* Consumer, drugstore groups raise opposition
* Antitrust review seen taking 6 months or more
* Analysts say approval a gamble
By Diane Bartz
WASHINGTON, July 21 Express Scripts Inc's
(ESRX.O) planned buy of Medco Health Solutions MHS.N met with
swift opposition from consumer advocates and drug stores,
signaling the beginning of what could be an ugly fight for
The $29.1 billion deal would create a U.S. powerhouse in
managing prescription drug benefits. Its only other real
competitor would be CVS Caremark Corp (CVS.N), at No. 2, and
possibly UnitedHealth Group (UNH.N). [ID:nN1E76K1PX]
"This is an area where there is already tremendous
concentration," said Sharon Treat, executive director of the
National Legislative Association on Prescription Drug Prices.
"If you look at who has all the (pharmacy benefits) contracts,
it's going to be concentrated on the Big Three which would now
be the Big Two."
Treat believes the combination will raise prices for
consumers at the drugstore due to the lack of competition.
Antitrust regulators tend to look skeptically at deals
which reduce the number of competitors in an industry from four
to three, and take an even harder look at deals that reduce the
number of competitors to two.
Community pharmacy groups were already consulting with the
Federal Trade Commission and state prosecutors on their next
steps in opposing the deal, the National Community Pharmacists
Association and National Association of Chain Drug Stores said
in a joint statement.
"The major PBMs (pharmacy benefits managers) already wield
an unchecked, one-sided advantage in setting contract and
reimbursement terms for community pharmacists, undermining
their viability to continue serving patients," said Douglas
Hoey, NCPA head, in an emailed statement. "Approval of this
merger would further distort this marketplace, to the detriment
of patients, true competition and lower prices," he said.
LIKE MERGING VISA AND MASTERCARD?
The review itself will take considerably longer than the
four months that FTC took to approve pharmacy giant CVS's
purchase of Caremark, which closed in 2007, said an antitrust
expert who asked not to be named.
Antitrust regulators could well take a hard look at how
many options big companies have when they look for a pharmacy
benefits contractor, said this expert.
"The question is how many alternatives do large companies
have?" this person asked. "When a large company goes out to bid
its (drug) plan, how many options do they have?"
The FTC is already investigating CVS Caremark following
allegations that it has used its pharmacy benefits business to
steer customers to CVS pharmacies rather than allowing
customers to go where they choose.
The three companies' -- CVS, Express and Medco -- share of
the large-plan market could well be 80 percent, said David
Balto, a former FTC policy director now in private practice.
"This is terrible for consumers. This is like Visa and
MasterCard merging," he said.
Analysts said approval was a gamble, while noting that
sophisticated corporations only rarely announce major deals
that they cannot shepherd through to approval.
"The companies I'm sure have investigated this and they
think that they have a decent shot of it, although it's notable
that there's no financial penalties in the deal if it doesn't
get approved by regulators," said Morningstar analyst Matthew
Coffina. "They're just making a bet at this point that
regulators will go along with it."
(Reporting by Diane Bartz; Additional reporting by Bill
Berkrot and Jessica Wohl; Editing by Tim Dobbyn)