FTC MOVE TO REVISIT APPROVAL OF MERGERS PRAISED BY NACDS

ALEXANDRIA, Va. -- The National Association of Chain Drug Stores praised the decision by the Federal Trade Commission to revisit the approval it gave to two earlier mergers of pharmaceutical manufacturers and pharmacy benefit management companies.

ment to make available to its customers an open formulary. A panel of independent experts not affiliated with Lilly or PCS is to select the listed drugs. Lilly will build a "fire wall" to prevent it from accessing pricing information submitted from other drug manufacturers that seek to sell their products through PCS.

"The FTC's decision to reconsider its previous approval of pharmacy benefit management companies purchased by major drug makers properly puts consumer needs ahead of corporate interests," said Ronald Ziegler, president and chief executive officer of NACDS.

FTC imposed no conditions when it approved the acquisition by Merck, Rahway, N.J., of Medco Containment Services, Montvale, N.J., in November 1993, for a purchase price of $6.6 billion, and the $2.3 billion purchase of Diversified Pharmaceutical Services, Minneapolis, by SmithKline Beecham, Philadelphia, in May.

Collectively, PCS, DPS and Medco (through its Paid Prescriptions subsidiary) control over 80% of the pharmacy benefit management marketplace, NACDS said. PCS is the largest, with programs covering approximately 50 million people.

NACDS had petitioned FTC to reject the Lilly merger with PCS, and to re-examine the Merck and SmithKline deals. NACDS noted that drug company-owned PBMs could promote or push the drug company's own generic products, possibly eliminating lower priced generics offered by other drug makers.

NACDS also expressed concern that in bidding for health plan business, PBMs owned by drug makers would be in a position to share pricing information with their corporate parents, and thus be able to undercut competitors' prices.

"Without the FTC imposing conditions similar to the Lilly-PCS case on Merck and SmithKline, the potential for market manipulation and domination remains a strong likelihood," Ziegler said.

"The continued vertical integration of the prescription drug marketplace leads to less, not more, competition," said Ziegler, resulting in higher prices to customers.

The Merck-Medco merger is also the subject of a lawsuit, brought by a group of California pharmacies based on state statutes, that is expected to go to trial in February.