Express Scripts, Medco Rebut Antitrust Concerns In US House Hearing
September 20 2011 - 4:41PM
Dow Jones News
The chief executives of pharmacy benefit managers Express
Scripts Inc. (ESRX) and Medco Health Solutions Inc. (MHS) sought to
ease concerns that the companies' proposed merger could hurt
competition in the PBM market at a congressional hearing
Tuesday.
Express Scripts and Medco are two of the three biggest players
in the industry, the other being CVS Caremark Corp. (CVS). The
proposed $29 billion deal has raised concerns about industry
consolidation, and the U.S. Federal Trade Commission is taking a
close look at the merger before it decides whether to grant
antitrust approval.
In written testimony submitted to a House antitrust
subcommittee, Express Scripts Chief Executive George Paz and Medco
Chief Executive David Snow said the market for PBMs was rapidly
evolving, with far more competitors than the current big three.
Paz said more than 20 PBMs provide service to Fortune 500
employers.
Snow pointed to the emergence of UnitedHealth Group Inc. (UNH),
a major Medco customer that is ending its relationship with Medco
and instead will run its own in-house PBM. "We now have another
major competitor in the marketplace, one that is widely regarded to
be a significant force in the market going forward," Snow said in
his written remarks.
Snow also said other competitors were making major investments.
As an example, he cited Catalyst Health Solutions Inc.'s (CHSI)
recent acquisition of Walgreen Co.'s (WAG) PBM business.
PBMs administer prescription-drug coverage for employers and
insurers, promising to fetch lower prices with drug makers and
pharmacies by buying in large quantities.
Tuesday's hearing was before the House Judiciary Subcommittee on
Intellectual Property, Competition and the Internet. Lawmakers are
set to question the executives later in Tuesday's hearing.
Members of Congress have no role in deciding whether the
proposed merger is granted antitrust approval, but they can shape
the public debate about the deal.
In the run-up to the hearing, several groups voiced opposition
to the proposed merger.
Five consumer-advocacy groups, including Consumers Union and the
Consumer Federation of America, said in a letter to the FTC that
the merger would lead to higher costs and restrictive pharmacy
networks that would limit patient choice.
They also expressed concern that the combined companies would
dominate the specialty pharmacy market, which provides services to
patients with chronic and complex conditions.
The Food Marketing Institute, which represents supermarket
pharmacies, voiced its opposition in a letter to the House
subcommittee, saying the merger would likely lead to lower
reimbursement rates for pharmacies, which could mean reduced
services for consumers.
-By Brent Kendall, Dow Jones Newswires; 202-862-9222;
brent.kendall@dowjones.com
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