Posts Tagged ‘Medco’

PBM Consulting – Express Scripts / Medco Deal Approved

Monday, April 2nd, 2012

The FTC announced their approval of the Express Scripts acquisition of Medco. As readers of this blog know, WBC (wbcbaltimore.com) has predicted for months that this would be the outcome.

In a  3-1 vote to end its investigation, the FTC said its probe “revealed a competitive market for PBM services characterized by numerous, vigorous competitors who are expanding and winning business from traditional market leaders.”

The FTC said it is confident the Medco buyout won’t change those dynamics and it sees little risk of the merged Express Scripts/Medco exercising monopoly power.

Capitalizing on the nation’s health care mania, Express Scripts played all the right cards. “Our merger is exactly what the country needs now,” Express Scripts CEO George Paz said in a statement. “It represents the next chapter of our mission to lower costs, drive out waste in health care and improve patient health.”  Music to the ears of influencers in Washington that made this deal happen.

Now the company has to deal with pending litigation over the transaction.  The community pharmacist association and drugstore trade groups have filed suit. Also, several states have their AG’s bringing action. All of this activity does seem like much ado about nothing after the FTC announcement. We believe that these legal actions are designed to extract some pricing concessions and will not ultimately prevail.

Here’s one vote for George  as industry executive of the year. This is quite the coup! Let’s see how it actually gets put into practice.


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PBM Consulting – Express Scripts/Medco Lawsuits

Friday, March 30th, 2012

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!

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PBM Consulting – Medco/Express Scripts Deal Almost Ready

Thursday, March 8th, 2012

The clock is ticking and it looks like the Express Scripts acquisition of Medco is almost ready to be approved. At WBC (www.wbcbaltimore) we been telling our readers for some time now not to believe the negative hype. This was a strong story that supports legislative efforts to reduce health care costs. Reducing pharmacy benefit costs is a big piece of the puzzle and the combined strengths of two solid pharmacy benefit titans is too good to pass up. Wall Street has warmed to the anticipated reality driving Medco stock to recent new 52-week highs. Not to mention the stampede to  Medco after their recent earnings call where Mr. Snow was giddy in announcing RECORD performance in all financial metrics!

Our Inside-the-beltway sources have told us that the deal is eminent, contingent on a couple of adjustments.  The main issue is a requirement that the newly formed “Expredco” will shed one of it’s Specialty pharmacy units.  You remember Specialty. Still the fastest growing component (20% trend) in a plan sponsor’s pharmacy drug spend.  Well, the powers that be have to throw the howling wolves (NACDS and NCPA)  a bone, so the sacrificial lamb will be Accredo, Medco’s superb Specialty management company.  Talk about throwing the baby out with the bathwater!  But that seems to be the price they must pay to get the deal done.  Recent press releases showed, for the first time, a softening of position by the community pharmacists, who said they could live with the new environment, as long as they get to participate in filling Specialty scripts.  We’ll see how it plays out.  As usual, stay tuned!

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PBM Consulting – More Medco / Express Scripts Merger Thoughts

Wednesday, February 8th, 2012

The minions in the press of those who do not want the Express Scripts acquisition of Medco to occur have been burning up their keyboards! At WBC (wbcbaltimore.com), we’ve been working the phones to gain better insight to the status of this transaction.  Will the new proposed “Expredco” actually help reduce prescription drug costs or will it reduce consumer choice? These are the issues being debated in Washington.

Lots of stories about skepticism of the deal are being floated by those who oppose it in order to try and gin up more lemmings to follow their lead. Lobbyists are working overtime to reach their favorite Congressional contact.  Let’s face it,  lobbyists get paid to put the kabossh on deals their clients don’t like.  Supermarkets and community pharmacists say no!  We knew the deal was headed for approval when the press releases issued this week by various supermarket spokespeople  were “this deal will put an end to our ability to offer $4 generics.”   Ha!   That sounds like a panic statement.

We tend to agree with Fitch’s assessment that the deal will get done. Fitch believes that the broader consumer interests of creating better pricing concessions and thus, help reduce health care costs, will ultimately win the day and enable the FTC to approve the deal. ESI is prepared to divest some business operations (particularly in the Specialty area) if that becomes a condition of approval.

As we’ve stated previously, the  combined companies still only represent around 30% – 35%  of all Rx’s being filled, so it’s far from the mega-monopoly that is being presented by organizations such as the National Association of Chain Drug Stores, the National Community Pharmacists Association and the Food Marketing Institute.  The FTC is expected to announce their decision by the end of February of very early in March.  Stay tuned!

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PBM Consulting – Medco/Express Scripts Union Looks Good

Wednesday, January 11th, 2012

Buzz has it that the much anticipated, and in some corners, shunned union of PBM giants Medco and Express Scripts is almost a done deal. Shareholders have overwhelmingly approved the acquisition and ESI is raring to go!  WBC (www.wbcbaltimore.com) has opined from the initial announcement that this marriage would receive FTC blessing, and on the latest report from confidential sources, they are ready to pull the trigger.

The ESI P.R. machine has been pushing out releases over the last several months touting the benefits to consumers and health plan payors of the new mega PBM represented by this super-sized combo. This position is sharply contrasted by several community pharmacy associations who fear the negotiating club that would be wielded by “Expredco.”

Unlike the AT&T deal for T-Mobile, which received a thumbs down from the FTC,  ESI/Medco, while potent, would still only represent 30% of the prescription drug market.  Expressed (no pun intended) another way, 7 out of 10 Rxs will still be managed by competitors.

The return for investors in a combined organization looks sweet, and ESI is making a strong case that cost savings will be significant.  The question remains whether these savings generated through operational synergies and ability to negotiate with manufacturers gets passed through to plan sponsors or is simply reserved to keep a smile on stockholders faces.  We’ll see.

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PBM Consulting – Express Scripts Buys Medco

Thursday, July 21st, 2011

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!

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