A federal judge has dismissed most of the claims in a lawsuit seeking to block the merger of Express Scripts Inc. and Medco Health Solutions Inc.

Express Scripts, Medco Health Solutions, merger, lawsuit, ESI-Medco lawsuit, National Association of Chain Drug Stores, National Community Pharmacists Association, NACDS, NCPA, pharmacy operators, Federal Trade Commission, pharmacies, PBM, U.S. District Court Judge Cathy Bissoon, specialty drugs, David Balto, Independent Specialty Pharmacy Coalition, community pharmacies, PBM services, Steve Anderson, Don Bell, Douglas Hoey, specialty pharmaceutical sales, mail order, Geoff Walden

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Community Rx mulls next steps in ESI-Medco lawsuit

September 10th, 2012

PITTSBURGH – A federal judge has dismissed most of the claims in a lawsuit seeking to block the merger of Express Scripts Inc. and Medco Health Solutions Inc.

The National Association of Chain Drug Stores and the National Community Pharmacists Association (NCPA), joined by nine pharmacy operators, filed the antitrust suit in March, four days before the Federal Trade Commission approved the merger. The plaintiffs claimed the combined entity would have “too much market power over patients and pharmacies and plans.”

But in a 23-page decision, U.S. District Court Judge Cathy Bissoon rejected most of the arguments, including the contention that Express Scripts would set unfair reimbursement rates for pharmacies outside of its network serving large employers.

The plaintiffs, she wrote, “failed to allege a cognizable antitrust injury.” But this may not be the final verdict on the claim, because Bissoon dismissed it without prejudice, which meant the pharmacy groups could file an amended complaint until September 10.

Bissoon did, however, dismiss completely the claim that the pharmacies are unfairly prevented from competing in the PBM market for large ­employers.

She left standing the claim that Express Scripts may unfairly dominate the market for specialty drugs.

“The court justifiably recognized the potentially egregious harm that can arise because of the merger,” said David Balto, general counsel for the Independent Specialty Pharmacy Coalition, which was not a party to the suit. “Independent specialty pharmacies play an important role in making sure the market works and that consumers receive the best service and vast amount of choice.”

In the lawsuit the retailers argued that PBMs usually exclude them from networks that dispense specialty medications, creating “high barriers to new competitors seeking to enter this field.”

In response to Bissoon’s ruling the plaintiffs released a statement saying, “NACDS and NCPA appreciate that the judge has maintained several claims in this lawsuit. We are reviewing the decision to determine our next steps with regard to the case.”

A spokesman for Express Scripts said the company was pleased with the decision.

At the time the suit was filed NACDS general counsel Don Bell said his organization and NCPA “believe that the potential harm to retail community pharmacies and patients is so great that we want to ensure that the potential anticompetitive impacts of this proposed merger are reviewed by a court.”

NACDS president and chief executive officer Steve Anderson said the merger would have “dire consequences” for pharmacies and patients.

The deal, he noted, would force sponsors into accepting plans that divert patients from “the face-to-face pharmacy services” they “prefer and receive from retail community pharmacies to Express Scripts and Medco’s proprietary mail-order facilities.”

The lack of competition in the market for PBM services would also allow the merged entity “to force sponsors and patients to accept formularies weighted toward expensive brand name drugs as well as other expensive drugs sold by Express Scripts and Medco’s specialty pharmacies,” Anderson said.

There is no evidence that the savings promised by the PBMs from the merger would be passed on to consumers and employers, he added.

Douglas Hoey, chief executive officer of NCPA, said the merger “would shrink the ‘Big Three’ to just two major PBMs and leave one clear loser, and that’s the American people.”
He noted that the merged entity would control more than half of specialty pharmaceutical sales, precluding new competition and enabling it “to strike sweetheart deals with manufacturers that could increase overall costs.”

Community pharmacists were already “over a barrel” in negotiations with PBMs, he said. “In order to continue serving our patients, pharmacy small business owners must deal with ‘take it or leave it’ contracts that are laced with onerous terms and poison pills. This merger would send that proverbial barrel straight over the cliff.”

After a merger, “all of retail pharmacy would be forced to contract with ESI-Medco regardless of the terms,” Hoey added.

Bell said the merger would create “a huge new middleman that stands between patients and their pharmacies.”