As the Federal Trade Commission ponders the potential ramifications of a $29 billion merger between Express Scripts and Medco Health Solutions, it confronts a number of weighty issues.

Express Scripts, Medco Health Solutions, merger, Express Scripts-Medco merger, Federal Trade Commission, FTC, PBM, pharmacy benefit management, Jeffrey Woldt, prescription drug market, National Association of Chain Drug Stores, Senate Subcommittee on Antitrust, Herb Kohl, community pharmacy, Mike Bettiga, Shopko, drug store operators, retail pharmacies, health care system

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Inside This Issue - Opinion

Role of drug store jeopardized by PBM deal

February 27th, 2012

As the Federal Trade Commission ponders the potential ramifications of a $29 billion merger between Express Scripts and Medco Health Solutions, it confronts a number of weighty issues.

The combination of two of the nation’s three largest pharmacy benefit management companies would create an entity with unprecedented clout in the prescription drug market, one with the power, if it is not used wisely, to do considerable damage to pharmacy operators and the patients they serve, and, in the process, drive up the nation’s total health care costs.

Opponents of the deal, prominent among them the National Association of Chain Drug Stores, cite a number of compelling reasons for the FTC to take action. Together Express Scripts and Medco would manage drug benefits for 155 million patients, more than double those handled by CVS Caremark, according to testimony gathered by the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights chaired by Herb Kohl (D., Wis.). The merged entity would administer more than 1.1 billion scripts a year, accounting for some 40% of the PBM business.

In addition, Express Scripts-Medco would have a dominant presence in the mail-order and speciality pharmacy sectors, controlling about 60% of sales in the former market and more than 50% in the latter. With such a big stake in those lucrative areas, the PBM would have a strong motivation to encourage patients to move away from community pharmacy.

“More consumers would be forced into using the PBM’s own mail-order facilities,” Mike Bettiga, chief operating officer of Shopko Stores Operating Co., all of whose 149 discount stores include a pharmacy, told the committee late last year. “They will see decreased or limited access to essential pharmacy services.”

The incentive to shift patients away from their local pharmacies, together with the combined PBM’s bargaining power, would threaten the financial viability of drug store operators, which operate on thin profit margins. Last year drug chains, which have a much more robust front-end business than most independents, had a net margin of just 1.4%. The merger would, therefore, pose a threat to an essential component of health care delivery.

Equally important is the impact that a decision by the FTC to let the Express Scripts-Medco merger proceed would have on the future. At this time, when expenditures continue to rise (a recent Congressional Budget Office study projects that government health care spending will more than double from 2012 to 2022) and some 30 million people who do not now have insurance are expected to obtain it by 2014 as a result of health care reform legislation, retail pharmacy is more important than ever.

With more than 60,000 locations in the United States, community pharmacy is the most accessible part of the health care system, and the professionals who staff the stores are among the most trusted in the country. They are uniquely positioned to have a positive impact on patient nonadherence with drug regimens, a problem that one research project has shown results in $290 billion a year in unnecessary costs.

The sector’s ongoing evolution promises even more. Many retail pharmacies now include in-store clinics and routinely offer screening and counseling for such chronic conditions as diabetes and asthma. The drug store is on the road to becoming a true community health care center that delivers convenient, low-cost services.

The FTC would do the country a disservice if it allowed an entity to take shape whose actions could put an end to that promising development.