Bloomberg News

Express Scripts, Medco Sued by Trade Groups Over Merger Plan

March 29, 2012

Express Scripts Inc. (ESRX:US) and Medco Health Solutions Inc. (MHS:US) were sued by drugstore and pharmacists’ trade associations seeking to block the companies’ proposed merger as a threat to the viability of local pharmacy services.

The National Association of Chain Drug Stores, the National Community Pharmacists Association and independent pharmacies filed the lawsuit today in federal court in Pittsburgh, claiming the purchase of Medco by Express Scripts would violate antitrust laws by shrinking competition and raising consumer prices.

“Retail community pharmacies throughout the United States that provide critical services to millions of patients are threatened with substantial, imminent and irreparable harm as a result of this acquisition,” the groups alleged in the complaint.

Express Scripts, based in St. Louis, agreed in July to buy Franklin Lakes, New Jersey-based Medco for $29.1 billion, saying that consumers would get more power to negotiate prices from the combined companies. The deal would create the largest pharmacy benefits manager in the U.S. The companies act as middlemen among drugmakers, pharmacies and health-plan sponsors to manage patients’ benefits.

FTC Ruling

The Federal Trade Commission, which has been conducting an antitrust review of the proposed transaction, is expected to rule on the case as soon as tomorrow, two people familiar with the case told Bloomberg yesterday.

Express Scripts spokesman Brian Henry declined to comment on the lawsuit. Jennifer Luddy, spokeswoman for Medco, said by e-mail, “We stand by our recent 8K filing, in which we stated that we expect the merger to be completed as early as the week of April 2, 2012.”

Medco also said in a regulatory filing yesterday that deal could close as early as next week.

Third parties can challenge mergers under the antitrust laws and win, said Jeffrey Jacobovitz, an antitrust litigator with McCarthy, Sweeney & Harkaway PC in Washington.

“The issue is whether they can prove there is an injury from an antitrust perspective,” he said.

A recent example of a private antitrust suit, Jacobovitz said, is Sprint Nextel Corp.’s challenge of a proposed merger between AT&T Inc. and T-Mobile USA Inc., which the companies abandoned in December. In November, U.S. District Judge Ellen Segal Huvelle in Washington had allowed Sprint’s lawsuit, joined by Cellular South Inc., to proceed.

No Indication

Filing the suit doesn’t indicate the pharmacists’ groups know the FTC will approve the deal, said Jennifer Mallon, general counsel of the National Community Pharmacists Association, told reporters on a conference call today.

“We have no idea how the FTC is going to conclude their investigation,” she said. “But we believe legal action is the next logical step in our multipronged strategy to oppose the merger.”

The groups also are lobbying Congress and urging the FTC to block the deal, Anderson said.

The groups claim the Medco acquisition will force pharmacy customers into filling prescriptions by mail and result in the loss of “face-to-face pharmacy services that patients prefer,” Steven C. Anderson, president of the National Association of Chain Drug Stores, said in the conference call.

“Forcing patients to use mandatory mail-order pharmacies and denying them access to their local community pharmacist even causes some patients to discontinue drug therapy prematurely,” they allege in the lawsuit.

Express Scripts fell as much as 1.8 percent in Nasdaq Stock Market trading today. The shares declined 73 cents to $53.16 at.

The case is National Association of Chain Drug Stores v. Express Scripts, 2:12-cv-00395, U.S. District Court, Western District of Pennsylvania (Pittsburgh).

To contact the reporter on this story: Tom Schoenberg in Washington at

To contact the editor responsible for this story: Michael Hytha at

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Companies Mentioned

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    (Express Scripts Holding Co)
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