As one of the most contentious acquisitions in the pharmaceutical industry gets set for another view under the microscope, seven members of Congress have written to the US Federal Trade Commission to ask the agency to speed its review of the planned $29 billion acquisition of Medco Health Solutions by its rival, Express Scripts. The deal would combine two of the largest pharmacy benefit managers.
They maintain that the deal, which will be the subject of a hearing next week by the US Senate Judiciary Committee, would lower drug costs for consumers and employers, and save hundreds of jobs across the country. All seven pols, who are members of the Congressional Black Caucus, also received contributions from Medco, Express Scripts or the trade group that represents PBMs.
“Experts indicate that the combined company will have the potential to reduce drug procurement costs and increase rebates and discounts negotiated from drug manufacturers, which could result in substantial cost savings passed on directly to consumers and employers," they wrote in their letter. "We view the merger as consistent with a competitive marketplace, which could contribute meaningfully to achieving critical goals for our nation’s health care system."
The letter was attached to a press release issued by Ed Towns, a New York Democrat, who received $1,500 from the Pharmaceutical Care Management Association and $1,000 from Medco and during the current election cycle, according to the Open Secrets database run by the Center for Responsive Politics (see this).
Among the six other pols who signed the letter was William Clay, a Missouri Democrat, who received $10,000 from Express Scripts (look here); Alcee Hastings, a Florida Democrat, who received $3,250 from Medco (read here); Danny Davis, an Illinois Democrat, who received $1,000 from Medco (see this); Greg Meeks, a New York Democrat, who also received $1,000 from Medco (look here); Eddie Johnson, a Texas Democrat, received $1,500 from Medco (look here); and Emanuel Cleaver, a Missouri Democrat, was given $2,500 by Medco (see this).
But not everyone is enamored. Two months ago, three US House Democrats pressed the US Federal Trade Commission to carefully scrutinize the deal (see this). The newly merged PBMs would control one-third of total 2011 PBM market share and 60 percent of the market share for mail-order drugs, they wrote in a letter to the agency. Two of the trio - Frank Pallone, a New Jersey Democrat - has received $2,500 from Medco and $2,500 from the PBM trade group (see here), while Colorado Democrat Diana DeGette received $1,000 from Medco (see this). Both have also received contributions from drugmakers and biotechs, which haggle with PBMs.
Meanwhile, trade groups representing pharmacies are lobbying against the deal. And several states have opened inquiries into the planned acquisition over concerns that the combined PBM will have too large a share of the market for directing prescriptions for corporations, unions, government agencies and other customers (read here). And the House Judiciary Subcommittee on Intellectual Property, Competition and the Internet held its own hearing in September. During his testimony, Express Scripts ceo George Paz emphasized the deal would yield safe and affordable meds.
However, the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights hearing, which will be chaired by Herb Kohl, a Wisconsin Democrat, may not be convinced, given the billing for the session, which be held next Tuesday, December 6: "Cost Savings for Consumers or More Profits for the Middlemen?" The witness list is not yet available, but you will be able to watch the proceedings here.
[UPDATE: The witness includes Paz; Medco ceo Dave Snow; Scott Streator, an associate vp for business development at the Ohio State University Medical Center; Susan Sutter, a co-owner of Marshland Pharmacies in Horicon, Wisconsin; Mike Bettiga, chief operating officer at Shopko; and David Balto, a former policy director in the Bureau of Competition at the FTC, who has worked with specialty pharmacies that oppose the deal.]
The FTC is under pressure to further scrutinize the proposed deal, given criticism that the agency was too lax when the CVS pharmacy chain purchased Caremark, the other large PBM in the triumvirate that dominates the US market. In fact, the FTC made a so-called second request for information about the proposed acquisition. There was no so-called second request by the FTC during the CVS/Caremark review, although a subsequent investigation into the combination remains ongoing.
pills pic thx to anolobb on flickr
2 Comments
When did any merger in any category save money for consumers? Without significant competition, what incentive would anyone have to pass their saving along to employers and consumers? That said, can a pol really be influenced by a $1000 contribution? That seems like a pittance in the big picture. It can help gain access in order to make your case, but that's about it I think.
I agree with tedw. I have never seen a merger without an associated down sizing of the "redundant" staff. With the economy so bad I think all mergers should be halted. I also seem to remember from basic macro economics that monopolys always drive up prices. Really lame if our Politicians can be bought for $1000.