We at WBC (wbcbaltimore.com) knew that Express Scripts (“ESI”) was hunting, but didn’t expect them to bag an elephant! Express Scripts Buys Medco is quite the story! The bigger question for Rx plan sponsors trying to reduce the cost of prescription drugs is “How will this effect my plan?” The new combined entity will be a whopper with 1.3 billion prescriptions annually and $111 billion in revenues. This should prove a GREAT integration project!
To say Medco has had a tough year would be an understatement. First came the CALPERS scandal, the fallout of which is still unknown. There may be much more in this story than has been reported. Second was the announcement that Medco would lose the Federal Employees business; and finally, a sidebar announcement today that the much rumored United Health deal, would, in fact, not be renewed with Medco. This seemed to be the third nail in the Medco cross that made the ESI acquisition a reality.
How this impacts prescription drug benefit plan sponsors trying to reduce the costs of prescription drugs remains to be seen. The bally-hooed party-line will yak about how the new scale of the combined companies will represent purchasing power that generates fabulous pricing, but as we’ve pointed out in this column before, it’s not what the PBM buys, but what they bill! We’re pretty sure that special deals (if any) obtained by ESI/Medco in the future will accrue to the benefit of their stockholders, and the pricing spreads that generate a PBM’s earnings will be greater than ever.
Here are some additional thoughts to ponder regarding this marriage made in Wall Street Heaven:
1. What will U.S. anti-trust regulators say?
2.Integration is always an issue in the mega PBM world. Will their platforms work together and what will the account service issues be?
3. How will ESI’s commitment to Buyer Behavior and “consumerology” gel with Medco’s investment in personalized medicine and genomics?
4. Will large Rx plan sponsors feel that they have fewer options with a change in the Big 3, or will they finally give legitimate shots to smaller PBMs that, in the past, have not been invited to the table?
5. How will ESI’s specialty company Curascript blend with Accredo from Medco?
6. Does this deal drive Walgreens back to the negotiation table with ESI?
7. Pink slips will sure to appear, so relationships that may have driven some client deals may be on the table if a favorite account manager is given their walking papers.
Stay tuned, this should be fun!