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Drugstores Sue to Block Express Scripts Deal

Drugstores Sue to Block Express Scripts Deal [St. Louis Post-Dispatch]

From St. Louis Post-Dispatch (MO) (March 30, 2012)

March 29--Two associations of drug stores, supermarkets and discount stores today filed an antitrust lawsuit to block the proposed merger of Express Scripts Inc. and Medco Health Solutions Inc.

Filed in U.S. District Court in Pittsburgh, Pa., the suit seeks to enjoin the $29 billion merger, arguing it would harm retail pharmacies and raise the drug costs. The suit names both Express Scripts and Medco as defendants. Plaintiffs in the lawsuit include some Pennsylvania-based pharmacies.

Express Scripts, in a filing on Wednesday, said it expected approval of the merger from the Federal Trade Commission in the next few days.

Steve Anderson, president and chief executive of the National Association of Chain Drug Stores, said during a conference call with reporters that the merger will have "dire consequences for retail community pharmacies and their patients."

The association includes larger chains such as CVS/Caremark and Walgreen Co., along with community pharmacies, supermarkets, and popular discount stores such as Target and WalMart. Its members operate more than 40,000 pharmacies and employ more than 3.5 million people, including 130,000 pharmacists, the association says.

Anderson said the merger would force consumers to accept and pay for higher priced drugs that are chosen by Express Scripts and drug manufacturers.

"There is no evidence that the merged pharmacy benefit managers would pass along any alleged savings to consumers and employers," he said.

The merger "would shrink the Big Three to just two major PBM’s and leave one clear loser -- the American people," said Doug Hoey, executive vice president of the National Community Pharmacists Association.

He said the merged company would control about 50 percent of the nation’s pharmacy business for specialized drugs that are used to fight life-threatening illnesses, and would also create the nation’s largest mail order pharmacy, accounting for about 60 percent of that market.

The pharmacists association includes more than 23,000 community pharmacies nationwide.

"Community pharmacies are already over the barrel with negotiations with the big PBMs," Hoey said. "They’re dealing with take-it-or-leave it contracts."

Don Bell, general counsel for the National Association of Chain Drug Stores, said the merger "would create a huge new middleman who stands between the pharmacies and their patients."

Bell also said the merged company would dominate the pharmacy benefit market for the nation’s largest employers, resulting in higher prices and fewer options for consumers. It could drive consumers to mail order and specialty pharmacies, and reduce competition between pharmacy benefit managers and community pharmacies, he said.

Express Scripts spokesman Brian Henry declined comment on the lawsuit. Jennifer Luddy, a Medco spokeswoman, said: "This proposed merger with Express Scripts is designed to improve patient health, enhance pharmacy safety, lower costs and address waste and abuse to the benefit of our clients and patients."

According to the lawsuit, the merger would create the largest U.S. pharmacy benefit manager, controlling access to prescription medicines for 155 million Americans.

Such mergers, the lawsuit argues, are "consistently enjoined by courts. Indeed, mergers in highly concentrated markets that dramatically increase market concentration, as this merger would, are presumptively illegal under U.S. antitrust laws."

Express Scripts, Medco, and CVS Caremark Inc. collectively cover about 72 percent of Americans who are privately insured, according to the lawsuit.

The merged company would "be able to increase their selective designations of high margin drugs as ‘specialty drugs’ to divert sales of these drugs" away from community pharmacies, the suit alleges.

The merged giant would also "be able to design its formulary to divert patients to high-priced branded drugs instead of generic drugs" without fear of competition, it alleges. "PBMs already have an incentive to engage in this behavior due to manufacturer ‘rebates’ that reward PBMs for forcing patients to use expensive brand medications."

The complaint also highlights a number of markets in Pennsylvania in which the merger would create a new dominant player.

According to the lawsuit, the merged company would control 56 percent of the prescriptions issued by Brighton Pharmacy, an independent pharmacy in New Brighton, Pa.; and nearly 59 percent of the prescriptions filled by Klingensmith, which owns eight retail pharmacies in Pennsylvania.


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Posted: March 2012