Express Scripts Acquisition of Medco
On July 21, 2011, in a joint statement released by the two companies, the acquisition of Medco Health Solutions by Express Scripts was announced. We found this proposed merger to be profoundly anticompetitive as well as likely to lead to increased drug prices.
Here are the facts:
Here are the facts:
- Pharmacy benefit managers (PBMs) serve a critical role in controlling drug prices. Positioned as intermediaries between drug manufacturers and pharmacies, PBMs help health plans to secure lower drug prices and reimbursement rates.
- Controlling over 80 percent of the large employer market, three PBMs—CVS Caremark, Express Scripts and Medco—dominated this market.
- The PBM market is a market plagued by deceptive and egregious anticompetitive conduct. A coalition of 30 state Attorneys General brought cases against the “big three” PBMs that secured over $370 million in damages and penalties.
- At the same time, the profits of the “big three” only continued to rise—skyrocketing from $900 million to over $3.5 billion in the past 5 years. This level of profit is unfathomable for mere middlemen and is likely in part the result of deception and unrealized savings to payors.
- The merger shifted this already tight oligopoly into a duopoly. It gave Express Scripts almost a 50% market share.
- As the major plans that will be participating in the insurance exchanges rely on the largest PBMs, the decreased competition of a market having shifted from 3 players to 2 has made controlling drug costs much more difficult.
- Express Scripts and Medco both have substantial specialty pharmacy capabilities. Having combined the two companies’ specialty pharmacy subsidiaries, Curascript and Accredo, the merger has secured Express Scripts a massive 52% market share in the specialty market.
- This incredible consolidation of the specialty market is of particular concern given the observed and projected increases in the specialty drug trend. The trend was 19.6% in 2010, compared to 1.4% for typical pharmaceuticals, and is expected to get as high as 27.5% by 2013.
- The FTC should have blocked Express Scripts' acquisition of Medco, and must be aggressive in opposing further consolidation of this market.