Recently, it was reported that attorneys general (AGs) in New York, Pennsylvania, Ohio, Texas and California are considering filing suit against the proposed merger between Express Scripts, Inc. (ESI) and Medco Health Solutions, if it is approved by the Federal Trade Commission (FTC) without conditions sufficient to guard against rising prescription prices and decreased pharmacy services.
These AGs are right to scrutinize the merger in this way - the two pharmacy benefit managers (PBMs) are multi-billion-dollar companies, which, combined, would control an excessive share of the market. The abundance of evidence shows this virtual monopoly would lead to higher health care costs and reduced access to cheaper generic drugs, lifesaving specialty medications and vital community pharmacy services. If it is not stopped, appropriate measures must be taken to protect American patients and consumers.
Since ESI and Medco announced plans to merge in a $29 billion deal last July, the deal has been scrutinized like none before. A number of observers including the American Antitrust Institute, American Consumer Institute, National Urban League, League of United Latin American Citizens, over 70 Members of Congress, attorneys general in dozens of states, pharmacy service providers, consumer advocates, patient groups, a group of 100 employers, and others have voiced concern that an approved would negatively impact American patients and consumers.
Their concerns are valid, indeed.
If Express Scripts is allowed to merge with Medco, it is very possible that the consolidated PBM will use its size and dominance to steer patients away from their local pharmacy and toward the company's own services - either by contract requirement or by lack of choice because smaller pharmacies could be forced to close their doors due to increased costs and severely slashed reimbursements.
When the local pharmacy is shuttered or shut off to patients, the quality of their health suffers. For many Americans, the pharmacy is the most accessible and affordable option for health care services. It is a place to receive vaccinations, health screenings and other services beyond simply filling prescriptions. Diminishing access to the local pharmacy means a severely weakened overall quality of health, especially for the most vulnerable populations.
The proposed merger is also extremely concerning for the 57 million American consumers who rely on "specialty" drugs -- treatments for complex conditions such as hemophilia, Crohn's disease, Hepatitis C, HIV/AIDS and many forms of cancer. Granting the combined company more than 50 percent market share of this specialized pharmacy area would give it the unprecedented ability to both decrease access to these critical treatments by restricting patient choice in pharmacies and increase the cost of specialty pharmaceuticals at will. These are not inexpensive drugs, having increased in price by 19.6 percent in 2010 alone (compared to a 1.4-percent increase in traditional retail drugs).
The merger would lead to the increased cost of traditional prescriptions; in addition, the merged Express Scripts/Medco would have little incentive to include cheaper generic versions on their lists of available drugs. PBMs exercise their buying power through negotiating formularies and because of that they are more likely to have brand-name drugs on their formularies instead of generic drugs.
In light of all of this, it's clear why the FTC and Congressional antitrust panels are examining the proposed merger, and why pharmacists, small businesses and consumers nationwide are opposed to it. Also, why this group of attorneys general is concerned.
The potential harm posed by this merger is nationwide and it should be stopped. But if it is not, appropriate measures must be taken to protect American patients and consumers. I applaud these five state attorneys general for being prepared to make sure that happens.
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The biggest opposition to this merger is probably coming from the big drug companies themselves as they have the most to lose with this merger. And yeah, all estimates of the post-merger market show that the new combined company will own somewhere between 25-30% of the market... very far from "an excessive share of the market" that the author states. This merger will actually bolster smaller and/or newer PBMs (such as UHCs newest subsidiary) because there is less to choose from at the top of the bracket.
The author needs to do their research before trying to cripple two huge employers in a job market that is, at best, barely above water.
Finally, the feared disappearance of small-chain or mom-and-pop pharmacies is entirely overblown. The PBMs need these small pharmacies in their network to provide service coverage to their clients' membership. Their are often requirements about having a pharmacy within X number of miles of each member, so the PBMs don't want to get rid of those small pharmacies. What is actually driving the small pharmacies out of business is the same factor in play throughout our capitalist society; supply-and-demand competition.
All this fretting about the ESI/Medco merger, which is all I have read about for months and seen during the congressional hearings, is truly sad and misinformed. If anything, the merger will open up new opportunities for some of the up-and-coming medium-size PBMs in the marketplace. Why don't we stop making the lawyers rich and let our free market do what it does best? Compete! This merger will not create anything CLOSE to a monopoly!
ALL PBMs try to steer business away from retail chains and towards their own (mail-order) services... but it's the PBM clients who decide what pharmacy network will be included in their benefits package, not the PBM. Clients decide to use mail-order because it is cheaper for them and more convenient for their members; and many members truly prefer mail-order to retail chains. In the end, the ratio of mail-order to retail pharmacy volume will not likely change much at all.
As for specialty drugs, many drug manufacturers insist on using a limited network of specialty drug pharmacies because of the complex therapy regimens and potential clinical issues associated with their drug products. Accredo and CuraScript (Medco's and ESI's specialty pharmacy divisions) provide measurably superior service and clinical support to specialty drug patients, leading to better therapy adherence and improved clinical outcomes. Trying to decimate these divisions in the name of "competition" is folly, and would leader to poorer health care for those patients who need it most!