The National Association of Chain Drug Stores and the National Community Pharmacists Association gave a thumbs-down to the proposed merger of Express Scripts Inc. and Medco Health Solutions Inc., saying the deal would create an unlevel playing field.


National Association of Chain Drug Stores, National Community Pharmacists Association, Express Scripts-Medco deal, Express Scripts, Medco Health Solutions, merger, NACDS, NCPA, community pharmacy, Steve Anderson, B. Douglas Hoey, PBM, pharmacy benefit manager, Mark Miller, William Blair & Co., Russell Redman, Walgreens, CVS Caremark, merger of Express Scripts and Medco, health care system, health care, prescription drugs, pharmacies, pharmacy services, pharmacy patient care, drug store, community pharmacists, Argus Health Systems, UnitedHealth, OptumRx


































































































































































































































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Rx groups: Express Scripts-Medco deal 'too big'

July 22nd, 2011

ALEXANDRIA, Va. – The National Association of Chain Drug Stores and the National Community Pharmacists Association gave a thumbs-down to the proposed merger of Express Scripts Inc. and Medco Health Solutions Inc., saying the deal would create an unlevel playing field.

In a joint statement issued Thursday, NACDS executive vice president and chief executive officer Steve Anderson and NCPA executive vice president and CEO B. Douglas Hoey called the union of pharmacy benefit managers (PBMs) Express Scripts and Medco "a bad deal" for the nation's health care system.

"Today's announcement that Express Scripts will buy Medco creates a middle man that is too big to play fair and will have immense power to unfairly dominate the market," Anderson and Hoey stated. "This combination will monopolize control of the supply line for brand and generic prescription drugs, threaten access to pharmacy patient care and is a bad deal for America, for health care plans, for pharmacies and, most notably, for patients."

NACDS and NCPA reported that because of such anti-competitive concerns they are consulting with the Federal Trade Commission, state attorneys general and other enforcement officials "to determine appropriate next steps."

"Community pharmacy services help to improve patient health and lower overall health care costs. Unfortunately, practical and rhetorical actions by the PBM community have increasingly ignored, and treated with irrational hostility, the vital importance of the patient-pharmacist relationship," Anderson and Hoey said in their statement. "This proposed merger will exacerbate PBMs' detrimental effect on pharmacy patient care."

In another statement released Thursday, Hoey urged lawmakers and regulators to nix the $29.1 billion merger of Express Scripts and Medco.

"The proposed merger of Express Scripts and Medco would quite simply make a bad situation much worse for American employers, government agencies, consumers and pharmacists. The major PBMs already wield an unchecked, one-sided advantage in setting contract and reimbursement terms for community pharmacists, undermining their viability to continue serving patients. Approval of this merger would further distort this marketplace, to the detriment of patients, true competition and lower prices," Hoey stated.

"Congress and the Federal Trade Commission should reject this proposed merger," he said.

Hoey noted that the deal raises competitive issues for retail pharmacies and mail order pharmacies.

"As Congress and federal regulators review this proposal, they should not overlook the near-monopoly it would establish in certain regions of the country and in the national mail order market, both for traditional and specialty drugs," he explained. "A combination of two of the top three PBMs is troubling enough. An Express Scripts-Medco company would dominate the market in certain parts of the country and effectively eliminate competition. Further, while NCPA believes that the choice between a community pharmacy and mail order should reside with the patient, those who opt for mail order deserve choice and competition, too."

The merger would combine the nation's No. 2 (Express Scripts) and No. 3 (Medco) PBMs, creating a PBM company with an estimed 32% market share in terms of prescription volume, analyst Mark Miller of William Blair & Co. wrote in a research note about the deal released Thursday.

Currently, CVS Caremark Corp. holds the largest PBM share by prescription volume with 20% of the market, followed by Express Scripts/WellPoint (17%), Medco (15%), Argus Health Systems (13%) and UnitedHealth's OptumRx (12%), he reported.

"It is not clear how the Federal Trade Commission will look at the [Express Scripts-Medco merger] transaction, given that the combined entities will have about 32% market share (factoring in Medco's loss of the UnitedHealth contract)," Miller wrote.

The deal, which Express Scripts and Medco expect to close in the first half of 2012, would have big implications for drug store giants Walgreen Co. and CVS Caremark, according to Miller.

"For Walgreens, [Thursday's merger] announcement clearly complicates its ongoing contract dispute with Express Scripts. As a larger collective bargaining agent, it is logical to think Express Scripts would have the ability to increase its demands when negotiating with pharmacy retail providers," Miller stated in his analysis. "We continue to believe that Walgreens and Express Scripts are likely to reach an agreement by year-end. This development increases the odds that Walgreens will be amenable to compromise, in our view."

If the stand-off with Express Scripts continues into next year, "it is unclear whether Walgreens would continue as a provider in Medco's networks following the merger," he added.

Meanwhile, the Express Scripts-Medco deal appears to put CVS Caremark "in the catbird seat," according to Miller.

"Greater concentration of PBM industry share should enhance industry discipline and pricing, and the company [CVS Caremark] could be a beneficiary among payers that are concerned about merger integration risk. Also, CVS drug stores should be in an enhanced bargaining position with Express Scripts for reimbursement — at least until the Walgreens dispute is settled," he wrote in his research note.

"If Walgreens remained out of Express Scripts' network," Miller added, "CVS Caremark could have enormous leverage over its PBM competitor, since it would be almost inconceivable that Express Scripts could successfully compete without both Walgreens and CVS stores in a network (representing close to 40% share)."

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