Viewpoints

Bets On as Industry Awaits PBM Merger Decision

RSS

It could be a watershed year for retail pharmacy as a proposed merger of two of the country’s largest pharmacy benefit managers — Express Scripts and Medco Health Solutions — looms. A ruling is expected within the next several months.

Even before the Federal Trade Commission’s decision, the impact of what it could mean for chain pharmacy is seen in Walgreens’ failure to renew its contract with Express Scripts due to unsatisfactory reimbursement rates. Dropping the PBM network cost the drug chain 2 cents per share in first-quarter results. It did $5.3 billion in prescription sales through Express Scripts in fiscal 2011.

Walgreens is trying to recoup those losses and Express Scripts patients with a transition plan designed to retain some business through discounts.

Meanwhile, Supervalu and CVS are actively soliciting Express Scripts patients. Supervalu’s Jewel-Osco said it is hiring more associates to serve the new business it expects from Express Scripts transfers from Walgreens. 

If the largest drug store chain in the country can’t come to terms with the nation’s second largest PBM, imagine negotiations, or lack of them, under a merged entity that would control anywhere from 30% to 60% or more of the PBM market?  

Here’s what’s at stake in the $29 billion merger as Dennis Wiesner of
H.E. Butt Grocery told a House Judiciary Subcommittee hearing last year: a network covering 135 million Americans, representing about one in three U.S. prescriptions filled, and control of more than 40% of the national prescription volume, 60% of mail orders and more than 50% of specialty pharmacy. 

The fear is such a market dominator can hold retail chain pharmacy hostage by dictating low reimbursement rates and limiting competition. Importantly, the merger could limit consumer choice and health services.

Numerous trade organizations and consumer groups vigorously oppose the merger. Those in favor say it will lower prescription drug costs for consumers through efficiencies gained from the merger. Express Scripts said it expects $1 billion in cost savings.

If the Feds’ action to block AT&T’s merger with T-Mobile was any indication, the approval to merge the PBMs, I think, would be a shocker. But don’t discount a shocker yet. Last week in a Bloomberg Businessweek news article, some are betting on the deal as the PBMs’ stocks rise.

Discuss this Blog Entry 0

Post new comment
or to use your Supermarket News ID
Contributors

David Orgel

David Orgel is executive director, content & user engagement, of Supermarket News (SN) and its website, SupermarketNews.com. Orgel delivers his opinions on industry trends through a bi-weekly...

Carol Angrisani

Carol Angrisani is an associate editor at Supermarket News. Along with covering the packaged goods beat, she also manages SN’s annual private-label and ethnic marketing supplements. Carol...
What's Viewpoints?

In their Viewpoints columns, SN editors give their perspectives on current industry issues.

Blog Archive
Penton Media Food Group and Related Sites

Sponsored Introduction Continue on to (or wait seconds) ×