Inside This Issue - News
More groups speak out against PBM merger deal
March 26th, 2012
NEW YORK – Organizations representing food retailers and wholesalers have urged the Federal Trade Commission to block the proposed acquisition of Medco Health Solutions Inc. by Express Scripts Inc.
Representatives of the Food Marketing Institute (FMI) argued that consumers and pharmacy patients have benefited from robust supermarket competition in the form of low prices and high levels of service.
“We believe this merger will harm the tens of thousands of consumers who depend every day on the valuable services and low prices they receive at their supermarket pharmacy,” said Cathy Polley, FMI’s vice president of health and wellness and executive director of the FMI Foundation. “Consumers need to reduce their drug expenses, and they know their supermarket pharmacy often can deliver the highest value at the lowest price, especially for generic drugs.”
National Grocers Association executive vice president and general counsel Tom Wenning stated: “Permitting this merger would harm consumers and deny the benefits to competition that are so essential to control health care costs. For this reason, food retailers were joined by some of the leading consumer groups, unions and health plans in this unified effort.”
Last month David Balto, an antitrust attorney in Washington, D.C., and former policy director of the FTC, released a white paper challenging Express Scripts’ and Medco’s claims that a combined entity would be synergistic.
The paper says that under merger guidelines and antitrust law, merging parties carry the burden of showing “extraordinary” efficiencies to offset competitive harm, and that no such justification exists in this case.
“The merger guidelines and the law are clear that only a countervailing efficiency argument demonstrating ‘proof of extraordinary efficiencies’ could justify the approval of this transaction,” Balto states. “When called upon to explain the benefits of this transaction for consumers, proponents of the deal have offered contradictory explanations that fail to meet the standard required under the Clayton Act.”
Balto questioned whether the merger’s potential cost savings will be passed on to consumers. He also examined the pharmacy benefit management (PBM) industry as a whole, arguing that further consolidation would amplify a lack of transparency and competitiveness.
PBMs “are not the panacea analysts such as Compass Lexecon claim they are, and the merger of the second- and third-biggest PBMs is certain to result in harm,” Balto states. “Suggestions that the current state of affairs in the PBM industry is healthy and competitive are misplaced, but worse is the suggestion that the merger will lead to further consumer benefit rather than harm.”
The merger has been investigated by the House Judiciary Subcommittee on Intellectual Property, Competition and the Internet and the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights.