Bloomberg News

Express Scripts, Medco Tout Cost Savings Before Merger Hearing

December 07, 2011

Dec. 5 (Bloomberg) -- Express Scripts Inc. and Medco Health Solutions Inc. provide tens of billions of dollars in annual drug cost savings, according to a report released before a U.S. Senate hearing on the companies’ planned $29.1 billion merger.

Supporters and critics of the deal also increased the debate as three Republican senators raised concerns the merger may reduce competition.

Express Scripts, of St. Louis, agreed in July to acquire Franklin Lakes, New Jersey-based Medco. The transaction requires approval from the Federal Trade Commission. The pharmacy-benefit managers save health-plan sponsors and consumers as much as $87 billion in annual prescription-drug costs, according to a Compass Lexecon study funded by the companies and released today.

“This study shows the economic benefits created by PBMs today, the role that PBMs should play in constraining rising health-care costs in the future and the role the merger of Express Scripts and Medco can play in accelerating those savings,” Jonathan Orszag, the study’s lead author, said in a statement that accompanied the report. Orszag, senior managing director at Washington-based Compass, served as an economic policy adviser to former president Bill Clinton.

The company-sponsored report “overlooks the considerations that should be driving the conversation” about the proposed merger, said David Balto, a Washington-based antitrust attorney representing consumer groups, business organizations and specialty pharmacies who oppose the deal.

Pharmacy-benefits managers act as middlemen for drugmakers, pharmacies and health-plan sponsors, negotiating prices and managing the use of drugs by patients. Their profits are tied to cutting their clients’ drug costs.

Antitrust regulators should conduct a “thorough and complete investigation” in deciding whether to clear the purchase, Republican Senators Saxby Chambliss and Johnny Isakson, both of Georgia, and Jerry Moran of Kansas said Dec. 2 in a letter to FTC Chairman Jonathan Leibowitz. The Senate Judiciary antitrust subcommittee is scheduled to discuss the proposed deal at a hearing tomorrow.

--Editors: Adriel Bettelheim, Andrew Pollack

To contact the reporter on this story: Molly Peterson in Washington at mpeterson9@bloomberg.net

To contact the editor responsible for this story: Adriel Bettelheim at abettelheim@bloomberg.net.


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