Pharmacists: Express Scripts-Medco Merger Would Raise Prescription Drug Costs, Reduce Patient Choice of Pharmacy

Congressional Hearing Comes as Consumer Groups Announce Opposition to the Merger

ALEXANDRIA, Va., Sept. 20, 2011 /PRNewswire-USNewswire/ -- The mega-merger of giant pharmacy benefit managers (PBMs) Express Scripts, Inc. and Medco Health Solutions, Inc., would subject consumers and health plan sponsors to fewer pharmacy choices and higher prescription drug costs, the National Community Pharmacists Association (NCPA) said in testimony before the House Judiciary Subcommittee on Intellectual Property, Competition and the Internet.

(Logo: http://photos.prnewswire.com/prnh/20100106/DC33253LOGO)

NCPA member Joseph Lech, RPh, of Lech's Pharmacy of Northeastern Pennsylvania, testified on behalf of more than 23,000 independent community pharmacies nationwide and the patients they serve.

"Over my 25 years in pharmacy, I have seen the large pharmacy benefit managers relentlessly gobble up smaller and medium-sized PBMs to reduce competition. The result is a highly-concentrated, consolidated marketplace. Yet, drug spending continues to go up, not down," Lech said.

Lech warned that the Express Scripts-Medco merger represented a "tipping point" in PBM consolidation. He said its approval "will harm patients by reducing choice, decreasing access to pharmacy services and ultimately leading to higher prescription drug costs paid by plan sponsors and consumers."

The chorus of voices opposed to the Express Scripts-Medco merger also grew louder today with the weighing in of Consumers Union (the publisher of Consumer Reports), Consumer Federation of America, U.S. Public Interest Research Group (or PIRG), National Consumers League and the National Legislative Association on Prescription Drug Prices (or NLARx) due to its "potential for significant consumer harm" and reduced patient choice.

"This merger will significantly reduce competition among the major PBMs," the groups wrote in a letter to the Federal Trade Commission, which is reviewing the merger. "By reducing market rivalry, Express Scripts-Medco is likely to charge more for its services as well as to pass on less savings obtained through rebates to public and private payors. Ultimately, consumers will bear these price increases in the form of higher premiums."

Lech also noted the following in his testimony to the committee:

• The merger's anticompetitive effects are likely to be most severe for sponsors of the largest U.S. health plans, where the already limited PBM options would drop from three to two, and in the "specialty" and mail order pharmacy markets. ESI-Medco would make up more than a 50 percent share of specialty and close to 60 percent of all mail order.
• The greater efficiencies claimed by Express Scripts and Medco are "empty promises" and contradicted by the results of past industry consolidation.
• There is no guarantee that any alleged savings would be passed on to patients, while local jobs and tax revenue would suffer from the merger as pharmacies are closed and patients forced to use out-of-state mail order.
• PBMs routinely deny patients the choice of where they fill their prescriptions by aggressively pushing them to PBM-owned mail order facilities – an anticompetitive practice that is likely to worsen post-merger.

Lech recalled helping a man who was evacuated from his house by boat – due to the recent Hurricane Irene flooding – before he could retrieve his 16 prescriptions. Lech asked, "But what would happen in cases such as this if pharmacies like mine disappeared from the communities that rely on them?"

The National Community Pharmacists Association (NCPA®) represents the interests of America's community pharmacists, including the owners of more than 23,000 independent community pharmacies, pharmacy franchises, and chains. Together they represent a $93 billion health-care marketplace, have more than 315,000 employees including 62,400 pharmacists, and dispense over 41% of all retail prescriptions. To learn more go to www.ncpanet.org or read NCPA's blog, The Dose, at http://ncpanet.wordpress.com.

SOURCE National Community Pharmacists Association

$27B CVS/Caremark merger caps M&A deals

$26.8 billion, Firm: King & Spalding LLP

Attorneys: Donald S. Kohla (Atlanta); Robert G. Woodward (Atlanta); Tracey A. Zaccone(New York)

Client: Caremark Rx Inc. Date: March 22, 2007

Description: CVS Corp. and Caremark Rx Inc. formally closed their merger, creating the nation's premier integrated pharmacy services provider. The combined company, renamed CVS/Caremark Corp. (NYSE: CVS), unifies the nation's largest pharmacy chain with a leading pharmaceutical, services company.

Express Scripts Inc. issued a statement late Wednesday calling its $26 billion bid for pharmaceutical services company Caremark Rx Inc. "superior."

The statement came after Caremark and rival bidder CVS Corp. issued releases Wednesday saying that their previously announced merger deal had cleared a regulatory hurdle: The initial waiting period required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976 had expired without a request for additional information from the U.S. Federal Trade Commission.

Express Scripts rival bid, made Monday, represented at the time a 15 percent premium over the all-stock purchase price to be paid to Caremark's stockholders under Caremark's Nov. 1 deal with drug chain CVS (NYSE: CVS), headquartered in Woonsocket, R.I. Express Scripts proposed to acquire all of the outstanding shares of Caremark Rx for $29.25 in cash and 0.426 shares of Express Scripts stock for each share of Caremark stock.

In its release Wednesday, Express Scripts' stated, "As we expected, the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act has expired for CVS Corporation. We said on December 18th that we anticipate the Express Scripts transaction with Caremark would be completed in the third quarter of 2007. The superior value of the Express Scripts offer for Caremark is clear as evidenced by the strong support of both Express Scripts and Caremark stockholders."

Express Scripts said that based on Wednesday's closing stock prices, its offer has a value of $60.68 per share, or $26.5 billion, a 21.5 percent premium on the current value of the CVS offer.

In its release Wednesday, CVS said it anticipates that a shareholder meeting to approve its deal and the closing will occur as early as the first quarter next year. Both CVS' and Caremark's shareholders must approve the transaction.

Caremark Rx Inc. (NYSE: CMX), based in Nashville, Tenn., dispenses pharmaceuticals to eligible participants in benefit plans maintained by its customers.

St. Louis-based Express Scripts Inc. (Nasdaq: ESRX) is one of the largest pharmacy benefit managers in the country.

St. Louis Business Journal

Law firm Mintz, Levin, Cohn, Ferris, Glovsky and Popeo said Tuesday it is representing CVS Corp. as co-counsel in connection with the company's $21 billion stock-for-stock merger transaction with Caremark Rx Inc.

The Boston firm said the merger between Rhode Island-based CVS (NYSE: CVS) and CareMark RX (NYSE: CMX) will combine two of the nation's largest companies in the drug distribution industry. The new company will be called CVS/Caremark Corporation.

The transaction is subject to stockholder approval from both companies as well as regulatory approvals, Mintz Levin said in a statement.

Boston Business Journal - Boston Business Journal

The proposed merger of Caremark Rx Inc. and CVS Corp. not only means big changes at Nashville's largest public company. It could also shake up the downtown real estate market.

On Wednesday, Nashville-based Caremark said it will merge with Rhode Island-based CVS in a deal worth about $21 billion. The home base for the merged company will be in Rhode Island, but the pharmacy benefit management program will be housed here.

The proposed merger marks a major transition for Caremark, a leading pharmacy benefit manager and one of several corporations that have relocated to Nashville in recent years. Like Louisiana-Pacific Corp., the building products supplier that moved here from Oregon, Caremark chose a downtown home, settling on 211 Commerce St., which is now decorated with the company's name.

It's not clear how the CVS/Caremark deal will impact Caremark's employee base in Nashville, which totals 200 at its headquarters and call center.

The wild card is CVS' $3 billion pharmacy benefit management business, which will be rolled into Caremark. If that integration involves executives and support staff moving here, there's a good chance the combined entity will be in the market for additional space.

Caremark now occupies one floor - about 22,000 square feet - at 211 Commerce, but that building is fully leased. If the company decides to pursue additional space in downtown Nashville, it will have a handful of high-profile options. Eakin Partners' SunTrust Plaza is being built two blocks west on Commerce, while an Atlanta developer has proposed a 28-story office tower in SoBro that would be anchored by law firm Bass Berry & Sims.

In addition, Nissan North America now occupies 240,000 square feet in the BellSouth Tower, but will move to Cool Springs when its new headquarters building is completed in mid-2008. And the Fifth Third Center has space available after Ernst & Young moved out earlier this year.

Those questions will be addressed as CVS and Caremark move forward with their deal. In a conference call on Wednesday, CVS CEO Tom Ryan said the companies expect to realize $400 million in savings from the deal, but are also looking to generate additional revenue.

"This is not a cost game," he said. "We're not going to save our way to success here."

Ernest Hyne II, a health care attorney with Harwell Howard Hyne Gabbert & Manner, says an obvious concern for the deal is that the company's corporate headquarters will move to Rhode Island, taking with it the decision-makers, executive talent and corporate-giving arms that are associated with it.

However, if the deal goes through, there is a possibility for some spin-off businesses that could take root in Nashville, he says.

"In those transactions, the FTC leans on those companies and says you have to dispose of certain assets, otherwise we won't give you clearance," says Hyne. "Either it runs into a buzzsaw and can't get accomplished ... or these businesses are spun out, and some of them might be headquartered here."

jflory@bizjournals.com, 615-846-4250
elawley@bizjournals.com, 615-846-4251

Nashville Business Journal - by Josh Flory and Erin Lawley