Today Rep. Henry A. Waxman, Rep. Frank Pallone, Jr., and Rep. Diana DeGette sent a letter to the Federal Trade Commission Chairman Jon Leibowitz urging a thorough examination of the proposed merger (announced last month) of Express Scripts and Medco Health Solutions. The proposed merger would combine two of the three largest pharmacy benefit managers, affecting hundreds of millions of Americans with private health insurance and having a potentially significant impact on drug costs for Medicare, Medicaid, and other government programs.
September 9, 2011
The Honorable Jon Leibowitz
Federal Trade Commission
Dear Chairman Leibowitz:
We are writing to ask you to give close scrutiny to the proposed merger of Express Scripts, Inc., and Medco Health Solutions, Inc. The proposed merger would combine the largest and third largest pharmacy benefit managers (PBMs) to create a single entity that would be over twice as large as the next biggest competitor.
If combined, the newly merged PBMs would control one-third of total 2011 PBM market share and 60% of the market share for mail-order drugs. One analyst noted that the merger would shift the balance of competition in the PBM market, changing a market with "three equal competitors" into one with "one huge player and a distant second and third." Medco will lose large contracts with Blue Cross Blue Shield and United Health Care in 2012, potentially mitigating some of the concerns raised by the combination of the two companies. However, the FTC must carefully analyze the competiveness issues raised by the merger of these two large competing PBMs. Community pharmacists have stated that "this merger would further disrupt this marketplace, to the detriment of patients, true competition, and lower prices."
Changing industry dynamics raise additional questions about this merger and its impact on consumers and healthcare costs. Expensive specialty drugs are the fastest-growing areas of the pharmaceutical market, and their distribution occurs primarily through large, mail-order service by PBMs. in June 2011, Walgreens, the nation's largest drug store chain, and Express Scripts announced that Walgreens would no longer be part of the Express Scripts network because of a pricing dispute. CVSCaremark, which would be the largest competitor for the new entity, is already the subject of an FTC investigation relating to its merged PBM and pharmacy businesses.
The proposed merger would affect hundreds of millions of Americans with private health insurance and have a potentially significant impact on drug cost for government programs including Medicare Part D, Medicaid, the Federal Employee Health Benefits Plan, and TriCare. The market for prescription drugs, which involves often opaque interactions between insurance companies, pharmaceutical manufacturers, pharmacies, and PBMs, is complex and rapidly changing, and the impacts of this merger could be significant. We are therefore asking that you carefully examine the impacts on healthcare cost and access as a result of the proposed Express Scripts-Medco merger.
Henry A. Waxman
Frank Pallone, Jr.
Subcommittee on Health
Subcommittee on Oversight and Investigations