PBM Consulting – Express Scripts/Medco Lawsuits

The Express Scripts acquisition of Medco is just around the corner and new lawsuits appear to try and muddy the water. At WBC (wbcbaltimore) we been telling readers for months that this deal would succeed, despite protests by the community pharmacists and drugstores associations, NACDS and NCPA. Express Scripts hoped to have approval from the FTC by the middle of next week, or certainly by their annual Outcomes Conference in the 3rd week of April. It would certainly ad to the festive mood in St. Louis!

Now, a federal lawsuit filed by these trade associations in the U.S. District Court for the Western District of Pennsylvania tries to block what seems to be a fete accompli. This action, joined by the announced actions of several state Attorneys General, shows how serious these opponents of the expected “Expredco” are!  The same rhetoric is being used now as during the FTC review process: that this mega merger will create a huge new middleman that stands between patients and pharmacies and hurt competition.

It is unlikely, however, that after withstanding FTC scrutiny and winning approval, that these 11th-hour legal attempts to block the transaction will have much chance of prevailing.  It could be that these efforts are being attempted to negotiate some concessions in advance of having to actually negotiate beyond the courthouse steps.

The truth is, this “mega middleman” as claimed in lawsuits, really isn’t such an anti-competitive controlling force. As identified in earlier WBC blog posts, the combined entity of ESI and Medco represents approximately 31-32% of Rx’s filled (not the 40% claimed by opponents). Here’s the actual breakdown:

PBM Market Share By Annual Rx Volume

1. Medco                               17.07%
2. ESI                                    15.13%
3. CVS/Caremark                 13.49%
4. Argus                                 11.76%
5. Optum Rx                          7.61%
6. ACS                                   5.77%
7. SXC                                   4.79%
8. MedImpact                      3.93%
9. Magellan                         3.43%
10. Humana                           3.36%
11. Catalyst/Regence          3.29%
12. Aetna                                2.64%
13. Other PBMs                     7.72%

Source:   AIS’s Quarterly Pharmacy Benefit Survey. Reported volume by 56 PBMs as of 4Q2011.

As usual, stay tuned as this story is the gift that keeps on giving!