of the market.
However, representatives of Express Scripts and Medco said that after the merger there still would be 40 other smaller competitors in the market (Modern Healthcare, 12/6). George Paz, chair and CEO of Express Scripts, said that PBMs actually help community pharmacists by getting them better deals on drugs (CQ HealthBeat, 12/6).
Sen. Richard Blumenthal (D-Conn.) asked whether the PBMs would consider divesting the components of their businesses that administer specialty prescriptions. Should the merger go through, the combined PBM would control 52% of that market.
The representatives rejected the idea. In addition, antitrust attorney David Balto testified that divesting individual components would not help foster competition in the market (Modern Healthcare, 12/6).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.