Retail News Breaks
Senators urge close FTC scrutiny of PBM merger
December 5th, 2011
ALEXANDRIA, Va. – The National Community Pharmacists Association hailed a call by three U.S. senators for the Federal Trade Commission to make a careful examination of the proposed merger of pharmacy benefit managers Express Scripts Inc. and Medco Health Solutions Inc.
NCPA said Monday that in advance of a key Senate subcommittee hearing on Tuesday, Sens. Saxby Chambliss (R., Ga.), Johnny Isakson (R., Ga.) and Jerry Moran (R., Kan.) sent a letter to FTC Chairman Jon Leibowitz that urged the agency to make a "thorough and complete investigation" of the nearly $30 billion merger proposal. The merger is slated to close in the first half of 2012, pending review by the FTC.
In the letter, the senators requested that the FTC "take into account what impact this proposed merger could have on consumers and patients, on taxpayers, on the government and on pharmacies. They also cited competitive concerns in certain markets, stating that "the combined entity has the potential to control 60% of the mail order and 50% of the specialty [pharmaceutical] market."
NCPA noted that the senators join the growing ranks of consumer groups, lawmakers and employers questioning the planned merger.
"We appreciate these senators and all members of Congress who have taken a stand for patients by voicing their doubts about this merger," NCPA chief executive officer B. Douglas Hoey said in a statement. "This merger would reduce patient choice and access to pharmacy services and ultimately result in higher prescription drug costs."
The U.S. Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights is scheduled to hold a hearing on Dec. 6 titled "The Express Scripts/Medco Merger: Cost Savings for Consumers or More Profits for the Middlemen?".
NCPA member Susan Sutter, co-owner of Marshland Pharmacies in Wisconsin, is scheduled to testify at the Senate subcommittee hearing. Also slated to testify are Express Scripts chairman and CEO George Paz; Medco chairman and CEO David Snow; Michael J. Bettiga, executive vice president and chief operating officer at Shopko Stores; Scott Streator, associate vice president of business development at Ohio State University Medical Center; and antitrust lawyer David Balto, a former policy director at the FTC.
In September, a House Judiciary Subcommittee held a separate hearing, NCPA added.
"We are very supportive of our senators who urged the FTC to conduct a complete investigation of this merger, which takes into account the potential — and expected — harm to Georgia's community pharmacists and their patients," stated Jim Bracewell, executive vice president of Georgia Pharmacy Association.
According to NCPA, 27 members of Congress now have questioned the PBM merger, reflecting concerns by a wide range of other public and private sector stakeholders, including the American Antitrust Institute (AAI), the Small Business Majority and the Pennsylvania Pharmacy Council and the Preserve Community Pharmacy Access NOW! (PCPAN) coalition. And as the FTC continues to scrutinize the merger, at least 28 state attorneys general have formed a working group to conduct their own review, the association said.
On Monday, Express Scripts and Medco announced the results of a study, by economists Jonathan Orszag and Kevin Green of Compass Lexecon, finding that the two PBMs save employers, the federal government, labor unions and consumers $51 billion to $87 billion annually on the cost of prescription medications.
The lower end of the savings range is based on the Congressional Budget Office's findings that PBMs reduce drug costs by 30%, the companies said. The analysis concludes that savings are likely higher when financial benefits from increased discounts provided by drug manufacturers and clinical offerings are considered.
The study estimates that Express Scripts and Medco save roughly $21.7 billion a year for the federal government and Medicare beneficiaries, as well as $61.9 billion every year for employers and individuals, and $3.5 billion per year for labor unions.
"Pharmacy benefit managers save consumers billions of dollars, but most people do not know very much about the role such firms play in the health care system," stated Orszag, who served as an economic policy adviser on President Clinton's National Economic Council. "We hope this study shows the economic benefits created by PBMs today, the role that PBMs should play in constraining rising health care costs in the future, and the role the merger of Express Scripts and Medco can play in accelerating those savings."
In an e-mail statement Monday, Balto blasted the Compass Lexecon study. "The report is as alarming for what it does not discuss as for what it does. The economic report released the day before the Senate Judiciary Committee's hearing on the proposed merger fails to mention the merger at all," he said.
"It is important to keep in mind the conflicts of interest inherent in the PBM industry and the likely anticompetitive effects that would result from the merger of two of the big-three PBMs," Balto added.
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