Mega-PBM Merger: Boon or Bane?

December 27, 2011 | Filed under: Press Releases | Posted by: Zacks Research

The burning issue across the US healthcare industry is converging with the anxiety of the antitrusts. Now the most discussed question in the industry is: How would the proposed merger of two of the three largest pharmacy benefit managers (PBM) – Express Scripts (ESRX) and Medco Health Solutions (MHS) – impact the competitive market scenario?

This is a long-standing debate where opinions diverge into two broad camps. One side believes the merger between the two leading PBMs would expand the service offering and reduce costs. Others contend the union would have an anti-competitive impact, hurting consumer sentiment and possibly leading to higher prices and inferior service. In this context, the third big player in this niche is CVS Caremark (CVS).

Why This Uncertainty?

On the back of non-renewal of several contracts, the proposed merger with Express Scripts can prove to be a lifeline for Medco. If the deal goes through, the combined company will emerge as a dominant player in the PBM space.

Uncertainty persists with the US Federal Trade Commission (FTC) issuing a ‘second request’ to both Medco and Express Scripts. The FTC is seeking additional information regarding the pending deal, also supported by the American Antitrust Institute (AAI).

Changing Role of PBMs

PBMs have a vital function in controlling prescription drug costs and improving chronic care management. PBMs work on improving prescription drug therapy management for patients and organize a variety of tools to contain drug costs for payers.

Empirical evidence demonstrates that PBMs deliver cost savings for consumers, labor unions, employers, health plans and government programs alike. As per the Congressional Budget Office (CBO) estimate, PBMs have the potential to save as much as 30% in total drug spending relative to unmanaged purchasing.

The researchers claim that PBMs control drug spending by virtue of their advanced technology platforms, with more use of generics and other lower cost medications. The studies also demonstrate that PBMs can limit other health related costs and improve health outcomes by boosting patient adherence to drug therapies.

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  • http://twitter.com/Thom_Gross Thom_Gross

    Combining Express Scripts and Medco is an opportunity for two leading pharmacy benefit managers (PBMs) to apply private-sector know-how to solve our country’s biggest healthcare challenge: lowering cost while raising quality.
    By joining complementary strengths, the proposed merger will benefit patients, employers and managed care plans, leading to safer and more affordable medicines for American families.
    PBMs play a central role in American healthcare.  We drive out pharmacy fraud, waste and abuse while lowering costs and improving health outcomes.  We increase adherence to prescribed medicines, proactively identify and correct prescription errors and promote cost-effective delivery of medicines.  Our efforts save billions of dollars and extend millions of lives. In Pennsylvania alone over the next 10 years, PBMs will produce $68.1 billion in savings for employer plans plus $38.2 billion for Medicare Part D, according to the Pharmaceutical Care Management Association.
    Neighborhood pharmacies have been and always will be essential partners in advancing our mission. More than 60,000 pharmacies of all sizes and locations participate in our retail network, including 90 percent of all independent pharmacies. PBMs help pharmacies by providing benefits of technology, instant adjudication of prescriptions, restoration of data in disaster areas, and notifications of harmful interactions and contraindications.
    As a combined company, we’ll collaborate with pharmacies, physicians and benefit plan sponsors to further improve America’s healthcare beyond what either company can do on its own.  Express Scripts and Medco have well-established histories of doing what’s right for patients.  The merger would accelerate our ability to do even more.
    Thom GrossExpress Scripts