By a vote of 3-1 the commissioners of the Federal Trade Commission have given the go-ahead for pharmacy benefits manager Express Scripts to complete its $29 billion merger with rival PBM Medco.
The approval ends an eight-month investigation of the proposed deal that was announced last July. According to information released by the FTC, approving the merger "was not an easy decision."
Among the major concerns of the regulators and ones that were brought by other interested parties was the shrinking of choice in the market brought on by the merger of two of the three largest PBM companies. With a 40 percent combined market share, federal regulators were concerned that the merger could lead to a number of anticompetitive effects, including driving drug dispensing fees so low that it would affect important services provided by local pharmacy providers, as well as concerns brought by specialty pharmacies that the merger would lead to exclusionary conduct.
"We determined that the evidence did not bear out these concerns," read a statement from the FTC commissioners who gave the go-ahead. "The investigation revealed that the high market shares of the parties do not accurately reflect the current competitive environment and are not an accurate indicator of the likely effects of the merger on competition and consumers."
But Commissioner Julie Brill did not share the opinion of her FTC colleagues, Chairman Jon Leibowitz and Commissioners J. Thomas Rosch and Edith Ramirez.
"This $29 billion merger – between two of the largest three pharmacy benefit management providers – is a game changer. I have reason to believe that this merger is, in fact, a merger to duopoly with few efficiencies in a market with high entry barriers – something no court has ever approved," stated Brill in a dissenting opinion. "I therefore respectfully submit that the Commission should have filed a complaint in Federal district court seeking to enjoin the transaction pending a full trial on the merits here at the Commission."
With the FTC approval in hand, the two companies completed their merger today.
"Our merger is exactly what the country needs now," said George Paz, chairman and CEO of St. Louis-based Express Scripts, in a press release. "It represents the next chapter of our mission to lower costs, drive out waste in healthcare and improve patient health."
Since announcing the proposed merger last summer, Express Scripts has regularly touted the benefits it would provide as a cost-saver in an industry that is desperately looking for ways to trim costs.
"Simply and most accurately put, we are successful when our clients save money through lower employer and employee health premiums and/or reduced out-of-pocket costs, while at the same time enhancing safety and more positive medical outcomes," Paz noted in December in support of Express Scripts' effort to complete the merger.
But Brill isn't so sure that will be the case. In her dissent, she noted the newly merged company and the next largest PBM CVS/Caremark – the so-called "Big Three PBMs" – would have a combined market share of 73 percent.
The National Association of Chain Drug Stores (NACDS) has been fighting the proposed merger, contending, among other things, that a merged Express Scripts-Medco would have incentive to divert patients from using retail locations in favor of the company's mail order business.
Last Thursday, the NACDS National Community Pharmacists Association (NCPA), and nine other retailers field an antitrust lawsuit against the companies.
"A merger of Express Scripts and Medco would have dire consequences for patients and the retail community pharmacies that serve them. We continue to make a strong case to the Federal Trade Commission (FTC) and state attorneys general about the negative impact this proposed merger will have on patient access to community pharmacy and the healthcare delivery system," said NACDS President and CEO Steven C. Anderson, in a statement announcing the lawsuit.
Brill, at least, was listening to their concerns.
"The legal presumption against this merger is overwhelming and is not, in my view, sufficiently rebutted by evidence regarding competitive effects or entry," Brill noted in her dissent and suggested the FTC should again revisit the case in three years to study what effects the merger may have had on the market.